MOBILE TELESYSTEMS FINANCE S.A. (A beneficially wholly owned subsidiary of Mobile TeleSystems OJSC) 2010 year financial report

Regulatory News:

1. STATEMENTS OF RESPONSIBLE PERSONS
2. REPORT OF THE REVISEUR D'ENTREPRISES AGREE
3. FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010.
4. MANAGEMENT REPORT DECEMBER 31, 2010.

MOBILE TELESYSTEMS FINANCE S.A.
11-13 Boulevard Grand Duchesse Charlotte
L- 1331 Luxembourg
(the "Company”)

STATEMENTS OF RESPONSIBLE PERSONS

Olga NIKONOVA, Director, residing 109147, Russia, Moscow, Vorontsovskaya, bld. 5–2;
and
Ella BOGOSLAVSKAYA, Director, residing 109147, Russia, Moscow, Vorontsovskaya, bld. 8–4a; and
Sergey MOLODTSOV, Director, residing 109147, Russia, Moscow, Vorontsovskaya, bld. 5–2,

state that to the best of their knowledge, the financial statements of Mobile TeleSystems FINANCE S.A. of operations for the year ended December 31, 2010, prepared in conformity with the applicable body of accounting rules give a true and fair view of the assets and liabilities, the financial situation and the profits and losses of MOBILE TELESYSTEMS FINANCE S.A. and that the Management report includes a fair review of the results and the position of MOBILE TELESYSTEMS FINANCE S.A.

Signed by
The board of directors:

Ella BOGOSLAVSKAYA, Director
Olga NIKONOVA, Director
Sergey MOLODTSOV, Director

MOBILE TELESYSTEMS FINANCE S.A.

(A beneficially wholly owned subsidiary of
Mobile TeleSystems OJSC)

ANNUAL ACCOUNTS AS AT DECEMBER 31, 2010
and
REPORT OF THE REVISEUR D'ENTREPRISES AGREE

11-13, Boulevard Grand Duchesse Charlotte
L-1331 Luxembourg
R.C.S. Luxembourg: B 84 895

MOBILE TELESYSTEMS FINANCE S.A.
(A beneficially wholly owned subsidiary of Mobile TeleSystems OJSC)

TABLE OF CONTENTS

Directors’ Report

REPORT OF THE REVISEUR D'ENTREPRISES AGREE
ANNUAL ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 2010

Balance Sheet
as at December 31, 2010

Profit and Loss Account
for the Year ended December 31, 2010

Notes to the annual accounts

MOBILE TELESYSTEMS FINANCE S.A.
3, avenue Pasteur
L-2311 Luxembourg, Grand-Duchy of Luxembourg
R.C.S. Luxembourg B 84 895

MANAGEMENT REPORT

concerning the accounts for the fiscal year ended December 31, 2010

The board of directors hereby presents the management report and accounts of Mobile Telesystems Finance S.A. ("MTS Finance S.A.” or "the Company”) for the year ended December 31, 2010.

As of December 31, 2010 total assets of the Company amounted to USD 416,217,631. During the year ended December 31, 2010 the Company realized an annual net loss of USD 42,649,333; loss carried forward USD 348,156.492; total loss of USD 390,805,825; to carry foward of USD 390,805,825.

GENERAL INFORMATION:

MTS Finance S.A. is a 100% beneficiary owned subsidiary of MTS OJSC, incorporated under the laws of Luxembourg on 10 December 2001, having its corporate seat in Luxembourg. Originally, the Company was created for initial public offering on the Luxemburg Stock Exchange.

OPERATIONS AND ACTIVITIES OF MTS FINANCE S.A.:

On October 14, 2003 the Company issued $400,000,000 notes bearing interest at 8.375% at par, maturing on October 14, 2010;

On January 28, 2005 the Company issued $400,000,000 notes bearing interest at 8.00% at par, maturing on January 28, 2012.
The proceeds received from bonds issued were loaned to MTS OJSC in the total amount of USD 1,200,000,000 with maturities matching those of the bonds. All notes fully and unconditionally guaranteed by MTS OJSC.

On October 8, 2010, the Company redeemed additional $400,000,000 outstanding notes in the principal amount and interest accrued. The loan and interest was fully repaid by MTS OJSC by that date.

During the year ended December 31, 2010, the Company has registered a total interest charge of USD 61,389,546 mainly attributable to the guaranteed bonds. An interest income of USD 60,166,574 generally relates to the long-term loans receivable.

