Annual Report 2003ALFA Annual Report 2003

O G U R R A A A P 3 0 0 2 p u n n o e a F L O G U R R A A A P 3 0 0 2 r p u n n o e a F t L l r t l ALFAALFA GROUP GROUP AnnualAnnual ReportReport 20032003 ALFAALFA GROUPGROUP AnnualAnnual ReportReport 20032003 ContentsContents

8 Statement by the Chairman of the Supervisory Board of Directors of Alfa Group 10 Supervisory Board of Directors 12 Alfa Group’s Corporate Centre 15 Alfa Group’s Investment Philosophy 19 Alfa Group Financial Highlights 20 Financial Review and Strategic Development of the Group 24 Alfa Group’s Principal Holdings 27 ● Financial Services – Alfa Bank; AlfaStrakhovanie Insurance Group 39 ● Oil & Gas Production – TNK-BP 45 ● Commodities Trading – Alfa-Eco Group 51 ● Retail Trade – Trade House Perekriostok 55 ● Telecommunications – Alfa Telecom (includes: Golden Telecom, Inc; VimpelCom; Kyivstar, MegaFon) 63 ● Technology – Russian Technologies 66 Serving Our Communities 70 Contact Information 73 Consolidated Financial Statements and Report of the Auditors

As one of the leading financial-industrial groups in Russia, and as one of the largest investors into emerging markets in the world, Alfa Group, its companies, and its people are recognised by presti- gious independent organisations and the media as leaders in their 5 industries. Following is a selection of some of this recognition:

■ 3RD ALL RUSSIAN COMPETITION “RUSSIAN “200 Most Professional Financial Officers, Top 20” (No.3) ■ CLUB OF CHIEF EDITORS OF REGIONAL ORGANIZATION WITH HIGH SOCIAL EFFICIENCY” Josef Bakaleinik, Chief Financial Officer at TNK-BP; (No.8) NEWSPAPERS OAO “Volga” (managed by Alfa-Eco): “Best Company in Teijo Panko, Chief Financial Officer at Alfa Bank (2003) Alexander Gafin, Director for Public Relations: Medal “Fourth Paper and Pulp Industry” (2002) “200 Most Professional IT Directors, Top 20” (No.8) Andrey Authority. For Contribution to the Press” (2003) Kuznetsov, Director of Information Technology at VimpelCom ■ 3RD ANNUAL NATIONAL AWARD IN MEDIA- (2003) ■ COMPANION MAGAZINE BUSINESS “MEDIA-MANAGER OF RUSSIA – 2003” “200 Most Professional HR Directors, Top 20” (No.10) Marina Igor Litovchenko, President of Kyivstar Company: “Best Alexander Gafin, Director for Public Relations: Malykhina, HR Director at Alfa Bank (2003) Manager - Тelecommunications” (2003) 1st Place, “PR–Industry” (2003) “Industrial & Regional Leaders” (No.4) Alexander Kosiyanenko, Chief Executive Officer at Perekriostok – ■ CREATIVE & CREATIVITY MAGAZINE ■ 10TH INTERNATIONAL EXHIBITION Trading Sector; (No.1) Peter Aven, President of Alfa Bank – Alfa Bank Express: 1st place, “Creative Company” (2003) “PRODEXPO-2003” Financial Sector; (No.10) Rushan Khvesyuk, Chairman of the Trade House of P.A. Smirnov’s Descendants (managed by Executive Board of Alfa Bank – Financial Sector (2003) ■ EFFIE AWARDS/BRAND OF THE YEAR Alfa-Eco): Gold Medal for Smirnov Vodka No. 21; Silver Medal VimpelCom, BeeLine GSM: “Highly Technological Services” for Liqueur “Mozzevelovaya” and “Klyukvennaya”; Bronze ■ THE BANKER MAGAZINE (2000, 2002, 2003) Medal for Liqueur “Limonnichek” and “Perzovaya”(2003) Alfa Bank: “Bank of the Year – Russia” (2000); “1000 Best TNK: “TNK Petrol Stations” (2002) Banks in the World” (2002) Alfa Bank Express: “Banks” (2003) ■ ALL RUSSIAN COMPETITION “GOLDEN Perekriostok: “Trading Chains and Centers” (2002, 2003) WEB-SITE” ■ BUSINESS WEEK MAGAZINE Golden Telecom: 1st Place, “Corporate Web-Site” (2002) Mikhail Fridman, Chairman of the Supervisory Board of ■ EMERGING MARKETS INVESTOR MAGAZINE Directors of Alfa Group: “The Stars of Europe – 25 Alfa Bank: “Best Domestic Bank in Russia” (2001) ■ ASSOCIATION OF MANAGERS AND Leaders” (2003) KOMMERSANT PUBLISHING HOUSE VimpelCom: 1st Place, “Best Telecommunication Company ■ EMERGING MARKETS NEWSPAPER “Business Leaders in Russia” (No.6) Mikhail Fridman, in the World and Best IT Company in Russia” (2002) Alfa Bank: “Best Trade Finance Bank in Russia and the CIS”, Chairman of the Supervisory Board of Directors of Alfa Group “Best Correspondent Bank in Russia and the CIS” (2004) - Inter-industrial Groups; (No.8) Peter Aven, President of Alfa ■ CANNES LIONS Bank - Financial Sector; (No.17) German Khan, Executive AlfaStrakhovanie: 1st Place, “Best Creative Idea for a Director of TNK-BP – Oil Sector (2003) Television Commercial” (2001) ■ EUROMONEY MAGAZINE ■ FORTUNE MAGAZINE ■ INTERNATIONAL ASSOCIATION Alfa Bank: “Highly Recommended Bank – Russia” (2000), Mikhail Fridman, Chairman of the Supervisory Board of OF BUSINESS COMMUNICATIONS Best Bank in Russia” (2002) Directors of Alfa Group: “Most Powerful People in Perekriostok: 1st Place, “Golden Net – Foodstuffs” TNK-BP: “Best Borrower of the Year” (2003) Business - Europe’s Power 25” (2004) (2002, 2003) TNK: 1st Place, “Golden Net – Petrol Stations” (2002) ■ EUROMONEY’S CENTRAL EUROPEAN ■ GENEVA INSTITUTE OF BUSINESS AND TNK-BP: 1st Place, “Golden Net – Petrol Stations” (2004) MAGAZINE MANAGEMENT ET AL Alfa Bank: “Best Bank in Russia” (1997, 1998, 1999, 2000, OAO “Volga” (Managed by Alfa-Eco): “Gold Medal for ■ INTERNATIONAL BEVERAGE INDUSTRY 2002) Irreproachable Business Reputation” (2002) FORUM Alfa-Eco: Gold Medal for 1700 Cognac; Bronze Medals for ■ EUROPEAN MARKET RESEARCH CENTRE ■ GLOBAL FINANCE MAGAZINE Smirnov Vodka and Armina 5 Star Brandy (2001) (EMRC) Alfa Bank: “Best Russian Domestic Bank” (1999, 2000, Igor Litovchenko, President of Kyivstar: Award “For out- 2001, 2002, 2003) ■ INTERNATIONAL EXHIBITION (ECOPRODEXPO) standing marketing achievements of Kyivstar and for inno- Alfa Bank: “Best Russian Trade Finance Bank” (2001, Perekriostok: Grand Prix – “Supermarket of the 21st vative policy” (2003) 2002, 2003, 2004) Century” (2003) Alfa Bank: “Best M&A Advisor” (2003, 2004) ■ EXPERT MAGAZINE Alfa Bank: “Best Foreign Exchange Provider ■ INVEST-GAZETA (Awards for Best Annual Reports) in Russia” (2004) Kyivstar: “ Most Dynamic Ukrainian Company” (2003) Alfa Group: “Internet Presentation” (2001 - Nominee; 2002 Alfa Bank: “Best Retail Bank in Russia” (2004) - Winner), “Richness of Information” (2002 - Nominee), ■ IR MAGAZINE AWARDS “Classic Genre” (2002 – Nominee), “Design and Printing” ■ INSTITUTE OF CORPORATE GOVERNANCE VimpelCom: “Best Corporate Governance Award”; (2003 - Winner) VimpelCom: Highest Overall Corporate Governance Rating “Best Investment Community Meetings and Roadshows”; Alfa Bank: “Classic Genre” (2000 - Winner), “Internet for a Russian Company (2000, 2001, 2002) “Grand Prix for Best Overall Investor Relations – Large Presentation” (2000 - Winner; 2002, 2003 - Nominee), Cap” (2003) Richness of Information” (2000, 2001 - Winner; ■ INSTITUTE OF ECONOMIC STRATEGY AND 2002, 2003 - Nominee), “Design and Printing” ECONOMIC STRATEGY MAGAZINE ■ JP MORGAN CHASE BANK (2001 - Nominee) Mikhail Fridman, Chairman of the Supervisory Board of Alfa Bank: “Best Bank in Terms of the Quality of US Dollar Alfa-Eco: “Design and Printing” (2002, 2003 - Nominee) Directors of Alfa Group: 1st Place, “Most Strategic Clearing” - Quality Recognition Award (2003) Managers” (2004) ■ EXPERT MAGAZINE Alfa Bank: 1st Place, “Leading Russian Companies” (2002) ■ KOMPANIYA MAGAZINE Alfa Bank: “Best Reputation Among Commercial Banks” AlfaStrakhovanie: 3rd Place, “Leading Russian Insurance TNK: “Best Fuel and Energy Company” (2000) (2002, 2003) Companies” (2002) TNK-BP: “Deal of the Year” (2003) Alfa Group Consortium: 1st Place, “100 Leading VimpelCom: “Best Telecommunications Company” (2001) ■ FINANCIAL TIMES Companies with the Highest Rating Status AAA and Alex Knaster, CEO of Alfa Bank: “Best Manager – Finance Mikhail Fridman, Chairman of the Supervisory Board of Maximum Strategic Level 88.0” (2004) Sector” (2000) Directors of Alfa Group: “Leaders of the New Europe” (2004)

■ FINANCIAL TIMES – ENERGY TNK: “World’s Best Oil and Gas Company” (2000) ■ MOSCOW INTERNATIONAL ADVERTISING ■ ROSBUSINESSCONSULTING ET AL FESTIVAL VimpelCom: “Best Service Company” (1999) Alfa Bank: 1st Place, “TV-Advertising” (2002) Perekriostok: National Award “Company of the Year - Consumers’ Services for Population”, “For Corporate ■ MOSCOW INTERNATIONAL CURRENCY Governance” (2003) ASSOCIATION Lev Khasis, Chairman of the Board of Directors of Alfa Bank: Best Currency Dealing – Russia (2002) Perekriostok: National Award “Person of the Year - Manager of Retail Business” (2002), “Person of the Year – ■ NATIONAL ASSOCIATION OF STOCK Entrepreneur” (2003) MARKETS PARTICIPANTS (NAUFOR) STOCK MARKET ELITE AWARDS ■ RUSSIADEAL LEAGUE Alfa Bank: “Best Credit Institution” (2001, 2002); Alfa Bank: “Leading Financial Consultant of Investment “Best Trading Institution” (2002); “Best Institution Banking Services on Russian Market” (2003) in Bond Market” (2002) ■ RUSSIAN MOBILE MAGAZINE ■ NATIONAL TRADE ASSOCIATION VimpelCom: “Best Cellular Operator. Choice of the Editors” Perekriostok: “Best Trading Chain” (2001); “Best Chain in (2003) Central Region” (2002) ■ STATE COMMISSION OF THE RUSSIAN ■ OIL & GAS INVESTOR MAGAZINE FEDERATION FOR TELECOMMUNICATIONS TNK: “Prize for Great Achievements in Corporate AND INFORMATION TECHNOLOGIES Governance” (2002) Alexander Vinogradov, President and CEO of Golden Telecom: Title “Master of Communications” (2003) ■ OPERATIONAL RISK MAGAZINE Alfa Bank: Operational Risk Achievement Award for ■ ST. PETERSBURG FAIR OF WINE & VODKA “Operational Risk Framework at a Financial Institution in an Trade House of P.A. Smirnov’s Descendants (managed by Emerging Market” (2004) Alfa-Eco): Gold Medal for Smirnov Vodka No.21, Liqueur “Sukharnichek” and “Brusnichnaya” ■ ORGANIZING COMMITTEE OF THE Alfa-Eco: Gold Medal for Gyumri Cognac; Grand Gold INTERNATIONAL FORUM “WORLD EXPERIENCE Medal for Cognac “1700 years of Christianity in Armenia” AND THE ECONOMY OF RUSSIA” (2002) Alexander Vinogradov, President and CEO of Golden Telecom: Medal “Leader of the Russian Economy” (2003) ■ UNION OF ENTREPRENEURS Alexander Fain, General Director of Alfa-Eco Group: ■ PROFIL MAGAZINE “Best Entrepreneur of the Decade – Trading Activities” (2001) AlfaStrakhovanie: “Most Professional Advertiser - Insurance” (2003) ■ WEBSITE OUTLOOK.RU 7 Perekriostok: 1st place, “Outlook Advertising” (May, June 2004) Statement by the Chairman of the Supervisory Board of Directors of Alfa Group 8

