MORNING HEADLINES RUSSIAN CAPITAL MARKETS

FRIDAY, OCTOBER 29, 2004

Sales/TradingLondon (+44 020) 7439 6881 (+7 095) 995 2400

MARKET

NEWS COMMENT

RTS index closed Thursday at 657.66, down 1.6% or 10.98 points from the TNKBP Acquires Four previous close. Trading volume on Thursday fell to U.S. $20.1 million from Slavneft Oil Units $34.1 million on Wednesday. MICEX index closed Thursday at 624.92, down 2.1% from the previous close. Trading volume on the Moscow Inter Bankruptcy: bank Currency Exchange was down to $703.8 million from $762.3 million Best Solution, accord on Wednesday.

ing to CFO

Yukos Tax Case May EVENTS Be First of Many, Says Putin Aide TO WATCH Mid Oct Yukos 2003 GAAP results Mechel priced ADS at 2003 GAAP results 1H 2004 IAS results $21 per ADS on the Oct 28 Irkutsk Region govt to hold tender for licenses to explore NYSE and produce placer gold at 9 gold deposits in the region Mechel Group to define ADR price Beg Nov Sedmoу Continent 20022003 IAS results Nov 1 UES to report firsthalf 2004 IAS financial results Nov 10 Sun Interbrew to release thirdquarter 2004 US GAAP re sults End Nov Mehel Steel Group to place Level 3 ADRs in US

RUSSIAN ADRs, LONDON INDICATORS Changes % Changes % Price, $ Vol 1 day 1 mo YTD Value 1 day 1 mo YTD $ mn $ Lon 37,3 25,3 4,1 4,5 44,0 RUB/$USD 28,8 0,0 2,3 6,7 Lon 124,0 108,1 2,6 0,8 33,2 Urals, bbl 48,5 2,2 4,1 60,1 SurgutNG Lon 39,8 17,5 1,6 8,2 35,4 Sibneft Lon 37,1 4,9 3,6 11,2 19,7 Brent, bbl 48,5 2,5 2,0 59,0 Yukos Lon 15,2 14,2 3,1 7,3 63,8 Brent 1м, bbl 48,5 2,2 4,1 60,1 Tatneft Lon 34,2 0,4 3,3 8,5 52,0 Nickel $/t 13300,0 0,3 7,7 19,4 UES Lon 31,0 8,5 1,7 7,4 13,7 Gold $/oz. 426,1 0,4 3,2 2,6 Mosenergo Lon 15,3 1,1 0,0 6,3 131,1 NY 13,8 0,5 2,1 5,3 10,1 Platinum $/oz. 834,5 0,5 1,8 2,6 MTS NY 146,2 31,8 1,9 2,6 76,6 Palladium $/oz. 215,5 0,5 0,9 11,4 Vimpelcom NY 111,5 34,6 2,4 5,3 51,7 Copper $/t 2750,0 1,8 6,2 19,5 Golden Telecom NY 0,0 0,0 0,0 0,0 0,0 Zinc $/t 1025,0 1,6 0,4 0,8 NY 61,5 61,8 5,2 1,6 7,5 HR steel CIS exp. $/t 560,0 4,3 4,3 75,0 Highland GM Lon 28,0 0 0,0 14,2 #N/A N.A. Severstal Ber 48,5 #VALUE! 2,5 2,0 59,0 INDICES OMZ Ber 28,1 40812 2,3 0,8 0,7 Changes % WBD NY 48,5 #VALUE! 2,2 4,1 60,1 Value 1 day 1 mo YTD Sun Interbrew Ber 14,9 0,0 0,6 0,8 12,4 RTS 657,7 1,6 4,1 15,9 Sberbank Ber 0,0 0,0 0,0 0,0 0,0 MICEX 624,9 2,1 3,2 21,4

Price,$ YTM.% Changes % Dow Jones 10004,5 0,0 0,7 4,3 1 day 1 mo YTD S&P 500 834,5 0,5 1,8 2,6 Severstal 14 98,1 0,0 0,0 0,0 0,0 Nasdaq Comp 1975,7 0,3 4,3 1,4 Gazprom 13 115,2 7,2 0,1 3,6 4,1 Bovespa 22928,5 1,0 1,2 3,1 MTS 10 102,6 7,8 0,1 1,9 0,4 FTSE 4642,8 0,3 1,2 3,7 Sibneft 09 110,6 7,7 0,0 3,7 2,4 MSCI EM 472,5 0,0 2,3 6,7