During the year ended December 31, 2010, the Company did not have other specific activities. The operating expenses are mainly attributable to consultants’ fees related to litigations regarding the acquisition of controlling share in Bitel LLC.

In December 2005, the Company acquired a 51.0% stake in Tarino Limited (the indirect owner of Bitel LLC – a Kyrgyz company holding a GSM 900/1800 license for the entire territory of Kyrgyzstan) from Nomihold Securities Inc. ("Nomihold”), for $150,000,000 in cash. Following the purchase, the Company entered into put and call option agreement with Nomihold representing the remaining 49.0% interest in Tarino shares (shares represent a proportional interest in Bitel shares). The price of put and call option agreement was estimated to be $170,000,000. Following a decision of the Kyrgyz Supreme Court, Bitel’s corporate offices were seized by a third party.

In November 2006, the Company received a letter from Nomihold purporting to exercise the put option for $170,000,000.

In January 2007, Nomihold commenced an arbitration proceeding against the Company in the London Court of International Arbitration in order to compel the Company to purchase the Option Shares.

After the closing of the financial year in January 2011 the London Court of International Arbitration made an award in favor of Nomihold satisfying Nomihold’s specific performance request and ordered the Company to pay to Nomihold $170,000,000 for the Option Shares, $5,900,000 in damages and $34,000,000 in interest and other costs – all representing in total approximately $210,800,000.

On January 26, 2011 the English High Court of Justice issued a freezing order which among other things states that the Company may not remove assets in England and Wales up to the amount of approximately $ 208,000,000 or in any way dispose of, deal with or diminish the value of any other of its assets outside England and Wales up to the same value.

RISKS:
The risk on the operations of MTS Finance is considered low. The bonds are fully guaranteed by the parent company, MTS OJSC, and the main income being generated by the long term loans granted to MTS OJSC.

MTS Finance does not incur any liquidity, foreign exchange nor interest rate risks as the characteristics of the loans receivable do match those of the bonds (same maturity, same currency, fixed interest rates).

FUTURE OUTLOOK:

The Company will continue its business and financial activities during the year 2011. The board of directors expects no change in the nature and size of business of the Company.

RECOMMENDATIONS:

The board of directors recommends shareholders to approve the balance sheet and statement of operations for the year ended December 31, 2010.

The board of directors:

Signed by
The board of directors:

Ella BOGOSLAVSKAYA, Director
Olga NIKONOVA, Director
Sergey MOLODTSOV, Director

MOORE STEPHENS
AUDIT SARL

43, bd. du Prince Henri L-1724 LUXEMBOURG
B.P.260 L-2012 LUXEMBOURG
Tel: +352 26 86 59 1 Fax: +352 26 86 59 99
maiI@moore-stephens-audit.lu
www.moore-stephens-audit.lu

REPORT OF THE REVISEUR D'ENTREPRISES AGREE

To the shareholders of
Mobile Telesystems Finance S.A.
11-13 Boulevard Grand Duchesse Charlotte
L-1331 Luxemburg

Report on the annual accounts

We have audited the accompanying annual accounts of Mobile Telesystems Finance S.A, which comprise the balance sheet as at December 31, 2010 and the profit and loss account for the year then ended, and a summary of significant accounting policies and other explanatory information.

Responsibility of the Board of Directors for the annual accounts

The Board of Directors is responsible for the preparation and fair presentation of these annual accounts in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the annual accounts, and for such internal control as the Board of Directors determines necessary to enable the preparation of annual accounts that are free from material misstatement, whether due to fraud or error.

Responsibility of the reviseur d'entreprises agree

Our responsibility is to express an opinion on these annual accounts based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the annual accounts are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts. The procedures selected depend on the judgement of the reviseur d'entreprises agree, including the assessment of the risks of material misstatement of the annual accounts, whether due to fraud or error. In making those risk assessments, the reviseur d'entreprises agree considers internal control relevant to the entity's preparation and fair presentation of the annual accounts in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the annual accounts.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the annual accounts give a true and fair view of the financial position to Mobile Telesystems Finance S.A as of December 31, 2010, and of the results of its operations for the year then ended, in accordance with the Luxembourg legal and regulatory requirements relating to the preparation of the annual accounts.