marked the fifth straight year of expansion in the Russian tion of US $1.46 billion - which will allow us to aggressively pursue 2003 economy with GDP growing on average by more than 5.8% interesting investment opportunities in Russia and the CIS as well as in per annum from beginning of 1999 through end of 2003 – other emerging markets. the world’s second fastest rate after China’s 7.6%. Not surprisingly, 2003 also marked the fifth straight year the RTS Index 2003 and 2004 also saw the further strengthening and diversification outperformed the MSCI Global Emerging Market Index. of our Group through continued investment into our existing busi- nesses including wireless telecommunications Although the Russian economy benefited and food retail. greatly from a uniformly robust commodity price backdrop (i.e. not only high oil and gas In the latter half of 2003 we acquired a 25.1% prices, but rising precious and industrial stake in MegaFon, the third-largest wireless metals prices), economic expansion in 2003 telecoms service company in Russia for US was increasingly driven by domestic invest- $295 million. We also funded the final tranche ment demand, growth in real wages and per- of our investment in VimpelCom of US $58.5 sonal consumption. Also noteworthy was million which is being used for the continued the fact that Russia’s growth was not limit- expansion of VimpelCom’s Russian regional ed to only the oil and gas sector, but it was cellular network. Also, Golden Telecom itself spread rather evenly across almost all sec- during 2003 and 2004 made a number of pru- tors of the economy. During 2003 and into dent strategic regional acquisitions aimed at 2004, we continued to capitalise on building economies of scale and market share. favourable macro-economic conditions. At the end of 2003 our investment in telecom assets was valued in excess of US $2 billion, Thanks to oil-inspired earnings, and the making us one of the largest private investors realization of profit on part of our Russian in the telecom sector in Russia and CIS. and Ukrainian oil and gas assets via merger with BP plc’s Russian oil and gas interests, Also significantly, in early 2004, we consolidated the year 2003 marked our most profitable all of our telecom assets (VimpelCom, Golden year ever in our 15-year history – we earned Telecom, Kyivstar and MegaFon), which were net profits of US $1.99 billion. 2003 also marked the Group’s fifth previously held in different parts of our Group, under a newly established consecutive year of strong profitability, with cumulative net profits of holding company - Alfa Telecom which will be used as the Group’s exclu- US $5.10 billion for the five-year period ended in 2003. At 31 sive vehicle for making investment into telecom assets. We plan to December 2003, Group shareholders’ equity reached US $4.65 billion aggressively develop and strengthen our telecom business through fur- – its highest-ever level. Alfa Group Consortium ended the year 2003 ther acquisitions in Russia, the CIS and other developing markets and by stronger and with an unprecedented financial flexibility – a cash posi- improving the liquidity of existing telecom assets. In early 2003, we funded the last US $10 million of our US $30 million the Russian economy over the next several years. We are also increas- capital injection into Trade House Perekriostok, our supermarket ingly interested in prudent investment into existing and potentially new chain. During 2003 and 2004 Perekriostok continued to rapidly lines of business in attractive emerging markets outside of Russia, expand into a number of promising Russian regions. This expansion where we have not historically focused our investment activities. was achieved organically, through the opening of new Perekriostok shops, as well as through the acquisition of 70.1% of SPAR Middle On behalf of the Supervisory Board of Directors, I wish to express Volga which owns seven supermarkets in Nizhniy Novgorod and the appreciation to all of our clients and partners for their business and surrounding region. for their unwavering trust and support over the years. I would also like to thank our management and our employees for their remarkable 2003 was also a decisive year for our Group in terms of co-operating contributions during the year – contributions that have been key to with foreign investors. The most noteworthy of this co-operation was sustained growth and profitability of the Group. the merger of TNK and our other oil assets (which we jointly owned with Access-Renova) with BP’s Russian oil assets under a single hold- ing company – TNK-BP, forming Russia’s third largest (by production Mikhail Fridman and reserves) oil company. Under the terms of the deal, TNK-BP is owned 50% by BP, 25% by Alfa Group and 25% by Access-Renova. This deal is the largest single foreign direct investment in Russian his- tory. In addition, together with our minority shareholder, we sold a 7.7% stake (new shares) in Perekriostok to Templeton Strategic 8 October 2004 Emerging Markets Fund LDC.

As has been the case in prior years, we continue to re-invest substan- tially all of our profits back into our existing businesses and make new investments on the belief that this is the best and highest use of our capital. In the five-year period ended 31 December 2003, we have re- invested US $4.98 billion of our US $5.10 billion in net profits – a re- investment rate in excess of 97%.

Looking beyond 2004, the Russian economy will be driven by rapidly ris- ing consumption and expanded consumer credit, as well as increasing 9 investment which will be bolstered by continuing liberal economic reforms. Further large-scale investment into telecom, food retail and retail banking will play an increasingly important role in the Group, pro- viding us with diversification and increased stability in earnings as the contribution from our oil and gas business comprises a lower proportion of Group earnings going forward. In terms of future exits from existing investments, we believe that well-run, progressive, transparent compa- nies will continue to attract increasingly serious investment from for- eign investors. We are confident that we are well positioned to benefit from the major trends which will persist in working their way through SupervisorySupervisory BoardBoard ofof DirectorsDirectors

The Supervisory Board of Directors of Alfa Group is the Group’s supreme consultative and oversight body that sets the general direction for the strategic development of the Group as a whole as well as of its individual companies. The Supervisory Board comprises 10 members who represent the main companies of the Group. Supervisory Board meetings are held once every two weeks, and serve as a forum to exchange ideas and opinions about the current developments in the world economic and political arenas. The Supervisory Board also considers key strategic issues for the Group, including the review of major financial and investment transactions, the critical evaluation of company performance, and the development of strong corporate governance and control mechanisms. The scope of activity of the Supervisory Board and of our individual companies’ Boards is regulated by the Group Statute and corporate regulations, which are periodically reviewed and appended.

The Annual Meeting of the Group is held each April at which time the Supervisory Board reviews the results of the yearly performance, approves performance-related compensation for top executives, ratifies forward-looking budgets, and agrees on the overall strategy for each of the Group’s companies.

The year 2003 has seen the continued strengthening of the Boards of Directors of our Group companies due to the appointment of new independent directors and the establishment of working committees (strategy, compensation and audit committees). Still, the Supervisory Board reflects on the important topics and shares its collective insight and experience with the leadership of our Group companies, to push the frontiers of our companies’ success.

Mikhail German Alexei FRIDMAN KHAN KUZMICHOV Chairman of the Executive Director Chairman of the Supervisory Board of of TNK-BP Board of Directors Alfa Group Consortium of Alfa-Eco Group

Mr. Fridman is a prin- Mr. Khan is the Mr. Kuzmichov is 10 cipal founder of Alfa Executive Director responsible for the Group Consortium. and a member of the strategic co-ordina- He graduated from the Moscow Management Board of TNK-BP Mana- tion and development of commodity Institute of Steel and Alloys. Two years gement. Mr. Khan is also a member of trading activities within the Alfa Group later together with other investors, he the Board of Directors of Slavneft and through the Group’s trading arm — founded Alfa-Eco, a trading company Alfa Finance Holdings SA. From 1992 Alfa-Eco. Mr. Kuzmichov is also serves on which he built Alfa Group to 1998, he held various managerial as Chairman of the Board of Directors Consortium. Mr. Fridman also serves as posts in Alfa Group. From 1995 to 1998 of Russian Technologies and is a mem- Chairman of the Board of TNK-BP and he held the post of Director of the ber of the Board of Directors of Alfa is a member of the Board of Directors of department of commodity trading at Finance Holdings SA. Mr. Kuzmichov is VimpelCom. Mr. Fridman was born in Alfa-Eco. Mr. Khan is a graduate of the a graduate of the Moscow Institute of Lvov, Ukraine in 1964. Moscow Institute of Steel and Alloys. Steel and Alloys. Не was born in Kirov, He was born in Kiev, Ukraine in 1961. Russia in 1962. Peter Alexander Alexander Alexander AVEN SAVIN FAIN KOSIYANENKO President of Chief Executive Officer General Director of Chief Executive Alfa Bank of Alfa-Eco Group Alfa-Eco Group Officer of Trade House Perekriostok

Mr. Aven is responsi- Since October 2003, Mr. Fain is the author Mr. Kosiyanenko is ble for the Bank’s Mr. Savin serves as of more than 70 scien- the founder of Trade overall strategy and CEO of Alfa-Eco tific articles, manuals, House Perekriostok for relations with business and govern- Group where he is responsible for overall books, monographs, and patents. Mr. and serves as Chief Executive Officer. ment leaders. Prior to joining the Bank, strategic business development. From Fain graduated from the Moscow He is responsible for the overall strate- Mr. Aven was Minister of Foreign 1992 to 2001, Mr. Savin worked at Bain & Institute of Chemical Engineering with gy and development of the Company. Economic Relations for the Russian Company in Moscow, Boston and honours. He also holds the title of Prior to establishing Perekriostok, Mr. Federation (1991-1992). He also London. From September 2001 Mr. active member of International Aca- Kosiyanenko served as Chairman of the worked at the International Institute for Savin worked as a Director in the invest- demy of Sustainable Development and Board of Directors of the commercial Applied Systems Analysis in Austria. ment banking department of Renais- holds a candidate’s degree and is a bank Moskva-Centre. Mr. Kosiyanenko Currently, he is Chairman of the Board sance Capital. He is also a former mem- professor in the field of applied mathe- graduated from the Moscow Institute of of Directors of Golden Telecom and ber of the Board of Directors Mosenergo matics. Mr. Fain was included in Profile Steel and Alloys. He was born in Co-Chairman of the Board of Directors and Kuzbassenergo. Mr. Savin is a grad- magazine’s annual list of the 50 most Volgograd, Russia in 1964. of STS Media. He holds a PhD in uate of Moscow State University and influential businessmen in Russia. He Econometrics from Moscow State received his MBA at Harvard Business was born in Moscow, Russia in 1936. University. Mr. Aven was born in School in 1996. Mr. Savin was born in Moscow, Russia in 1955. Moscow, Russia in 1969.

Mikhail Nigel Alexei GAMZIN ROBINSON REZNIKOVICH General Director of Director of Corporate Director of Group Russian Technologies Development, Finance Portfolio Management and Control – Alfa Group and Control – Alfa Group

As the principal Mr. Robinson is Mr. Reznikovich is founder and General responsible for coordi- responsible for mana- Director of Russian nating financial control gement-audit as well 11 Technologies, Mr. Gamzin is responsible and reporting of all Alfa Group companies as the application and control over fulfill- for its overall strategy and development. and for corporate governance for the ment of strategic recommendations for Prior to forming Russian Technologies, Group as a whole and control over the all companies in the Group. Mr. Mr. Gamzin served as Chairman of the ultimate holding company of the Group. Reznikovich graduated from the Board of Directors of Intec Group, a Mr. Robinson is a British qualified Moscow State University, Economics sugar and grain business which in 2001 Chartered Accountant and a member of Faculty and received his MBA from both merged with Alfa Group’s sugar business the Institute of Chartered Accountants in Georgetown University (USA) and to create United Food Company. UFC England and Wales. He graduated from INSEAD (France) in 1993. From 1993 to was sold to a Russian strategic investor at the Accounting Faculty of Norwich City 2000 Mr. Reznikovich worked in the end of 2002. Mr. Gamzin graduated Institute in the UK. Prior to joining Alfa McKinsey & Co. In 2000 he and his part- from Moscow Commercial Institute, Group, Mr. Robinson was a senior man- ners established a new company, EMAX, Foodstuff Commodity Research and ager in the audit and business advisory which develops Internet centers in Sales Faculty in 1989. Mr. Gamzin was group at PricewaterhouseCoopers. He Russia. He was born in Moscow, Russia born in Krasnodar, Russia in 1964. was born in Corringham, England in 1967. in 1968. ALFAALFA GROUP’SGROUP’S CORPORATECORPORATE CENTRECENTRE

CTF Holdings Ltd (CTF), founded in 1996, is the ultimate holding company of the Alfa Group Consortium and fulfils the functions of the Group Corporate Centre. The Corporate Centre reports directly to the Supervisory Board of Directors through both the Director of Corporate Development, Finance and Control who heads CTF Holdings and serves as Secretary of the Supervisory Board, and through the Director of Group Portfolio Management and Control.