EQUITIES

Recom Mcap Price Target Up Volume Change 52 wk 52 wk 4 wk mendation .$ bn Price side (RTS 1 day 1 mo YTD High $ Low $ vol, $ $ % MICEX) % % % $mn $mn Bashneft Buy 1,07 5,20 11,6 122% 0,04 0,0 19,8 55,7 5,4 3,2 0,01 Gazprom loc. Buy 64,8 2,74 2,80 2% 123,0 1,0 7,1 107,6 85,3 33,7 1922,0 Gazprom, ADS Hold 88,3 37,30 28,00 25% 25,3 4,1 4,5 44,0 39,7 20,4 20,9 Lukoil Hold 26,4 31,05 U/R #VALUE! 2,1 2,2 0,2 33,4 33,5 19,2 41,2 Ritek U/R 0,46 4,56 U/R #VALUE! 0,03 0,0 8,6 144,5 4,6 1,6 0,1 Sibneft U/R 17,8 3,75 3,00 20% 1,2 1,4 12,6 31,6 3,8 1,9 3,2 SurgutNG Buy 32,1 0,79 0,79 1% 0,3 1,9 5,7 34,9 0,8 0,4 13,0 Surgut NG, pref Buy 0,53 0,50 6% 0,7 0,0 10,0 35,9 0,6 0,3 0,2 Tatneft Hold 3,9 1,75 1,07 39% 54,8 1,4 11,8 55,6 1,9 0,9 5,4 Buy 5,86 943 1396 48% 0,0 1,5 5,0 59,4 1040,0 480,0 0,7 Yukos Sell 10,1 3,8 3,00 20% 28,1 1,4 8,5 64,5 15,6 2,8 6,2 Mosenergo 4,5 0,16 0,0 5,3 10,0 137,0 0,3 0,1 7,8 UES 13,3 0,31 5,5 2,5 7,4 11,1 0,4 0,2 4,7 UES, pref 0,27 2,6 0,5 2,4 6,9 0,3 0,2 0,4 Vimpelcom, ADS U/R 6,00 111,5 113,0 1% 34,6 2,4 5,3 51,7 116,9 58,3 36,9 Golden Telecom Buy 1,02 28,1 35,30 26% 1,1 2,3 0,8 0,7 37,5 22,5 2,8 Dalsvyaz Hold 0,15 1,21 0,87 28% 0,02 0,0 8,1 4,8 1,4 0,9 0,9 MGTS Hold 1,05 13,14 11,30 14% 1,25 1,8 5,0 4,0 16,2 10,7 0,0 МТS, ADS U/R 14,6 146,2 U/R 31,8 1,9 2,6 76,6 152,5 72,2 44,0 RBC 0,26 2,6 0,05 1,1 26,5 22,6 2,7 1,7 0,1 Rostelecom Buy 1,66 2,3 2,53 11% 3,0 3,4 10,7 2,7 1,7 6,2 Rostelecom, pref 1,6 138,4 0,0 4,0 9,0 1,8 1,1 0,2 NW Telecom Hold 0,50 0,6 0,48 17% 0,01 0,5 14,9 40,6 0,7 0,4 \

VolgaTelecom Buy 0,98 3,27 4,10 25% 0,16 0,0 12,0 21,8 3,5 2,1 0,0 2 Sibir Telecom Buy 0,89 0,06 0,06 3% 0,29 2,6 25,0 72,3 0,1 0,0 0,3 Uralsvyazinform Buy 1,55 0,04 0,04 3% 8,4 4,0 15,25 7,1 0,05 0,03 3,9 Center Telecom Hold 0,67 0,3 0,27 21% 0,1 0,0 19,4 3,5 0,5 0,3 0,1 South Telecom Buy 0,29 0,08 0,09 18% 0,2 0,0 5,0 19,4 0,1 0,1 0,3 Severstal Buy 4,12 186,5 260,0 39% 0,2 2,5 8,6 53,0 207,5 103,0 2,6 NLMK Buy 5,93 0,99 1,3 28% 0,30 6,60 3,88 181,7 1,2 0,3 0,1 NTMK Hold 1,15 0,88 1,0 9% 1,34 3,69 5,42 62,0 0,0 0,4 0,1 Zapsib Buy 1,33 104,00 140,0 35% 0,00 0,00 4,59 225,0 109,0 60,0 0,0 Mechel U/R 0,75 238,0 235,0 1% 0,24 4,4 52,6 173,6 250,0 61,0 0,2 Norilsk Nickel Buy 13,0 61,0 82,0 34% 29,1 6,5 2,0 6,4 81,2 45,5 16,3 VSMPO Buy 1,06 100,0 150,0 50% 0,1 1,6 8,7 330,1 103,0 17,0 2,2 Uralelectromed Buy 0,29 56,50 100,0 77% 0,00 0,00 0,36 141,5 72,9 20,0 0,0 OMZ 0,16 4,1 0,0 1,7 2,0 52,6 10,5 4,0 0,0 Baltika Brewery 2,08 16,3 0,008 2,1 16,5 35,4 16,6 11,1 0,012 WimmBillDann Hold 0,66 14,9 14,0 6% 0,1 0,6 0,8 12,4 21,1 12,5 0,9 Sberbank 8,9 453,0 2,7 1,2 8,8 73,9 461,0 238,0 2,5 FIXED INCOME