Emphasis of matter

We draw attention to Note 11 and 12 to the annual accounts as at December 31, 2010 that the Company is involved in an arbitration proceeding against the Company in the London Court of International Arbitration. The Company recorded a provision with an amount of $210 million in its annual accounts for the year ended December 31, 2010 to cover the risk. Our opinion is not qualified in respect of this matter.

Report on other legal and regulatory requirements

The management report, which is the responsibility of the Board of Directors, is consistent with the annual accounts.

Other matters

We consider it is useful to draw your attention to the fact that at December 31, 2010 losses exceed half of the subscribed capital. According to art 100 of the amended law of August 10, 1915, the shareholders need to assess in a general shareholders meeting if they decide to dissolve the Company or continue the activity of the Company.

Luxembourg, June 6, 2011

Signed by

"Réviseur d’ entreprises agréé

MOORE STEPHENS AUDIT S.á r.l.

MOBILE TELESYSTEMS FINANCE S.A.
(A beneficially wholly owned subsidiary of Mobile TeleSystems OJSC)

BALANCE SHEET
AS AT DECEMBER 31, 2010

(Amounts in U.S. dollars)

		NOTE		31.12.2010		31.12.2009
ASSETS
CURRENT ASSETS
Debtors
Amounts owed by affiliated undertakings
becoming due and payable within one year		3		14,007,889		405,274,672
becoming due and payable after more than one year		3		400,386,840		400,746,120
Other debtors				439,747		439,536
Cash at bank and in hand				12,827		685,182
				414,847,303		807,145,510
PREPAYMENTS				1,370,328		1,374,265
TOTAL ASSETS				416,217,631		808,519,775
LIABILITIES
CAPITAL AND RESERVES
Subscribed capital		4		125,000		125,000
Legal Reserve		4		12,500		12,500
Result brought forward				(348,156,492)		(343,799,385)
Loss for the financial year				(42,649,333)		(4,357,107)
				(390,668,325)		(348,018,992)
PROVISIONS FOR LIABILITIES AND CHARGES
Other Provisions		5		210,976,814		171,533,523
CREDITORS
Bonds
becoming due and payable within one year		6		-		400,000,000
becoming due and payable after more than one year		6		399,796,645		399,623,056
Amounts owed to affiliated undertakings
becoming due and payable within one year		6		13,852,055		2,991,229
becoming due and payable after more than one year		7		181,711,236		180,958,034
Other creditors
becoming due and payable within one year				510,077		995,412
DEFERRED INCOME				39,129		437,513
TOTAL LIABILITIES				416,217,631		808,519,775

The accompanying notes to the annual accounts are an integral part of these annual accounts.

MOBILE TELESYSTEMS FINANCE S.A.
(A beneficially wholly owned subsidiary of Mobile TeleSystems OJSC)

PROFIT & LOSS ACCOUNT
FOR THE YEAR ENDED DECEMBER 31, 2010

(Amounts in U.S. dollars)

		NOTE		for the year ended		for the year ended
				31.12.2010		31.12.2009
CHARGES
Other external charges		8		40,528,643		4,104,165
Value adjustments in respect of current assets				897,718		993,485
Interest payable and similar charges
other interests payable and charges		9		61,389,546		66,458,870
TOTAL CHARGES				102,815,907		71,556,520
INCOME
Other interest receivable and similar income		10		60,166,574		67,199,413
derived from affiliated undertakings
Loss of the financial year				42,649,333		4,357,107
TOTAL INCOME				102,815,907		71,556,520

The accompanying notes to the annual accounts are an integral part of these annual accounts.

MOBILE TELESYSTEMS FINANCE S.A.
(A beneficially wholly owned subsidiary of Mobile TeleSystems OJSC)

NOTES TO THE ANNUAL ACCOUNTS AS OF DECEMBER 31, 2010
(Amounts in U.S. dollars, except if otherwise stated)

1. DESCRIPTION OF BUSINESS

Mobile TeleSystems Finance S.A. (the "Company”) is a company incorporated under the laws of Luxembourg on December 10, 2001 under the legal form of a "Société Anonyme.” The registered office of the Company is 11-13 Boulevard Grande-Duchesse Charlotte, L-1331 Luxembourg. The Company’s operations include holding of participations directly and indirectly, in any form whatsoever, in Luxembourg and foreign companies, the acquisition by purchase, or in any other manner as well as the transfer by sale, exchange or otherwise of stock, bonds, debentures, notes and other securities of any kind, and the ownership, administration, development and management of its portfolio. The Company may also hold interest in partnerships.