The primary mandate of the Corporate Centre is to increase shareholder value by managing development-related risks of the Group through the implementation and maintenance of strong mechanisms of corporate governance and financial, strategic and investment control within the Group. More specifically, this includes providing decision-making and implementation support to the Supervisory Board, the representation and protection of shareholder interests as well as the provision of direct assistance to the companies forming the Group.

The work performed by the Corporate Centre covers an extensive range of key functions including:

Financial Control and Audit Corporate Governance Strategic Planning Organizational Structure and Human Resources

Includes the development of a Group-wide Includes working to increase effectiveness of Responsibilities include developing and accounting and reporting policy; Review of the Boards of Directors, including the recruit- implementing Group-wide standards and Includes the provision of assistance to our quarterly company IFRS accounts; ment of independent directors and establish- recommendations to facilitate meaningful companies in hiring key management, Preparation of Group consolidated IFRS ing fully functioning Board committees (e.g. and timely strategic planning in our compa- finance and other senior personnel; accounts; Coordination of the external Audit, Strategy, and Remuneration nies; Critical analysis of strategic plans Conducting organizational audits of our audit; Attracting strong personnel for key Committees); updating and enforcement of (pre-implementation), operating plans and companies; Establishing appropriate finance and accounting positions; Creation the Group corporate statute which governs budgets through direct work with our com- systems of motivation and compensation. of and oversight over Internal Audit decision-making in the Group; Improving panies and active work on the Board and Departments in our companies; Group transparency of the Group through the Board committees of our companies; Special Projects compliance role (SEC). Group’s website and publication of the Group Continual monitoring of strategy implemen- annual report. tation; Support to our companies in devel- opment and implementation of an effective Includes significant involvement in facili- system of key performance indicators Legal and Shareholder Matters Investment Planning tating Group acquisitions and divestitures (KPIs) and assistance in developing KPI- as well as Group restructurings and other based compensation strategies. Responsibilities extend to development of Responsibilities include the development ad-hoc projects. an efficient and transparent Group-wide and implementation of Group-wide stan- ownership structure; Developing formal, dards for evaluating and approving invest- IT Development transparent decision-making procedures; ment decisions; Issuance of policy manuals Efficient structuring of transactions and to our companies regulating the approach, 12 restructurings; Representation of share- methodology and format to investment deci- Includes assessment and support in devel- holders’ interests in respect of various sion-making; Enforcement of investment oping sustainable IT strategies in our com- matters. decision-making regulations; Monitoring and panies; Critical review of IT budgeting and control over individual investment projects; key IT projects in our companies; Organisa- Organization of the work of our companies’ tion of the work of Alfa Group’s IT Expert Investment Committees including assistance Council (comprising our companies CIOs) in preparing major investment decisions transferring best practices and sharing taken by the Investment Committees and expert knowledge. Boards of our companies.

ALFAALFA GROUP’SGROUP’S INVESTMENTINVESTMENT PHILOSOPHYPHILOSOPHY WE RELY ON OUR INVESTMENT PHILOSOPHY TO GENERATE SUPERIOR RETURNS FOR OUR SHAREHOLDERS OVER THE LONG TERM, TO PROMOTE SOUND CORPORATE GOVERNANCE AND BUSINESS PRACTICIES, AND TO BENEFIT OUR PARTNERS, COUNTERPARTIES, EMPLOYEES, THE RUSSIAN CONSUMER AND SOCIETY AT LARGE. WE CONTINUE TO BELIEVE THAT MUCH OF OUR FUTURE SUCCESS WILL BE ROOTED FIRMLY IN THIS INVESTMENT PHILOSOPHY.

Simply stated, we are value-oriented investors. In evaluating any investment opportunity, We are opportunistic our investment philosophy is driven by the opportunity to purchase assets that, due to investors. perceived risk, low liquidity, disinterest or a lack of understanding on the part of market participants, are undervalued.

Much of our past success has been the result of our intimate We believe the most knowledge and understanding of emerging markets, in particular, attractive opportunities the Russian and CIS markets. We believe there are still substantial are in world emerging 15 opportunities in the world’s emerging markets and that we are well markets. placed to take full advantage of them.

We typically make investments on the basis that we will have either majority or joint control, We are interested in through share ownership, board representation, or both. Non-controlled investments are investments over generally not attractive to us because the lack of control makes it difficult to guide the which we can exercise development of these companies and maximise shareholder value. Joint control is accep- control. table in cases where the joint venture partner is reliable and brings experience or skills that complement our own, or shares funding obligations and risks, which due to their size or nature, we wish to share. The lack of liquidity of emerging market assets makes any exit strategy tenuous. We typically take a longer- In Russia and the CIS in particular, the lack of liquidity is pervasive, which places it term view, in order to outside our direct control. We use this time to develop our assets and guide our realise the full potential of companies to close the value gap. While we do not particularly welcome the our investments. inflexibility of being wed to an investment for the longer term, we lower our risks by seeking undervalued investments that provide ample down side protection and, as far as possible, interim cash flows.

The need to attract foreign investment is becoming increasingly critical. Foreign investors We view co-operation with provide not only capital investment, but also the expertise, credibility and advancement foreign investors and the of reputation which is needed to successfully develop and realize the full value of our attraction of foreign capital investments. We are fully aware that the failure to attract longer-term foreign investment as important to the develop- will result in under-developed assets and missed business opportunities. Also, with ment of our companies. regard to exit strategy, sale to foreign investors provide us with a logical and attractive means of exiting our investments.

First and foremost we are investors, not business managers — we leave We do not consider the day-to-day management and operating decisions of our companies ourselves experts in to professional, competent management with industry experience. Our 16 managing and operating companies are independent entities and are given fairly wide latitude to the companies that we own. conduct their affairs. However, we actively advise and take decisions on important strategic matters that have an impact on the shareholder value of our companies. We also continually evaluate management and measure the financial performance of our investments.

We require those in which we invest to be one of the top three in their business field We are guided by the or with a clear potential to become one of the top three within a reasonable period. philosophy of investing in Where we see that our investments are not meeting this criterion, we take active only those companies that measures to divest and free up our financial and management resources for more are leaders in their effective investments. respective fields of business.

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ALFAALFA GROUPGROUP FINANCIALFINANCIAL HIGHLIGHTSHIGHLIGHTS ('000 USD)

2003 2002(1) 2001(1) 2000(1) 1999(2)

Cash and Cash Equivalents 1,460,080 405,694 619,647 631,981 300,042

Trading Securities andInvestments Available for Sale 1,128,863 552,416 353,805 294,714 161,742

Long-term Funding (3) 252,723 341,404 82,270 139,854 163,853

Shareholders’ Equity 4,648,617 2,517,175 1,901,693 1,015,998 120,950

Gain Arising from Investments Available for Sale 48,671 75,238 61,653 53,309 16,853

Gain from Disposal of Interest in Joint Ventures, Associated Companies and Subsidiaries 2,091,972 32,767 – – –

Net Profit 1,991,172 625,765 870,095 1,158,288 457,639

Source: Annual audited IFRS financial statements. (1) Expressed in terms of the purchasing power of the Russian Rouble at 31 December 2002; (2) As stated in the 2000 IAS financial statements (corresponding figures); (3) Includes non-current: borrowings, customer accounts and due to banks. FinancialFinancial ReviewReview andand StrategicStrategic 20 DevelopmentDevelopment ofof thethe GroupGroup

In 2003, the Group operated across five different business segments – Financial Services, Oil & Gas, Commodities Trading in Russia, CIS and Overall Analysis of the Group’s Southeast Asia, Retail Trade and Telecoms. All segments contributed Financial Results for 2003 positively to the Group’s net profit of US $1.99 billion in 2003 (see table on page 21). Analysis of the By far and away, oil and gas assets comprised the largest part of the By all measures, 2003 was an outstanding year for the Alfa Group Group’s Financial Group’s net profit – US $1.89 billion, or 94.6%. Approximately 61% Consortium. We ended the year larger, stronger and with a cash posi- of this net contribution was realized as a gain from merging our oil tion that permits us to be even more opportunistic in pursuing attrac- Results for 2003 by and gas interests in Russia and Ukraine with BP’s oil and gas tive investment prospects. Net profit more than tripled from US $626 Industry Segment interests in Russia while the remaining 39% was from the million in 2002 to US $1.99 billion in 2003. At 31 December 2003, proportional share of net profits in our investment in TNK-BP. In shareholders’ equity stood at US $4.65 billion, its highest-ever level. realizing part of our investment via this merger, we reduced our overall Return on shareholders’ equity for 2003 was 56% while return on exposure to oil and gas assets, however, we still carry a relatively large assets was 21%. exposure. As we have stated many times before in these pages, this is an exposure which we continue to feel comfortable with because of our We continued to strengthen our balance sheet with a year-on-year perception of the continued favourable risk-to-reward ratio of Russian oil and reduction in relative debt levels. The ratio of long-term debt to share- gas assets, in particular since we have partnered with BP, and because of the holders’ equity fell to 0.05 at the end of 2003 from 0.14 at the end of growing strategic importance of other business segments of the Group. 2002, and the ratio of long-term debt to assets fell to 0.02 at the end of 2003 from 0.05 at the end of 2002. The Group also improved its liquid- After the oil and gas segment, our telecommunications segment (comprising VimpelCom, Golden Telecom, Kyivstar ity position, mainly as a result of closing our deal with BP during late and MegaFon) contributed the next largest amount to Group net profit. All of the companies that we invest into in 2003. The Group’s cash position increased from US $406 million at the this segment are achieving increasingly strong financial results as they begin to realize economies of scale from end of 2002 to US $1.46 billion at the end of 2003. several years of heavy investment and from recent acquisitions on the markets in which they operate. In absolute terms, the telecoms segment contributed nearly three times more net profit in 2003 than in 2002. Financial services Growth of US $1 Invested into RTS Index versus Alfa Group (comprising both Alfa Bank Group and AlfaStrakhovanie Insurance Group) contributed the next largest amount to (1 January 2000 – 31 December 2003) Group net profit. Retail Trade (Trade House Perekriostok) contributed a relatively modest amount to Group net profit in 2003 as it continued to fulfil its ambitious expansion plans into Russia’s regions. Commodities Trading in Russia, CIS and Southeast Asia (Alfa-Eco Group) posted a small net profit in 2003 after posting a previous year loss. In early 2004, Alfa-Eco significantly restructured its business to focus exclusively on the kind of proprietary and for-client special-situation investment projects which it has been successfully involved for the past several years. As part of $3.24 this restructuring Alfa-Eco ceased its trading business as it has been either loss-making or only marginally profitable (224%) for the past few years.