Source: Bloomberg Changes

Current YTM CY Spread 1 day 1 mo 3 mo YTD % % % % % %

Eurobonds EMBI+ 317,4 0,2 1,3 11,9 7,7 Eurobond05 104,0 0,0 0,4 7,5 4,1 3,1 8,4 62,6 Eurobond07 114,5 0,0 1,4 23,4 2,4 4,1 8,7 91,0 Eurobond10 110,8 0,0 1,8 11,9 1,1 5,9 7,4 129,8 Eurobond18 135,6 0,0 3,7 13,2 0,2 6,9 8,1 207,3 Eurobond28 158,6 0,0 4,3 11,3 0,6 7,4 8,0 227,5

E urobond30 99,7 0,0 3,6 13,3 3,9 6,8 5,0 167,7 RUSSIAN CAPITAL MARKETS

Source: Bloomberg MACROECONOMIC STATISTICS – USA

Date Time Statistic For Actual Market Expects Prior Revised From October 25 10:00 AM Existing Home Sales Sep 6.75M 6.54M 6.54M October 26 10:00 AM Consumer Confidence Oct 94 96.8 October 27 8:30 AM Durable Orders Sep 0.2% 0.50% 0.60% 0.3% October 28 8:30 AM Initial Claims 23Oct 350K 335K 330K 329K October 29 8:30 AM GDPAdv. Q3 4.30% 3.30% October 29 9:45 AM Mich SentimentRev. Oct 88 87.5 October 29 10:00 AM Chicago PMI Oct 59 61.3 Source: Yahoo Finance Morning bell October 29 2004 Friday

NEWS TNKBP ACQUIRES FOUR SLAVNEFT OIL UNITS, BOOSTING RESERVES TNKBP has announced the acquisition of four companies with licenses for appraisal and production of hydrocarbons located in the Krasnoyarsk, YamaloNenets and Taimyr regions in the Bolshekhetskaya Depression. The assets were acquired from Slavneft, in which TNKBP and Sibneft (SIBN, $3.70, Hold) each hold 50% stakes. Slavneft estimates the four companies’ ABC1 + C2 reserves at 830 million barrels of oil and 117 bcm of gas. TNKBP plans to invest more than $35 million by 2007 to explore the fields and to pump first oil. The company plans to develop Bolshekhetskaya Depression in cooperation with and LUKoil (LKOH, $31.75. Hold), which also have upstream assets in the area. Commercial development in the region should begin in 2008, with gross peak production of 13 million metric tonnes per year (250,000 barrels per day). The reserve area is located away from Slavneft’s main operations, and thus was not subject to an asset split agreed between Sibneft and TNKBP dividing the assets of Slavneft subsidiary Megionneftegas. We view TNKBP’s reserve acquisition as the first step toward the Megion asset split. We also expect TNKBP to seek to buy out Sibneft’s 50% share in Slavneft.

YUKOS BANKRUPTCY: BEST SOLUTION, ACCORDING TO CFO Yukos (YUKO, $3.70, Sell) CFO Bruce Misamore views bankruptcy as the best solution for handling its tax debts from the Russian government, according to French daily Le Monde. Filing for bankruptcy would treat all the creditors of the group in an ordered and equitable manner, 3 according to Misamore. Yukos has almost paid off a $3.4 billion tax debt for operations in 2000,

Misamore said on Tuesday. in September served Yukos with a $4.1 billion tax claim for 2001. Meanwhile Yuganskneftegaz, which pumps 60% of Yukos’s oil, this month received a $951 million claim for unpaid taxes in 2002. We believe Yugansk is likely to be seized and sold off at a depressed valuation, and reiterate our Sell recommendation on Yukos shares.

YUKOS TAX CASE MAY BE FIRST OF MANY, SAYS PUTIN AIDE Other Russian oil companies may face similar tax claims to those levied against Yukos, which is facing at least $7.5 billion in back tax claims, according to Igor Shuvalov, an aide to Russian President . Many oil companies have used tax optimization schemes, and may soon be forced to reconsider their tax history. ‘We should check everyone,’ Shuvalov said. We view Sibneft (SIBN, $3.70, Hold), the most aggressive tax minimizer in the past, as the Russian authorities’ most likely next target. Sibneft has already received a $1 billion tax bill for 2000–1, and its largest production subsidiary, Noaybrskneftegas, has also been charged with $420 million in back taxes. So far, the government has not pressed for payment from Sibneft, as investigations are still ongoing. However, we believe the company could be targeted next to pay large additional tax charges, which would be likely to depress its share price.

MECHEL PRICED ADS AT $21 PER ADS ON THE NYSE Mechel Steel Group (MTL) OAO set on Friday the price of its planned of 13.9 million American Depositary Shares (ADSs) at $19 to $21 per share. In the proposed U.S. IPO, each ADS represents three common shares for a total of 41.6 million common shares. The estimated price range was disclosed in an amended offering document filed with the U.S. Securities and Exchange Commission. Of that amount, the company is selling 33.3 million shares and shareholders are selling another 8.3 million shares. The placement was set in the RUSSIAN CAPITAL MARKETS highest range of $1921 per ADS which we see as a very positive for the company and may further rise interests to the Russian steel industry. Morning bell

October 29 2004 Friday