The Company may borrow in any form and proceed to the issue of bonds and debentures. It may lend funds including the proceeds of such borrowings and issues to its subsidiaries, affiliated companies or any other companies. In a general fashion it may grant assistance to affiliated companies, take any controlling and supervisory measures and carry out any operation which may deem useful in accomplishment and development of its purposes.

Since the Company’s incorporation, its main activity has been issuing of notes and loaning the gross proceeds of the notes to Mobile TeleSystems OJSC ("MTS OJSC”), the Company’s 100% beneficial shareholder that is incorporated under the laws of the Russian Federation.

2. SUMMARY OF SIGNIFICANT ACCOUTING POLICIES

Accounting Principles

The Company maintains its accounting books and records in U.S. dollars based on Luxembourg accounting regulations. The accompanying financial statements have been prepared in order to present the Company’s financial position and its results of operations in accordance with accounting principles generally accepted in Luxembourg. . The transaction made in currency other then in USD are translated into USD at the exchange rate prevailing at the transaction date. Consequently, only realized foreign exchange gains or losses and unrealized foreign exchange losses are taken into account in the profit & loss account.

Cash and cash equivalents

Cash and cash equivalents represent cash on hand, in bank accounts and in short term investments having original maturity of less than three months.

Receivable from related parties

Loans receivable from related parties are recorded at nominal value. Based on management assessment of the recoverability of the amounts, no specific bad debt provision was created at December 31, 2010.

Debt issuance costs

Legal and other direct costs incurred in connection with the issuance of debt are deferred and amortized through interest expense using the effective interest rate method over the life of the underlying debt.

Notes payable

Notes payable are initially recorded at par value less any issue discount (or plus any premium). The discount or premium between issue and redemption value is amortized over the life of the underlying debt through interest expense using the effective interest rate method.

Deferred income

Fees reimbursed by MTS OJSC in connection with notes issuance costs and discounts on the issuance of debt are deferred and recognized as income over the life of the debt to match the amortization of the corresponding initial borrowing costs and the discount on issue of the debt.

Taxation

Deferred tax assets and liabilities are recognized for the expected future tax consequences of existing differences between financial reporting and tax reporting bases of assets and liabilities, and loss or tax credits carry-forwards using enacted tax rate expected to be in effect at the time these differences are realized. Valuation allowances are recorded for deferred tax assets for which it is more likely than not that the assets will not be realized.

Interest income and interest expense

Interest income and interest expense are recorded on an accrual basis.

Financial instruments

At December 31, 2010 and 2009, the fair value of the notes payable (see Note 6), calculated based on quoted market prices was approximately $422 and $832 million, respectively.

The long-term receivables from MTS OJSC bear a market rate of interest and management believes that the book value approximates the market value of this receivable at December 31, 2010 and 2009.

The Company does not use derivatives for trading purposes.

3. DEBTORS

On October 15, 2003, the Company entered into a $400 million loan agreement with MTS OJSC that bears interest at 8.47% payable semi-annually in arrears. The loan has been redeemed at October 8, 2010.

On January 28, 2005, the Company entered into a $400 million loan agreement with MTS OJSC that bears interest at 8.03% payable semi-annually in arrears. The loan matures on January 28, 2012.

Accrued interest on these loans at December 31, 2010 and 2009 amounted to $14,007,889 and $4,909,822, respectively.

For the year ended December 31, 2010 and 2009 the Company received interest payments under these loan agreements of $49,936,000 and $82,056,000, respectively. In 2009 there was an upfront payment in the amount of 16,060,000 related to 2010.

Debt issuance costs are comprised of commissions and fees incurred related to the issue of the notes payable and associated with the loan agreements. As of December 31, 2010 and 2009, debt issuance costs related to the issue of the notes payable amounted to $386,840 and $1,110,970.

4. CAPITAL AND RESERVES

On December 10, 2001, the Company was incorporated with a share capital amounting to $125,000, represented by 1,000 shares with a nominal value of $125 each, fully subscribed and paid-up. On an annual basis, if the Company reports a profit for the year, Luxembourg law requires appropriation of an amount equal to at least 5 percent of the annual net income to a legal reserve until such reserve equals 10 percent of the issue capital. This reserve is not available for distribution. The amount of this reserve at December 31, 2010 and 2009 was $12,500 and $12,500, respectively.