Russian Technologies, discussed later, did not impact on net profit of the Group as it was established during 2003 and made its first investment in 2004. $38.43* (3743%) Alfa Group RTS 0 500% 1000% 1500% 2000% 2500% 3000% 3500% 4000%

* As measured by change in Group shareholders’ equity (based on historic USD as at 31 December 1999). Note that there were no capital contributions into the Group during this 4-year period. Continued Development of New and Existing Businesses

Percentage Breakdown of Alfa Group’s Net Profit/Loss by Industry Segment

2003 2002 For the past several years, as investors we have taken the view that substantial re-investment of the Group’s net profits, both into our existing businesses and investment into new businesses is the highest and best use of our capital. In the five-year period ended 31 December 2003 we re-invested US $4.98 billion of our US Oil & Gas Production 94.6% 91.1% $5.10 billion in net profits – a 97.6% re-investment rate. During the same period only US $121.1 million Telecommunications 3.3% 3.7% (2.4%) of the Group’s net profits were paid as dividends. Financial Services 1.8% 12.2% Retail Trade 0.2% 1.0% To arrive at our investment decisions, we make use of investment appraisal procedures which have been Commodities Trading in Russia, standardised across the Group’s major companies and that utilise modern financial modelling and risk analysis techniques, which help to identify sources of value creation. In 2003 and 2004 we continued to CIS and Southeast Asia 0.1% (4.7)% make strategic investment into telecommunications and retail sectors, as well as new investment into the Food Processing n/a 5.6% technology sector. International Commodities Trading n/a (8.9)% Total 100.0% 100.0%

Source: Derived from the annual audited IFRS financial statements GROWTH IN SHARE PRICE OF VIMPELCOM AND GOLDEN TELECOM Telecommunications SINCE ALFA GROUP INVESTED IN MID-2001 Since realizing part of our investment after merging our oil assets with BP’s Russian oil assets, we have reduced our exposure to oil 100 VIP = 554% and gas assets in absolute terms. Looking beyond 2003, the oil GLDN = 162% and gas segment will also probably contribute less to Group net In August 2003, we funded three months early, the 80 profits in relative terms as the scale of our investment into other final tranche of our investment in NYSE-listed business segments - especially telecoms and food retail - VimpelCom of US $58.5 million which is being 60 continues to grow. Furthermore, we expect that a larger proportion used for the continued expansion of VimpelCom’s of our earnings in the years to come will derive from outside of Russian regional cellular network. Also, in August 40 Russia as we are now seeing some interesting investment 2003, we acquired a 25.1% stake in MegaFon, the possibilities in other promising emerging markets. third-largest wireless telecoms service company in Russia for US $295 million. Golden Telecom itself 20 during 2003 and into 2004 made a number of strategic regional acquisitions aimed at building 0 Dec 31 Dec 31 Dec 31 Aug 31 economies of scale including a 100% stake in 2001 2002 2003 2004 Sibchellenge (Krasnoyarsk), an effective 50%+1 stake in Samara-Telecom, and an effective 100% stake in Comincon-Combellga. VimpelCom Golden Telecom 21 Our investments into Russian fixed-line and Internet provider Golden Telecom, and cellular In January 2003, we funded the last US $10 million of our US $30 mil- communications service companies VimpelCom, MegaFon and Kyivstar make us one of the lion capital injection into Trade House Perekriostok for the purpose largest private investors into the Russian/CIS telecommunications markets. Since having made of funding continued rapid expansion. During 2003, Perekriostok our first investments into the telecoms sector in mid-2001 through purchase of significant stakes expanded into a number of promising Russian regional areas in US NASDAQ-listed Golden Telecom and US NYSE-listed VimpelCom, their share prices have including Nizhniy Novgorod, Samara, Volgograd, and Togliatti risen 162% and 554% respectively through 31 August 2004. Retail trade and also increased its presence in St. Petersburg. This expan- sion was achieved organically, through the opening of new Also noteworthy was the restructuring of our telecom assets in early 2004 – a restructuring Perekriostok shops, as well as through the acquisition of which consolidated all of the Group’s telecom assets (VimpelCom, Golden Telecom, Kyivstar 70.1% of SPAR Middle Volga which owns seven supermarkets and MegaFon), which were previously held in different parts of the Group, under a newly in Nizhniy Novgorod and the surrounding region. We also established holding company - Alfa Telecom. Through this reorganization, we realized definite retain an option through the beginning of 2008 to acquire the organizational and governance efficiencies and an improved overall flexibility allowing us to remaining stake from management. Looking forward, we are cer- better pursue telecom opportunities both in Russia and the CIS as well as other emerging tain that acquisitions will play a key role in expanding Perekriostok’s markets. Alfa Telecom will be used as the Group’s exclusive vehicle for making future presence in Russia and the CIS. investment into telecom assets.

During 2003 we formed a new Group company, Russian Technologies. This Company is focusing on the identification and commercial exploitation of promising Russian technologies for world-wide consumer and industrial use as well as the import of certain technologies into Technology Russia. Noteworthy projects which have already received initial funding include investment into the production of rechargeable electric motors for bicycles and lightweight vehicles and power line communication technology (PLC), which envisions usage of existing power supply networks to enable high-speed and high-quality communication. A number of other projects are under review for possible funding.

As we have 2004 to 2006. In July 2004, together with 2004, despite tougher credit conditions. Co-operation with Foreign stated many Access-Renova, we sold our entire interest After successful capital raising on the times in these in the three BP tranches to a third-party Eurobond markets by VimpelCom, Alfa Bank Investors pages, we view bank for US $3.58 billion. Also, in January and TNK in 2002, our companies continued the attraction 2004, BP paid an additional US $1.4 billion to attract longer, cheaper and more stable of foreign capi- to Alfa Group and Access-Renova for the financing. In early 2004 Trade House tal and foreign contribution by Alfa Group / Access-Renova Perekriostok closed a 2-year syndicated expertise as essential to the development of of our 50% Slavneft stake into TNK-BP. Our borrowing with international private banks our businesses – co-operation with foreign deal with BP is, by far, the single largest for- for US $75 million – the first ever all-private investors forms a very important part of our eign direct investment in Russian history. international syndication for a Russian retail 22 strategy as a sale to foreign investors pro- The purchase price of the deal at the time company. In March 2003, Kyivstar launched vides us with an attractive and logical means implied financial valuation multiples which US $60 million in 3-year loan notes, follow- of exiting or partially exiting our investments. were in line with or at a premium to other ing their November 2002 offering which Russian oil majors. raised US $100 million. This was the first In August 2003, we expanded our relation- ever Ukrainian corporate bond issue and ship with BP by merging virtually all of our In April 2003, together with our minority first ever 144A offering from Ukraine. Alfa Russian and Ukrainian oil and gas assets investor, we concluded the sale of a 7.7% Bank also, at the end of 2003, launched a with almost all of BP’s Russian oil interests stake (new shares) in Perekriostok to portfolio US $200 million Euro commercial paper pro- into TNK-BP, a newly formed holding com- investor, Templeton Strategic Emerging gramme with maturities of up to one year – pany. Under the terms of the deal, TNK-BP Markets Fund LDC. At the time, the implied the first out of Russia since the 1998 debt is owned 50% by BP, 25% by Alfa Group post-money equity valuation for Perekriostok crisis. In addition to being obtained on and 25% by Access-Renova. Additionally, was more than 3 times the amount of our favourable financing terms, the program BP paid total cash of US $2.6 billion at the aggregate historical investment. diversifies the Bank’s funding base and pro- close of the deal to Alfa Group and Access- vides very good flexibility to fund the Bank’s Renova and is committed to paying three In addition to the equity markets, our com- clients. In mid-2004, VimpelCom raised US subsequent annual tranches of equivalent panies were also successful in tapping the $450 million on the Eurobond markets in US $1.25 billion each in BP shares from international debt markets in 2003 and into 5-year notes. Outlook

Over the past 1.5 years, Russia’s economy has shown substantial progress in terms of curb- ing existing risks. The Russian fiscal system is more transparent, the debt burden no longer threatens economic stability, and Russian reform, while slow continues to move ahead with reasonable effectiveness. While significant, sustained, wide-spread foreign investment has been slow to materialize, it is clear that the scope for increase for investment in Russia is tremendous. We have for some time appreciated that only those companies which demon- Divestiture of Group Assets strate a true and lasting commitment to principles of transparency and corporate gover- nance will manage to co-operate successfully with foreign investors. It is not accidental that we have a long history of extensive co-operation with foreign investors.

From time to time, we take the decision to exit certain of our investments. We typically take Despite the periodic instability exhibited by the Russian economy during 2004, all indica- the decision to divest as it allows us to re-deploy capital to more interesting opportunities, tions suggest that 2004 promises to be another strong year for the Group. As experienced focus management attention on investments which have strategic priority, and to realize investors, we remain confident in our abilities to manage the risks and navigate the changes returns by exiting or partially exiting investments which we consider to be fully-valued. which are now taking place in Russia and to capitalize on both investment and exit oppor- tunities. In the years to come, our companies will be well placed to benefit not only from the Aside from our merger transaction with BP which, in-effect was a partial exit from our oil and growing participation of foreign investors, but also from the continuing long-term domestic gas investments, we had two other notable exits during 2003. In late 2002, together with trends of rising consumption, increasingly-wide availability of credit, and continuing eco- minority investors, we purchased approximately 20% of GDR-listed GUM, the largest nomic reform. We are increasingly interested in prudent expansion of existing businesses department store chain in Russia, for US $31.2 million on our belief that it was appreciably and new investment outside of Russia, especially in the area of telecommunications. As undervalued. In early 2004, together with minority investors, we opportunistically sold our stake Russia continues its inevitable integration into the world economy and as we begin to look in GUM, for net proceeds of US $78 million to a Russian strategic investor. Also in late 2003, to new markets to invest, as always, we will remain steadfastly committed to our investment Alfa-Eco Group sold its approximately effective 46.5% stake in Volga, the largest manufacturer philosophy, a philosophy which has served us well for more than 15 years (see pages 15–16). of newsprint in Russia, for US $56.2 million, to our joint venture partner, realising US $5.9 million profit over the carrying value of our investment.

23 Alfa Bank Group Largest private bank in Russia. Wide range of financial services, including commercial and investment banking, trade finance, and asset management. AlfaAlfa Group’sGroup’s

AlfaStrakhovanie PrincipalPrincipal HoldingsHoldings Insurance Group Leading issuer of non-obligatory insurance in Russia.

TNK-BP 3rd largest (by production and reserves) vertically integrated oil company in Russia. Alfa-Eco Group* 24 Commodities trading and distribution in Russia, CIS and Southeast Asia. Strategic investment into telecom- munications. Proprietary and for-client investment in Russia, the CIS and other developing markets.

Golden Telecom, Inc. Trade House Perekriostok Leading facilities-based provider of integrated Leading chain of supermarkets and hypermarkets in telecommunications and Internet services in major Moscow and other population centres in Russia. population centres in Russia and CIS.

ALFA Alfa Telecom TELECOM One of the largest private investors into wireless and VimpelCom fixed-line telecommunications companies in Leading wireless telecommunications service company Russia/CIS and other promising emerging markets. in Russia.

Russian Technologies Kyivstar Investment in and development of promising Russian Leading wireless telecommunications service company commercial and consumer technologies. in Ukraine.

MegaFon 3rd largest wireless telecommunications service company in Russia.

* - In the first-half of 2004, Alfa-Eco Group ceased its trading business and transferred its interests in VimpelCom and MegaFon to Alfa Telecom. Since this restructuring, Alfa-Eco Group is engaged exclusively in propri- etary and for-client investment in Russia, the CIS and other developing markets.

ALFAALFA BANKBANK

ALFA BANK, RUSSIA’S LARGEST PRIVATELY OWNED BANK, WAS FOUNDED IN 1990. ALFA BANK IS A UNIVERSAL BANK AND IS PRE- SENT IN ALL KEY SECTORS OF THE FINANCIAL SERVICES INDUSTRY, INCLUDING CORPORATE BANKING, RETAIL BANKING, INVEST- MENT BANKING, TRADE FINANCE AND ASSET MANAGEMENT. WITH THE OPENING OF SEVERAL NEW OFFICES IN RUSSIA DURING THE FIRST-HALF OF 2004 ALFA BANK BRANCH NETWORK REACHED 120, INCLUDING SUBSIDIARY BANKS IN RUSSIA, UKRAINE, KAZAKHSTAN, THE NETHERLANDS AND A REPRESENTATIVE OFFICE IN LONDON. IN ADDITION TO BANKING, THE BANK HAS REGU- LATED FSA AND NASD BROKERAGE SUBSIDIARIES LOCATED IN LONDON AND NEW YORK — ALFA SECURITIES LIMITED AND ALFA CAPITAL MARKETS INC. www.alfabank.com 27 Alfa Bank Today

In today’s competitive environment, Alfa Bank successfully combines international standards of business and corporate management with the unique experience of work in the Russian market. Today the Bank is able to offer its clients a full spectrum of banking products and services and continues to innovate and strengthen the Bank’s professional team.

During 2003 and 2004, Alfa Bank continued to receive accolades from the international financial media. In 2003, Alfa Bank was recognized as Best Russian Domestic Bank, Best M&A Advisor in Russia, and Best Trade Finance Bank in Russia by Global Finance. The Bank was also voted Most Improved Bank in Emerging Europe by the publication Emerging Markets.

Also, during 2004, the publication Operational Risk presented Alfa Bank the Operational Risk Achievement Award for “Operational Risk Framework at a Financial Institution Based in an Emerging Market”. Global Finance named Alfa Bank Best Trade Finance Bank in Russia, Best Foreign Exchange Bank in Russia, Best M&A Advisor in Russia and Best Retail Bank in Russia. Emerging Markets named Alfa Bank Best Correspondent Bank and Best Trade Finance Bank in Russia and CIS.

In addition to receiving awards, Alfa Bank also bestowed awards in 2003. Alfa Bank and the Lauder Institute of the Wharton School of Business in 2003 selected Procter & Gamble as the winner of the Annual Award for Excellence in Foreign Investment in Russia, an award that honours a foreign firm that is conducting business successfully in Russia, while at the same time contributing to a broader improvement of Russia’s business culture and society as a whole. Alfa Bank Chairman Mikhail Fridman presented this prestigious Award.

Currently, Alfa Bank’s long-term ratings are Fitch (B+, with stable outlook), Moody’s (Ba2, with stable outlook) and Standard & Poor’s (B, with stable outlook). During 2003, the Bank not only maintained its position Financial Highlights Corporate Banking as a leader of the Russian financial market, ranking among the top three companies in nearly every segment of the market, but also significantly strengthened its leadership. Alfa Bank today is not only the largest private bank in Russia, but also the As-at 31 December 2003, assets of Alfa Bank technological leader, offering the most comprehensive range of products. It is specifically this embodiment grew to US $5.9 billion, shareholder equity was of the Bank’s strategy, directed at expanding the products we offer, diversifying business, and improving US $547 million, and the loan portfolio grew to stability and effectiveness, that has made the Bank the most attractive and reliable partner for our clients and counter-parties. During 2003, the number of corporate accounts grew from 49,000 to 61,000. US $3.6 billion. Net profit for the year 2003 was US $106 million. In the area of corporate banking, Alfa Bank is third only to Sberbank and Vneshtorgbank by size of operations and range of services, with 5% of the market for lending and fourth by deposits, with 4% of the In 2003, growth in Alfa Bank’s capital matched market. Over the year, the Bank’s corporate deposit base rose some 75%. As a result of the rapid growth in the rapid rate of growth of our business. As-at Alfa Bank’s liabilities, our market share in corporate deposits grew by 0.5% during 2003. Alfa Bank serves the end of 2003, our capital adequacy ratio was one-third of Russia’s large and mid-sized companies, and acts as creditor to a quarter of these companies. 10.29%. Maintaining a capitalization that matches our cautious approach to running a business in Russia is part of Alfa Bank’s strategy for protecting the interests of our clients. Development of our retail banking business is becoming an Effective use of resources is a key factor in Alfa Retail Banking increasing strategic priority as products focusing on the new Bank’s reliability. At the end of 2003 commer- Russian middle class are in huge demand. cial credit remained the largest part of our earn- ings-generating assets. The Bank established a cutting-edge retail network, which entered the Moscow market in 2003 under the brand name of Alfa Bank Express. Alfa Bank Express was founded as an innovative banking service format targeted to the mass market. Alfa Bank Express was the first service on the Russian market to offer not only separate products, but a full spectrum of banking services from traditional deposit and credit card services, to full access to credit 120 Net Profit ('000 USD) resources (particularly in the area of consumer lending) and long-distance banking services. Initial results are of strong client interest in the services of this network, which offers ‘twenty-four-seven’ banking service. 100 Clients may use any one of the Bank’s branch offices, regardless of where the account was opened. By the end of 2003, we had opened 20 such branches in Moscow. All ‘old-format’ branches will be converted into 80 Alfa Bank Express branches by 2005. 105,619 104,590 60 85,417

40 77,235 The past year was notable for our continuing targeted expansion, Regional Network aimed at deepening our presence in priority regions. We opened a 20 subsidiary bank in Kazan, and began work in eight new structural 49,976 divisions in other regions. We now boast over 120 branches, and the COMMERCIAL BANKING 0 share of regional branches of the Bank is also growing continuously. 1999 2000 2001 2002 2003

Source: Annual audited IFRS standalone financial statements 28 AlfaAlfa Bank’sBank’s PresencePresence inin RussiaRussia andand OtherOther CountriesCountries

The Bank also has subsidiary banks in Kazakhstan and Ukraine as well as in the Netherlands, the latter being the only 100% privately owned Russian commercial bank (Amsterdam Trade Bank or “ATB”) with a comprehensive banking license in the European Union. Alfa International Network Bank operates brokerages in London and New York to service the international client base of the Bank’s securities divisions. Alfa Securities in London was founded in June 2000 and is licensed by UK’s Financial Services Authority (“FSA”). Alfa Securities was the first Russian company to obtain a FSA license after the 1998 Russian financial crisis. Alfa Bank also has NASD registered Alfa Capital Markets (USA) Inc in New York to facilitate brokerage and dealer operations in the US.

Alfa Bank has the largest loan portfolio of any of Russia’s During 2003, the Bank was able to Lending private commercial banks. As-at the end of 2003, International Borrowing significantly strengthen its position the Bank’s corporate loan portfolio was $3.6 billion, up as one of the highest-class Russian approximately 40% year-on-year. We have also continued borrowers on the international to diversify our client base. The share of loans held by our financial markets. ten largest borrowers fell to 39% (compares with a Russian banking sector average of 48%). The share of loans to affiliated companies has also Over the year, Alfa Bank arranged two one-year syndicated loans worth US $50 million and US $82 fallen (from 18% as at year-end 2002 to 3% in January 2004). Also, the share of loans million with option to extend. Moreover, the number and geographical reach of participating banks to medium-sized creditors is continually rising. has grown significantly. JP MorganChase took part in its first-ever syndicated loan in Russia in a transaction with Alfa Bank worth US $82 million.

In 2003, the Bank became the first Russian borrower following the 1998 financial crisis to enter the Western money market, with our own Euro commercial paper program worth US $200 million (the first tranche of this instrument was placed in December 2003). Equities and Brokerage

Russian equity markets as a whole, and Alfa Bank in particular, had a very good year in 2003. Alfa Bank had total trading volume of US $6 billion on MICEX in 2003, 12.5% higher than that of its nearest competitor.

Internet brokerage Alfa-Direct has achieved impressive results. Alfa-Direct’s MICEX trading volumes exceeded US $4.7 billion in 2003, while RTS volumes reached US $690 million. The past two years saw stable growth in private investment. In 2003, Alfa-Direct’s Internet customer base grew 70%, to several thousand accounts by the year-end 2003 and project that Alfa-Direct’s customer base will grow by more than 2,000 new clients in 2004. Currently, Alfa-Direct completes over 4,000 trades daily.

Alfa Bank’s research department plays an important role in helping maintain our clients’ loyalty. Our 19 research analysts, who cover both equity and fixed-income, command great authority on the Russian securities markets. The annual Institutional Investor client poll once again chose Alfa Bank as one of the leading analytical teams in Russia.

Alfa Bank is ranked among the most reliable professional securities market players by Russia’s National Association of Securities Market Participants (NAUFOR). In 2003, Alfa Bank received a top NAUFOR rating of AAA. Alfa Bank was also awarded top place in a “Securities Market Elite” national competition under the nomi- nation “Top Credit Organization on the Securities Market.”

30 INVESTMENT BANKING Capital Markets Corporate Finance

In 2003, Alfa Bank’s total volume of The Bank became a leader in financed According to an independent study conducted by RussiaDeal at the end of 2003, Alfa trading in foreign currency deno- and margin trading on the debt Bank was acknowledged as a leading financial consultant among both international minated fixed income securities rose markets. The largest volumes of and Russian investment banks operating in the Russian market. Total 2003 deal 40%, to US $10 billion. Client trades financed trades were in foreign currency volumes in which the Bank acted as financial consultant reached nearly US $9 billion. also continued to grow as a debt, with volumes up 50% in 2003. percentage of the Bank’s total trading The market for margin trading with volume, to US $7 billion, twice as Rouble-denominated corporate debt Alfa Bank: Selected Corporate Finance Transactions in 2003 high as in 2002, while the share of also grew. client profit in overall profits of the Client Brief Description Approximate Transaction Volume Debt Capital Markets Division grew In 2003, Alfa Bank’s domestic currency to 30% from 20% a year ago. market turnover rose 150% year-on- year. The main share of transactions TNK Alliance of TNK and BP Russian and Ukrainian assets US $7.6 billion In 2003, the Bank expanded its was currency exchange for banks and presence and trade volumes on the companies from the CIS and Western ICN Pharmaceuticals Sale of Russian assets US $55 million Russian Rouble debt market. Our Europe. By the end of 2003, Alfa Bank total annual turnover in Rouble-deno- became the largest Russian market Tomsk Cellular Communications Sale of a 100% stake to minated debt instruments was some maker, with 35% of the market and Mobile TeleSystems US $47 million US $400 million — nearly twice as in average daily turnover of some US $800 2002. Our returns are continuously million to US $1.2 billion. SibirTelecom Sale of 30% of the shares of rising both from proprietary trading Sibirsky Cellular Systems 900 US $29 million Our Alfa FOREX Internet brokerage and from customer business. Amtel Holding Private placement of 3.8% system came on-line this year. The of shares to Templeton In 2003, Alfa Bank helped to place 10 system uses cutting-edge technology Strategic Emerging bond issues for clients worth more to assist in FX trades for counterparties Markets Fund US $10 million than RUR 13.4 billion. Despite a and our own branches. deterioration in the debt market Perekriostok Private placement of 7.7% environment in the second half of the Alfa Bank’s activity on the market for of shares to Templeton year, Alfa Bank strengthened its hard currency transactions leads in all Strategic Emerging position, rising from sixth to third sectors of the market, and is highly Markets Fund US $15 million place in debt issuance (according to profitable. In 2004, the authoritative the information agency Cbonds). journal Global Finance, for the first time, named Alfa Bank as the Best Foreign In 2003, our clients not only invested Exchange Bank in Russia. The Corporate Finance Division’s main focus was to provide Russian and foreign their own assets directly, but also clients with financial consulting on M&A deals. bought securities on margin, as well as using spread strategies such as One of the Bank’s main achievements was to act as a financial consultant to the hedging the purchase of certain Russian shareholders of Tyumen Oil Company (TNK) at the start of its flagship securities through the sale of others. strategic alliance with BP in Russia and Ukraine. The invaluable experience we gained during the course of the deal has taken us to the number one position in the market for energy sector consulting.