5. PROVISIONS FOR LIABILITIES AND CHARGES

Provisions		As at 31.12.2010		As at 31.12.2009
Provisions associated with put and call option agreement with Nomihold to acquire the remaining 49% interest in Tarino, owner of Bitel (See Note 11)		210,760,000		170,000,000
Provisions for future payments to legal consultants		216,814		1,533,523

6. BONDS

On October 14, 2003, the Company issued $400,000,000 notes bearing interest at 8.375% at par. Related debt issuance costs in the amount of $3,320,000 were capitalized. The cash proceeds, net of issuance costs of approximately $3,300,000, amounted to $396,700,000. These notes were paid out in October, 2010. The notes were listed on the Luxembourg Stock Exchange.

On January 28, 2005, the Company issued $400,000,000 notes bearing interest at 8.00% at the price of 99.736%. Proceeds received from the notes, net of underwriting discount, were $398,944,000. Related debt issuance costs in the amount of $2,515,939 were capitalized. These notes are guaranteed by MTS OJSC and mature on January 28, 2012. The Company is required to make interest payments on the notes semi-annually in arrears on January 25 and July 25 of each year, commencing on July 25, 2005. The notes are listed on the Luxembourg Stock Exchange. The proceeds were loaned to MTS OJSC.

As of December 31, 2010 and 2009, interests accrued on notes payable in the amount of $13,852,055 and of $2,991,229, respectively.

7. DEBT

As of December 31, 2010 and 2009, debt is comprised of the loan from MTS OJSC in the amount of $174,611,501 and $174,793,501 respectively and accrued interest related to this loan at 0.5% per annum in the amount of $7,099,735 and $6,164,533 respectively.

8. OTHER EXTERNAL CHARGES

For the year ended December 31, 2010 other external charges comprised of consultancy and legal services expense relating to Bitel matter (see Note 11) in the amount of $40,299,729, and $228,914, relating to the bank commission expense and other expense.

For the year ended December 31, 2009 other external charges comprised of consultancy and legal services expense relating to Bitel matter (see Note 11) in the amount of $4,002,438, and $101,727, relating to the bank commission expense and other expense.

9. INTEREST EXPENSE

Interest expenses are related to notes payable (see Note 6) and totaled to $61,389,546 and $66,458,870 for the year ended December 31, 2010 and 2009 respectively.

10. INTEREST INCOME

For the year ended December 31, 2010, interest income comprises of $59,034,067, interest income from MTS OJSC (see Note 3); of $883,718, relating to the recognition of deferred income; and other insignificant amounts totaled $248,789.

For the year ended December 31, 2009, interest income comprises of $66,191,826, interest income from MTS OJSC (see Note 3); of $995,411, relating to the recognition of deferred income; and other insignificant amounts totaled $12,176.

11. COMMITMENTS AND CONTINGENCIES

In December 2005, the Company acquired a 51.0% stake in Tarino Limited ("Tarino”), from Nomihold Securities Inc. ("Nomihold”), for $150.0 million in cash based on the belief that Tarino was at that time the indirect owner, through its wholly owned subsidiaries, of Bitel LLC ("Bitel”), a Kyrgyz company holding a GSM 900/1800 license for the entire territory of Kyrgyzstan.

Following the purchase of the 51.0% stake, the Company entered into a put and call option agreement with Nomihold for "Option Shares,” representing the remaining 49.0% interest in Tarino shares and a proportional interest in Bitel shares. The call option was exercisable by the Company from November 22, 2005 to November 17, 2006, and the put option was exercisable by Nomihold from November 18, 2006 to December 8, 2006. The call and put option price was $170.0 million.

Following a decision of the Kyrgyz Supreme Court on December 15, 2005, Bitel’s corporate offices were seized by a third party. As the Company did not regain operational control over Bitel’s operations in 2005, it accounted for its 51.0% investment in Bitel at cost as at December 31, 2005. MTS OJSC appealed the decision of the Kyrgyz Supreme Court in 2006, but the court did not act within the time period permitted for appeal. MTS OJSC subsequently sought the review of this dispute over the ownership of Bitel by the Prosecutor General of Kyrgyzstan to determine whether further investigation could be undertaken by the Kyrgyz authorities.