The Bank continues to act as a strategic consultant to UES, one of Russia’s largest natural monopolies, during the course of its restructuring. Alfa Bank is optimistic about its future. In the area of investment banking and fund management, the Bank plans to develop new products, such as the Asset Management Alfa Bank continues to realize its strategy of developing a mutual funds we began offering last year, as well as secu- modern, universal bank, represented among all principal rities market brokerage services for our clients. segments of the financial and banking market, including retail business, corporate commercial and investment Introducing new technologies will remain a focus for us, Alfa Capital Management Company, a whol- businesses while maintaining its dynamic growth. creating a base for the Bank’s continuing development. ly-owned subsidiary of Alfa Bank, is rapidly The Bank will focus in particular on developing cutting- becoming one of the leading Russian fund In the area of retail operations, edge service channels. We intend to management companies for both private and the Bank aims to continue build- strengthen our leadership in developing corporate clients in Russia and abroad. ing a retail network of the new electronic banking and brokerage Founded in the early days of Russian market type we first introduced last year operations. While 80% of sales will still liberalization, Alfa Capital received new impe- under the brand name Alfa Bank be conducted through our banking per- tus in 2003, becoming a diversified business Express. In 2004, the main goals sonnel, we intend for 80% of services combining both portfolio investment in debt of our retail banking business are provided to clients to be replaced securities and shares. As such, a new group to ensure aggressive growth, Strategy through distance technologies, includ- was created which is dedicated to direct beating the market, optimizing ing on-line and telephone banking. investment - Alfa Capital Partners (ACP). the technology we have intro- duced, and to make servicing Management will also focus on increas- Alfa Capital has also been selected by the our clients as quick and comfort- ing the Bank’s efficiency, optimizing government to manage individual pension able as possible. We plan to structure and staffing to meet the grow- savings. focus our attention on the devel- ing competition, including from foreign opment of credit products for the banks. In connection with this, we have retail sector, including consumer decided on an organizational restruc- lending. The Bank sees great potential in this opportuni- turing within the Bank intended to group management ty, considering the huge lack of credit products available around our core businesses. We believe this should lead in Russia. to a clearer management structure, better cooperation between the Bank’s divisions, and to better products and In the area of commercial banking and services for cor- services for our clients. porate clients, we intend to become a more attractive source of loans to mid-sized companies, while continuing support of our large corporate clientele. The Bank has steadily diversified both its business and credit portfolio in 2003 and we hope to continue this trend. The Bank also plans to redouble its efforts in the sphere of com- mercial banking, especially in the services that have not yet been developed sufficiently in Russia, such as leasing and project finance. 32

AlfaStrakhovanieAlfaStrakhovanie InsuranceInsurance GroupGroup

AlfaStrakhovanie Insurance Group is one of Russia’s largest insurers and is consistently ranked amongst the leading insurance companies on the market. The Group offers a diversified portfolio of services including comprehensive business insurance programs and an extensive product range for individuals. AlfaStrakhovanie actively operates across the whole of Russia. www.alfastrah.ru

AlfaStrakhovanie ● IBS Group Holding Ltd. ● Wild Orchid More Reliability in 2003 ● IBM ● TsENKI ● Golden Telecom ● NTV+ ● SIDANCO ● DON-Stroy AlfaStrakhovanie’s reputation is based on the ● Emergency Ministry of the ● MIAN IN 2003, THE GROUP strict performance of its obligations to its clients. Russian Federation ● Partiya Undertaking large risks requires a high capital- ENJOYED ● Culture State TV and Radio ● Tekhnosila ization - AlfaStrakhovanie’s aggregate share capital at the end of 2003 reached RUR 1.90 bil- COOPERATION WITH Channel ● Bayersdorf (representative lion (US $64.6 million). Re-distribution of a por- ● VimpelCom office) tion of obligations which are undertaken among A NUMBER OF MAJOR ● ● other reliable insurance and re-insurance com- ICN Samsung Electronics Co. Ltd. panies is a pillar that underpins the stability of CLIENTS INCLUDING: ● Transnefteproduct (representative office) insurance businesses worldwide. A reliable port- ● Udmurtneft ● Daimler Chrysler AG folio hedging re-insurance program enables AlfaStrakhovanie to insure large financial risks of ● Pulkovo-2 Airport (representative office) its clients. Risks are re-insured with top leading ● Volga Motor Works ● Wimm-Bill-Dann global companies, such as Munich Re, Swiss ● ● Re, SCOR, Hannover Re, and Lloyd’s of London Petrovskiy Passage SUN Interbrew as well as blue-chip Russian companies. 35 ● Alfa-Eco Group ● Udarnitsa Confectionery ● Kommersant Publishers Factory Based on the Company’s financial standing, Expert RA rating agency awarded AlfaStrakho- ● Volgotanker ● Pepsi Co. vanie the rating of A++ (high reliability with pos- ● Danone itive outlook) in 2003. The Group’s key priorities for the next year include the continued roll-out of comprehensive risk management programs for industrial enterprises (so-called Umbrella More Quality Coverage programs) and development of customised plans for insuring clients’ businesses.

Within the last year new insurance programs were offered to Russian Aluminium, Alfa Bank, Sun Interbrew, a major construction company DON-Stroy, Aeroflot as well as to a number of other long-standing customers of the Group.

To ensure a tailored approach to each customer, AlfaStrakhovanie set up MedAS, its own medical clinic with personal physician service, in December 2003. The medical clinic is integrated into the infrastructure of the Russian Health Ministry’s State R&D Centre Outpatient Clinic which has at its disposal state-of-the-art advisory and diagnostic facilities.

40% New products which the Group offered to its individual clients in 2003, 500 000 60% NUMBER OF CONTRACTS AND MIX OF More Simplicity were in most cases uncomplicated policies which could be issued in a INSURANCE POLICES WRITTEN BY few minutes by choosing a required set of services and price levels. 400 000 441,826 ALFASTRAKHOVANIE AT YEAR – END AlfaTravel product was specially timed to the holiday season for tra- 300 000 vellers and includes five price levels depending on the scope of services and a policy for persons travelling abroad with their 22% own car. A broader coverage was also offered to customers – the policy is now valid not only abroad but also in Russia if a 78% customer is at least 90 km away from his or her permanent residence. 200 000 31% 27% 69% 73% Number of contracts concluded 33% 172,358 by affiliated companies of AlfaStrakhovanie AlfaMed, a new convenient product for corporate customers, was developed based on the personal physician service at MedAS 100 000 67% 101,815 Contracts with individuals clinic to meet demand by medium and large enterprises for reliable and quality medical coverage for their employees. AlfaMed is a 77,935 three-tiered product which divides an enterprise’s personnel into top managers, line managers, and non-management employees, 0 43,455 Contracts with legal entities each tier containing a set of standard insurance services which can be supplemented at the customer’s request. 1999 2000 2001 2002 2003 Source: Company data

In 2003, AlfaStrakhovanie continued its geographical expansion into REGIONAL NETWORK GROWTH – 150 More Focus on Clients Russia’s regions opening 5 affiliates and 59 branches in Ioshkar Ola, 150 NUMBER OF BRANCH OFFICES AT Kemerovo, Krasnoyarsk, Lipetsk, and Arkhangelsk. In aggregate, 125 YEAR – END 101 AlfaStrakhovanie is comprised of over 150 regional branches (excluding 100 Moscow) in Russia. 75 66 Compulsory third party auto insurance has rapidly developed in the regions. According to the Russian Insurance Association, 50 45 AlfaStrakhovanie ranks among the top ten insurers based on the results of operations for the last six months of 2003. 25 28 21 AlfaStrakhovanie has begun large-scale IT infrastructure upgrades in a number of key regional branches, which will ensure a 0 high standard of service delivery to customers throughout Russia. 1998 19992000 2001 2002 2003

To maintain high quality service while intensively core insurance products, making it possible to greatly enhance the efficiency of business processes related More Technology expanding the business has become one of to insurance contract management. AlfaStrakhovanie’s top priorities. Significant funds have been invested in the automation of business Similar technological improvements are being implemented on the corporate side, with the continued imple- processes, upgrading the IT infrastructure, building mentation of an integrated insurance and accounting system, including the automation of the budgeting a comprehensive and unified information system and providing for information security. and management reporting processes.

AlfaStrakhovanie is successfully proceeding with implementation of SalesLogix, a customer relations man- Round-the-clock support delivered by our corporate call centres is an absolute prerequisite for customer agement system, and with the development of specialized data processing systems for voluntary health satisfaction. This service is now available to all the clients insured under voluntary health and auto insur- insurance (AVIS) and life insurance (LifeOffice). Also, in 2003, a unified information system was created for ance programmes.

Double-digit growth of the Russian insurance market provides ever- In 2003, AlfaStrakhovanie’s top More Professionalism increasing challenges to people involved in this business. After hiring a management adjusted and the number of top professionals from leading insurance companies, banks More Confidence Board of Directors approved and FMCG companies in 2002, there were no major reshuffles in key staff changes to the existing strate- during 2003. gic investment program cover- ing the period through 2006. The business development strategy combines further One of the cornerstones of AlfaStrakhovanie’s well-balanced HR policy is the sustained development of existing personnel. To development of products and distribution channels, active expansion into regions, this end, in 2003, the Corporate University of AlfaStrakhovanie was founded. Notably, a program of uniform corporate training strengthening of the sales organization, and further cooperation with Alfa Bank. standards for employees and agents was developed.

TNK-BP TNK-BPTNK-BP is Russia’s third largest oil company and among the world’s top ten private sector oil producers. In 2003 production was 1.28 mil- lion barrels of oil per day (approximately 64 million tonnes of oil per year). TNK-BP operates five refineries in Russia and Ukraine and it markets products through more than 2,200 branded retail outlets across both countries. www.tnk-bp.com

TNK-BP commenced operations on 1 September 2003 after BP and Alfa Group, jointly with the independent international firm DeGolyer and McNaughton. Annual crude output in 2003 Access/Renova Holding, (together AAR), merged their oil and gas assets in Russia and Ukraine. was approximately 64 million tonnes. TNK-BP holds five refineries with total refining capacity BP and AAR each own a 50% stake in TNK-BP. TNK-BP has the exclusive rights to implement of approximately 50 million tonnes of oil per year and markets products through a retail net- all AAR and BP oil and gas projects in Russia and Ukraine. work counting over 2,200 sites in Russia and Ukraine.

In agreement with the terms of the merger, ААR contributed its The combination of AAR’s and BP’s oil and gas interests forms the shareholdings in TNK-International, ONACO, SIDANCO and basis for TNK-BP becoming one of the largest and the most profi- Slavneft, stakes in Rusia Petroleum (holder of licenses for the table oil and gas companies in Russia and Ukraine. When the inte- Kovykta gas and condensate field and Verkhnechonskoye oil and History gration is complete, TNK-BP will have evolved into a company with gas field development), in the Rospan gas-production company a single organisational structure, having uniform operating proces- (which is developing the New Urengoy and East Urengoy gas ses and systems. TNK-BP’s team was formed from TNK, SIDANCO fields) while BP contributed its ownership in SIDANCO, its stake and BP representatives, enabling it to consolidate the advantages in Rusia Petroleum as well as its Moscow retail network. As a sup- of Russian and international management best practice. plement to the assets it transferred, BP also paid cash to AAR and agreed to issue BP treasury shares to AAR. TNK-BP’s short-term plans include further development of its Russian and Ukrainian assets, boosting oil and gas output through the use of new technolo- As of 31 December 2003, TNK-BP’s proved oil reserves stood at 9.0 billion barrels (based on gies, expansion in Eastern Siberia, further growth in its reserves portfolio and implementation the criteria stipulated by the Society of Petroleum Engineers), according to an audit by of a series of new strategic projects. 39 TNK-BP operates in virtually all oil and gas provinces in the Russian TNK-BP’s downstream objective is to ensure A large-scale upgrade and modernisation pro- Federation. The Company’s portfolio largely consists of fields that have efficient processing and sales of extracted gramme, which is being implemented at the been developed over a number of years; however, they also have good 40 crude oil and gas. Ensuring access to the best Ryazan Refinery, is an example of the work being medium- and long-term growth potential. A key element for realisation markets is key to profitability. In practice, this done to increase the yield of high value-added of this potential is achieving maximum investment efficiency. means maximising export sales of crude oil and products. Special attention is being paid to high petroleum prod- value-added In the short-term, the ucts, while ensur- products that are Company will focus on ing the highest experiencing a the most efficient profitability of sa- higher rate of les in domestic demand growth development of exist- markets. The than the basic Upstream ing reserves, the bulk Company’s crude Downstream refined products of which lie in Western oil output and its (e.g. A-95 gaso- Siberia. It is planned to capacities for line). Successful boost output, to in- processing/sales completion of the crease reserves reco- of petroleum pro- programme will very and to ensure the ducts are well increase light commercially effective development of probable reserves through the balanced. Yet, as upstream production grows product yield and make it possible for the refin- targeted application of new technologies. Rehabilitation of idle wells, at a rate exceeding Russia’s average, there will ery to meet the growing demand for light and new reservoir stimulation techniques, waterflood system reconfigura- be a need to gain expanded market access. environmentally friendly petroleum products in tion – all this has proved its efficiency many times in the global oil indus- the Moscow area and potentially in new try and has a significant potential for Russia as well. For instance, at The Company will boost production of high European markets. value-added petroleum products, which will be Samotlor, TNK-BP’s largest oil field, the application of recovery me- sold through retail stations working under TNK thods used by BP at Prudhoe Bay, Alaska, should enable the Company and BP brands in selected markets. to add approximately 1 billion barrels of new reserves for each two per- cent increase in the recovery factor.

TNK-BP’s proved reserves are estimated at 9.0 billion barrels as of 31 December 2003. This figure may potentially increase approximately TNK-BP Annual Production (excluding Slavneft) three-fold as new technologies and enhanced development plans are ('000 barrels per day) TechnologiesTechnologies developed and implemented. Strong output growth will be balanced by robust reserves replacement. In the medium and long-term, output will 1400 Technology plays a key role, not only in exploration and be enhanced by further growth in the producing fields and by the 1,276 1200 production, but also contributes to the improved efficien-

development of new oil and gas fields. Efficiency of capital investment 1,116

1,015 cy across the Company’s asset base. Investments in 1000 will be achieved by combining modern drilling and completion tech- technology will not only ensure further production growth, niques as well as enhanced secondary recovery methods. In the longer 800 but also enhance capital efficiency throughout TNK-BP. 357 term, development of such new projects as the Rospan Development, 314 600 1,276 Expert technical working groups have been formed and Kovykta (East Siberia) and Uvat (south of the Tyumen Region) will pro- will focus on key areas where technology can make the vide the basis for further growth. 400 most impact on the upstream and other businesses of 701 200 759 the Company. TNK-BP exploration and production strategy envisages applying 0 advanced technology in order to turn the Company’s enormous 2001 2002 2003 Special attention is being paid to introducing technology resources into proven reserves and to produce them in the most effi- +10% +14% to the oil field services in order to enhance upstream cient and profitable way. capital productivity gains. This will enable TNK-BP to TNK Sidanco TNK-BP improve the quality of oil field services, while reducing costs and the time of service delivery. The Company’s goal in this area is to achieve the best level of services Source: Company data provided in Russia in all core lines of technical support, including drilling, infrastructure repairs, well workovers, hydraulic fracturing, and so on, to comply with interna- tional standards. WhereWhere WeWe Operate:Operate: UpstreamUpstream

RUSSIA Rospan MOSCOW TNK-Sakhalin TNK-Nizhnevartovsk Vanyoganneft JV UKRAINE Udmurtneft TNK-Nyagan Varieganneftegaz Udmurt Oil Company Samatlorneftegaz NNP Verkhnechonskneftegaz TNK-Uvat Yugraneft Orenburgneft Saratovneftegaz Tyumenneftegaz Novosibirskneftegaz Orenburggeologya RUSIA Petroleum (Kovykta Project)

Upstream Companies Note: Excluding Slavneft New Projects

WhereWhere WeWe Operate:Operate: RefiningRefining andand MarketingMarketing

Karelia

Kaluga RUSSIA UKRAINE MOSCOW Tula Ryazan Kiev Yekaterinburg (Uralskaya NK) Kursk Nizhnevartovsk Lisichansk (NNPO)

Orenburg Rostov Saratov Orsk

Refinery Retail market share Notes: 1. TNK-Stolitsa and TNK-Megapolic are not indicated on the map Marketing <25% 2. Excluding Slavneft 25%-50% Source: Company data >50% TNK-BP:TNK-BP: Long-TermLong-Term PlanningPlanning The principal goal in TNK-BP’s five-year strategy is to increase the long-term value of the Company. Though the Company has developed an aggressive short-term growth plan, it also intends to implement large-scale investments in long-term growth. The purpose of these investments is to create pre- requisite conditions for sustainable growth and profitability in the period going far beyond the five-year plan.

Briefly, the key elements of this strategy are as follows:

Strong production growth. The objective is to deliver growth rates exceeding the industry averages. Growth will be balanced by robust annual reserve replacement.

Greater profitability through investment in transportation, processing, and marketing of crude oil and petroleum products. Special attention will be paid to increasing export sales and improving the netbacks along the entire value chain.

Investment in technology to enhance efficiency in all business segments.

Commercial development of the Company’s gas resources; increased gas supplies to the domestic market with a view on targeting export markets in the Asia Pacific area.

Streamlining the business through selective acquisition of assets in the Company’s core business areas and through divesting non-core and under-performing assets.

Increase in the Company’s valuation by attaining a high level of corporate governance and transparency and introducing best management practices throughout the entire Company.

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ALFA-ECOALFA-ECO GROUPGROUP

FOUNDED IN 1989, ALFA-ECO GROUP HAS GONE THROUGH A NUMBER OF STAGES IN ITS DEVELOPMENT. ALFA-ECO WAS ENGAGED IN THE PRODUCTION AND TRADE OF A WIDE RANGE OF FINISHED GOODS AND RAW MATERIALS IN DOMESTIC AND INTERNATIONAL MARKETS INCLUDING OIL PRODUCTS, COAL, METALLURGICAL PRODUCTS, PULP AND PAPER PRODUCTS, AGRICULTURAL AND FOOD PRODUCTS AND ALCOHOLIC BEVERAGES. MANY ALFA GROUP BUSINESSES AND INVESTMENT PROJECTS SUCH AS ALFA BANK, TNK, PEREKRIOSTOK, VIM- PELCOM AND MEGAFON ORIGINATED FROM ALFA-ECO. IN EARLY 2004, ALFA-ECO COMPLETED THE RESTRUCTURING OF ITS BUSINESS AND RE-FOCUSED ITS ACTIVITIES ON MAKING PROPRIETARY AND FOR-CLIENT INVESTMENTS IN RUSSIA AS WELL AS THE CIS AND OTHER EMERGING MARKETS. AT THE END OF 2003 ALFA-ECO HAD OVER US $1 BILLION OF ASSETS UNDER MANAGEMENT. www.alfaeco.ru

The Group has unmatched experience in the field of investment projects, Alfa-Eco’s success is rooted in a clear competitive advantage. The Group having implemented a number of well-publicised investment and manage- has created a team of highly professional investment managers, who are ment programs with considerably positive results. In the past several capable of efficiently running enterprises in various industries, have in- Alfa-Eco Group years, Alfa-Eco has successfully com- depth knowledge of the specifics of pleted projects at such leading Russian Russia’s regional markets and the ability to enterprises as the Achinsk Alumina InvestmentInvestment ActivityActivity react quickly and appropriately to changes Plant, the West Siberian Metallurgical in these markets, and are able to build In early 2004, Alfa-Eco Group (“Alfa-Eco” or Complex, Taganrog Metallurgical Plant, mutually beneficial relationships with the “Group”) announced its new strategy of Balakhna Pulp and Paper Mill “Volga”, the Korshunovsky Ore Mining and clients. This combination of qualities makes it possible to precisely reveal focusing its business on making investments Enrichment Plant and others. Over the years, many projects have been the most promising projects and carry out transactions of a highly com- later spun-off as separate business units, including within the structure of plex nature. on behalf of shareholders, proprietary and for- Alfa Group Consortium, including Tyumen Oil Company, the Perekriostok client investment in Russia and also the CIS supermarket chain, United Food Company and some others. The most Over the past three years, investments in completed transactions and other emerging markets. Alfa-Eco’s recent example is Alfa-Eco’s transfer of its telecommunications assets amounted to over US $460 million, while their average annual internal project range includes all types of projects for VimpelCom and MegaFon, which are among the top 3 leading mobile rate of return was around 332%. operators in Russia, to Alfa Telecom. large equity funds. This includes geared acquisitions of significant shareholdings Average Annual Internal Rate of Return (IRR)* for Selected Exits Growth in VimpelCom Performanсe Indicators Since Alfa-Eco Group Began (LBO), providing capital for financing of of Investment Projects of Alfa-Eco Group Investing in May 2001 growth strategies, acquisition of under valued Achinsk Alumina Refinery 680% assets, corporate restructuring and optimisa- May 2001 March 2004 Korshunovsky Ore Mining and Enrichment Plant 161% tion of operational activity in portfolio compa- Volgograd Metallurgical Plant Krasniy Oktyabr 253% Number of subscribers (mln) 1.11 13.21 nies, alliances with strategic investors, Taganrog Metallurgical Plant 84% Market capitalization (USD mln) $806.8 $5,590 acquisition of enterprises operating under dif- Amurmetal Metallurgical Plant** 30% Share price of Level 3 ADR ficult financial conditions, anti-crisis manage- Volga (Balakhna Pulp and Paper Mill)** 31% on the New York Stock Exchange (USD) $15.00 $103.99 ment and solving conflict situations. Cosmos Hotel** 79% VimpelCom*** 129%

45 *Calculation performed using a method developed by the European Venture Capital Association (EVCA) and based on financial statements audited by PricewaterhouseCoopers (unless otherwise noted). **Calculation based on unaudited data. ***Estimation based on quotation as at 31 March 2004. Alfa-Eco’sAlfa-Eco’s Main Main Projects Projects in in 2003 2003

Since 2001 the Group had owned In August 2003, the Group acquired a 25.1% VimpelCom and managed a blocking voting MegaFon interest in Russia’s third-largest cellular stake in cellular communications telecommunications provider MegaFon. provider VimpelCom (brand name: MegaFon and its subsidiaries’ licenses cover Bee Line GSM). In mid-2004 Alfa-Eco transferred its interest in VimpelCom to the the entire Russian Federation (145 million people). The company’s net income increased five- newly established company within Alfa Group Consortium, Alfa Telecom. fold in 2003, reaching US $131 million, while its revenue was US $822 million, EBITDA was US $378 million, and the number of subscribers exceeded 6 million. Since making an initial investment in May 2001, Alfa-Eco has played an active role in the management of VimpelCom. Thanks in no small part to the efforts of Alfa-Eco In mid-2004, Alfa-Eco’s stake in MegaFon was transferred to Alfa Telecom with which Alfa-Eco managers, VimpelCom has succeeded in considerably expanding its presence in will likely in the future implement joint projects in the telecommunications industry. Russia’s regions. At the end of 2003, the BeeLine network operated in 55 regions of the Russian Federation (in 56 regions as of March 2004), and was intensively engaged in building new networks. Starting in 2003, the company began pene- The Group gained management control of trating two more Russian regions: the North-western and Urals Federal Districts. TsBK “Volga” Balakhna Pulp and Paper Mill (Volga) in 2001 The priority strategic goal is to extend the network’s license zone to cover the entire when the company was in technical default country. on its debt. A team of Alfa-Eco managers optimized the mill’s condition and the plant has since enjoyed stable operations and is now an Since Alfa-Eco began participating in the management of VimpelCom, the BeeLine industry leader. Volga manufactures over 30% of all newsprint in Russia. In 2003, it produced network’s subscriber base has grown from 1.11 million in May 2001 to 11.44 mil- 555,000 tonnes of goods. Around 63% of the plant’s paper is exported to 50 countries around lion at the end of 2003 (in March 2004, the number of subscribers reached 13.21 the world, with the bulk of exports going to the European Union. Leading publications in Great million). VimpelCom’s market capitalization increased from US $806.8 million in Britain, France, Germany, Italy and other countries are printed on paper from Volga. May 2001 to US $3.95 billion at the end of 2003 (in March 2004, capitalization was as high as US $5.59 billion). During 2003, Alfa-Eco continued to manage When Alfa-Eco initially invested in the project, VimpelCom’s stock (level 3 ADR) was the Kamsk Pulp and Paper Mill (OAO TsBK trading on the New York Stock Exchange at US $15 per share, whereas by 31 TsBK “Kama” “Kama”, Perm Region). The Kamsk Mill was December 2003 the stock price had increased almost five-fold, reaching US $73.50 the last non-privatised enterprise in this sec- (in March 2004, US $103.99). tor, faced with huge production and financial problems after losing its market share. After Alfa- Eco took ownership of the plant in 2002, it enjoyed a marked improvement in its performance. Kama has streamlined its management structure, and introduced a new concept of sales and 46 employee motivation. In 2003, labour productivity increased by 70% and the output of high- quality paper was increased and new products were launched. The company is now imple- menting a technical upgrade program for the plant. Petrosakh

In 2003, Alfa-Eco continued its management of Sakhalin-based Petrosakh, a vertically- integrated oil company (Alfa-Eco manages a 97% equity stake in the company). Petrosakh delivers its output to Asia-Pacific countries and also locally to satisfy Sakhalin’s needs. Petrosakh owns a license for the geological exploration of a large oil- and-gas field in the Sakhalin-6 coastal shelf zone (potential deposits are estimated at 1 billion tonnes). A seismic survey has been carried out and an international pool of investors is being organised for its develop- ment. The potential size of the required investment is estimated at US $1.5 billion.