In November 2006, the Company received a letter from Nomihold purporting to exercise the put option and sell the Option Shares for $170.0 million to the Company. In January 2007, Nomihold commenced an arbitration proceeding against the Company in the London Court of International Arbitration in order to compel the Company to purchase the Option Shares. Nomihold sought specific performance of the put option, unspecified monetary damages, interest, and costs.

In January 2007, the Prosecutor General of Kyrgyzstan informed MTS OJSC that there were no grounds for involvement by the Prosecutor General’s office in the dispute and that no legal basis existed for MTS OJSC to appeal the decision of the Kyrgyz Supreme Court. Consequently, management of the Company’s Management decided to write off the costs relating to the purchase of the 51.0% stake in Bitel, which was reflected in its financial statements for the year ended December 31, 2006. Furthermore, with the impairment of the underlying asset, a liability of $170.0 million was recorded with an associated charge to non-operating expenses.

In addition, three Isle of Man companies affiliated with MTS OJSC (the "KFG Companies”), have been named defendants in lawsuits filed by Bitel in the Isle of Man seeking the return of dividends received by these three companies in the first quarter of 2005 from Bitel in the amount of approximately $25.2 million plus compensatory damages, and to recover approximately $3.7 million in losses and accrued interest. In the event that the defendants do not prevail in these lawsuits, the Company may be liable to Bitel for such claims. The KFG Companies have also asserted counterclaims against Bitel, and claims against other defendants including Altimo LLC ("Altimo”), and Altimo Holdings & Investments Limited ("Altimo Holding”), for the wrongful misappropriation and control of Bitel.

On November 30, 2007 the High Court of Justice of the Isle of Man set aside orders it had previously issued granting leave to serve the non-Manx defendants out of the jurisdiction as to the KFG Companies’ counterclaims on the basis of a lack of jurisdiction. The KFG Companies appealed that ruling to the Isle of Man Staff of Government and on November 28, 2008, the Staff of Government reversed the High Court and ruled that the case should proceed in the Isle of Man. The defendants have sought leave to appeal from the Judicial Committee of the Privy Council of the House of Lords of the United Kingdom.

In a separate arbitration proceeding initiated against the KFG Companies by Kyrgyzstan Mobitel Investment Company Limited ("KMIC”), under the rules of the London Court of International Arbitration, the arbitration tribunal in its award found that the KFG Companies breached a transfer agreement dated May 31, 2003 (the "Transfer Agreement”), concerning the shares of Bitel. The Transfer Agreement was made between the KFG Companies and IPOC International Growth Fund Limited ("IPOC”), although IPOC subsequently assigned its interest to KMIC, and KMIC was the claimant in the arbitration.

The tribunal ruled that the KFG Companies breached the Transfer Agreement when they failed to establish a date on which the equity interests in Bitel were to be transferred to KMIC and by failing to take other steps to transfer the Bitel interests. This breach occurred prior to the Company’s acquisition of the KFG Companies. The arbitration tribunal ruled that KMIC is entitled only to damages in an amount to be determined in future proceedings. At the request of the parties, the tribunal agreed to stay the damages phase of the proceedings pending the resolution of the appeals process before the court in the Isle of Man, as described above. The management of the Company is not able to predict the outcome of these proceedings or the amount of damages to be paid, if any.

12. SUBSEQUENT EVENTS

In January 2011 the London Court of International Arbitration made an award in favor of Nomihold satisfying Nomihold’s specific performance request and ordered the Company to pay to Nomihold $170.0 million for the Option Shares, $5.9 million in damages and $34.0 million in interest and other costs – all representing in total approximately $210.8 million ("Award”). In addition to the $170.0 million liability related to this case and accrued in the year ended December 31, 2006, The Company recorded an additional $40.8 million in its financial statements for the year ended December 31, 2010.

On January 26, 2011 the English High Court of Justice issued a freezing order which among other things states that the Company may not remove assets in England and Wales up to the amount of approximately $ 208 million or in any way dispose of, deal with or diminish the value of any other of its assets outside England and Wales up to the same value.

On March 10, 2011 the Judicial Committee of the UK Privy Council ruled in favor of the KFG Companies. The Privy Council’s ruling confirms the jurisdiction of the Isle of Man courts to try the counterclaims asserted by the KFG Companies against various defendants, including Sky Mobile, Altimo and Altimo Holdings, for the wrongful misappropriation and seizure of Kyrgyz telecom operator Bitel and its assets.