Alfa-Eco is the major shareholder of the Alfa-Eco Don Smirnov Trading House for Reviving the Traditions Cosmos Hotel of P.A. Smirnov, Purveyors to the Court of His Imperial Highness, which holds the In the reporting year, a grain holding company rights to the internationally acclaimed In 2003 the Group acquired a blocking stake Alfa-Eco Don was formed, which operates in Smirnov brand of vodka. In 2003, Smirnov in the famous Cosmos Hotel in Moscow. the spheres of grain processing, grain storage won a gold medal, two silver medals and Cosmos is a 3-star hotel with developed and transhipment possibilities via railroad and two bronze medals at the 10th anniver- amenities, is favourably located and is a well- port. It has an export potential of approxi- sary exhibition Prodexpo-2003. known brand. Experts in the hotel sector mately 1 million tonnes of product per year. gave Cosmos one of the best ratings for The company intends to expand its co-oper- Alfa-Eco is intensifying its program to pro- 2003 among Moscow hotels in its class. It ation with agricultural producers in the mote the Smirnov brand in order to has an annual turnover of approximately Southern regions of Russia. increase its sales volume, to expand the US $20 million. product family and to improve its quality. An improved composition of Smirnov Cosmos is an especially attractive invest- vodka was developed and tested in co- ment project due to the lack of 3-4-star operation with the best industry specialists. hotels in Russia’s main cities. Over the reporting year Alfa-Eco, together with the other majority shareholder in Cosmos, the Moscow city government, participated in the strategic and operational management of Cosmos. 47 In 2003, the oldest company of Russia’s municipal housing sector, Rosvodokanal, was acquired by the Group. Rosvodokanal together with the Russian Congress of Municipal Formations coop- Rosvodokanal erate on implementing projects aimed at the creation of efficient market-oriented enterprises which operate public water supply systems. Rosvodokanal’s specialists have already begun operating such systems in some regions of Russia. TheThe SecuritiesSecurities MarketMarket

Alfa-Eco has been an active participant on the Russian securities market since 2001, when it placed an issue of its own promissory notes (the issuer was one of the principal companies in the Group, OOO Alfa-Eco M). This issue represented one of the first successful financial instruments issued by a Russian industrial-and-trade company.

In 2002, OOO Alfa-Eco M also issued Russian Rouble-denominated bonds which are widely traded on the market. Alfa-Eco M has been ranked among the most reliable promissory note issuers by NAUFOR, along with major Russian corporations and banks.

Alfa-Eco’s securities meet the highest expectations of investors and provide a good vehicle for diversifying sources of financing. Many banks, investment houses and insurance companies have included these securities in their investment portfolios.

48

TRADETRADE HOUSEHOUSE PEREKRIOSTOKPEREKRIOSTOK

FOUNDED IN 1995, TRADE HOUSE PEREKRIOSTOK WAS ONE OF THE FIRST FOOD RETAIL CHAINS TO BE ESTABLISHED IN RUSSIA. AT THE END OF 2003, 66 STORES WERE OPERATING WITH AN AGGREGATE TRADE AREA OF OVER 80,000 m2. ADDITIONALLY, THE COMPANY OWNS AND OPERATES ITS OWN DISTRIBUTION CENTRE OF 17,500 m2. PEREKRIOSTOK 51 OPERATES STORES IN MOSCOW, THE MOSCOW REGION, ST. PETERSBURG, SAMARA, TOGLIATTI, VOLGOGRAD, NIZH- NIY NOVGOROD AND PLANS TO AGGRESSIVELY EXPAND FURTHER INTO RUSSIA’S REGIONS AND THE CIS. www.perekriostok.ru

With its origins in trading, Alfa Group was well posi- Middle Volga which owns and operates seven super- tioned to meet the growing demand for western-style markets. This was the first deal on the Russian retail Concepts and Strategy supermarkets, as a new middle class emerged from market where a strategic investor acquired shares post-Soviet society, eager and able to buy high-quali- from a portfolio investor. This acquisition is synergis- ty goods. In 1994, Alfa Group took a strategic deci- tic and improves the position of Perekriostok on the sion to establish Trade House Perekriostok national retail trade market. The principal objective of Perekriostok is to provide middle- (“Perekriostok”). income customers with a wide range of high-quality food In January 2004, Perekriostok products at reasonable prices in a pleasant shopping environ- The first Perekriostok super- concluded a 2-year syndicated ment with efficient and high-quality service. market opened its doors to credit for US $75 million which consumers in September was organised by HSBC and Each Perekriostok is a modern western-style store with many 1995. As early as 1996, the Raiffeisenbank, which included resembling a kind of “shopping city”, where customers can pur- project received support of History in the syndicate a number of chase not only food products but also other goods ranging from worldwide financial and credit major western banks. This was newspapers and magazines to fresh flowers. Additionally, many institutions, including the the first ever all-private interna- stores have on-premises dry-cleaners, beauty salons, photo European Bank of tional syndication for a pure studios, ATM’s and mini-banking facilities. Each store utilises Reconstruction and Develop- Russian corporate borrower. scanner checkouts, saving time for customers. ment. In summer of 1998, the From the very beginning, Perekriostok has pursued a strategy of Company launched its own building and leasing stores in densely populated suburban areas distribution centre providing of Moscow. This is where the vast majority of Muscovites live, but ● At the end of 2003 there were 66 modern super- significant and unprecedented cost and logistical the infrastructure and amenities in the suburbs are typically much advantages over its competitors. In April 2003, the markets operating under the Perekriostok brand less advanced than in downtown areas. Since Muscovites, like Company attracted its first outside investment - a name in Moscow, St. Petersburg, Samara, any other large city dwellers, prefer to shop close to home, 7.7% stake in the Company was sold to international Togliatti, Volgograd and Nizhniy Novgorod. Perkeriostok caters to an enormous captive market. investment fund Templeton Strategic Emerging ● Perekriostok employs more than 9,000 persons. Markets Fund LDC. ● Perekriostok grew its revenues by 32% in 2003 Since late 2002 the Company has been rapidly expanding into with turnover reaching approximately US $450 the middle-class population centres outside of Moscow and In 2003, the Company acquired from Delta Capital million (inclusive of taxes). plans to aggressively expand further into Russia’s regions and Management a controlling interest in one of the lead- the CIS. ing retailers of the Nizhniy Novgorod region – SPAR Products Pricing

Perekriostok supermarkets offer a wide choice of food products and other goods (over Perekriostok’s pricing policy is very straightforward – to provide customers with high-quali- 15,000 SKUs in a typical supermarket and as many as 35,000 SKUs in the hypermarkets), ty goods at reasonable prices. This is possible through the forming of closer relations with with 75% accounting for food products) - both domestic and imported. In addition to domestic suppliers and using advantages from having an in-house distribution centre. stocking all the standard supermarket lines, Perekriostok stores offer approximately 360 Direct deliveries and large-volume purchases considerably cut product costs, which ready-to-cook or ready-to-eat items including fresh meat and fish. Additionally, many of the enables the chain to maintain competitive price levels in all of the Company’s supermarkets. supermarkets have an in-store mini-bakery which provides a selection of more than 80 orig- Also, the Company offers a discount program and joint promotions with suppliers to attract inal and traditional baked items. The Company also has its own private-label branded line of new customers and retain their loyalty. high-quality goods. In March 2003, the Company launched a “Healthy Nutrition” program which it jointly developed with the Russian Academy of Medical Sciences, which is aimed at Regular polls and loyalty cards programs enable the Company to understand customer promoting healthy eating habits among its customers. needs and preferences, and also help to determine pricing policies, assortment of goods, merchandising in the store, design of the store interior and assists in developing and intro- ducing up-to-date marketing programs and new services. 2 St.Petersburg PEREKRIOSTOK STORE LOCATIONS AND NUMBER OF STORES THROUGHOUT RUSSIA (June 2004) GROWTH IN NUMBER 70 66 OF PEREKRIOSTOK 42 60 2 STORES AT YEAR END 46 2 50 Моscow 12 N.Novgorod 38 40 Hypermarket 7 28 30 19 Supermarket 20 12 9 1 Tolyatti 10 1 5 Small Format Source: Company data 0 Samara 1 1995 19961997 1998 1999 2000 2001 2002 2003 Franchise Volgograd 1

Launch of not less than 26 additional stores in 2004 with an aggregate trade area of 30,000 m2;

Launch of up to 40 stores in 2005 with trade Further Development for area of 45,000 m2; A NUMBER OF PRIORITIES HAVE BEEN SET AND WILL BE Obtaining credit ratings from international 2004-20052004-2005 FULFILLED IN 2004-2005. rating agencies in 2005; SOME OF THE MORE IMPORTANT PRIORITIES INCLUDE: Selected acquisitions of technologically-sound 52 retail chains in Russia and CIS; Turnover in 2004 – more than US $750 million; in 2005 - more than US $1 billion.

ALFAALFA TELECOMTELECOM

GOLDEN TELECOM, INC. IS A LEADING FACILITIES-BASED PROVIDER OF INTEGRATED TELECOMMUNICATIONS AND INTERNET SERVICES TO BUSINESSES AND OTHER HIGH- GOLDENGOLDEN TELECOM,TELECOM, INC.INC. USAGE CUSTOMERS AND TELECOMMUNICATIONS OPERA- TORS IN MAJOR POPULATION CENTRES THROUGHOUT RUSSIA AND OTHER COUNTRIES OF THE CIS. www.goldentelecom.ru

Customers Shareholders Structure Customers Shareholders Shareholders of Golden Telecom Golden Telecom’s customers include Golden Telecom was incor- Golden Telecom consists of three large, medium and small Russian porated as a Delaware corpo- major operating companies: Sovintel, companies, large transnational com- ration on 10 June 1999 and is 18% Comincom, and Golden Telecom panies, business centres, hotels, listed on NASDAQ under the (Ukraine), and conducts its business in fixed line, mobile and paging opera- symbol “GLDN”. Current share- 6% 30% Russia and the CIS through a network tors, banks, financial institutions, holders of Golden Telecom rep- of affiliated or controlled structures. residential clients, embassies and resent a balanced mixture of 7% The most significant branches are representative offices of foreign strategic and financial, as well 8% those in St. Petersburg, Arkhangelsk, companies. The Company makes as Russian and international Khabarovsk, Irkutsk and Ufa. The lead- use of its own backbone fiber optic investors. 11% 20% ing regional joint ventures are situated network in Moscow, St. Petersburg, in Nizhniy Novgorod, Kaliningrad, Nizhniy Novgorod, Krasnoyarsk, Krasnoyarsk, Novosibirsk, Vladivostok, Samara, and Kiev which is accessed Alfa Group Baring Vostok Ekaterinburg, Krasnodar, Volgograd using fiber optic, copper wire, and Samara. Through agents and dis- Telenor Capital International microwave and fixed wireless lines. tributors, the Company also offers Rostelecom Free Float service in Azerbaijan, Belarus, Georgia, EBRD and operates through subsidiaries in 55 Kazakhstan and Uzbekistan.

Source: Shareholders’ SEC filings, as of 31 December 2003 Sovintel Services Golden Telecom provides a variety of services to its customers. Some of the services offered include: Sovintel was established in 1990 as a competitive local exchange carrier in Moscow in the form of a 50/50 joint ven- To business customers: ture between the former parent company of Golden Telecom, Global TeleSystems, Inc. (GTS) and the Main ● Local numbers and lines, local, domestic long-distance and Centre for Management of Long-Distance Communications of international digital voice services; USSR (GTsUMS). GTsUMS subsequently became part of ● Private lines; Rostelecom - the Russian national long distance carrier. ● From its early days, Sovintel was positioned as a superior Dedicated Internet access; voice service provider with a focus on the high-end of the ● Design, installation and management of private data networks; corporate market. Sovintel expanded quickly and estab- ● Call centre services lished a strong blue-chip customer base and a stellar repu- tation for customer service. GTS’ holding in Sovintel was transferred to Golden Telecom, Inc. as part of the Golden To cellular operators: Telecom IPO in 1999. In September 2002, Golden Telecom ● Local numbers and connection lines to the Public Switched bought the remaining 50% of Sovintel from Rostelecom. Telecommunications Network (PSTN), local, domestic long-dis- tance and international traffic carrier services

Comincom To international carriers: ● Voice traffic termination in Russia and the CIS; ● Comincom, together with its 100%-owned subsidiary, Capacity resale Combellga, provides telecommunications services, princi- pally to major hotels, business offices and mobile commu- To smaller fixed-line operators: nication companies through its telecommunications net- work in Russia, including Moscow, St. Petersburg, ● Local, domestic long-distance and international traffic carrier Voronezh, Samara and several other major population cen- services; tres. The acquisition of 100% of Comincom in December ● 2003 further strengthens Golden Telecom’s position in the Voice over Internet Protocol (VoIP) traffic termination; key Moscow and St. Petersburg communications markets, ● Broadband IP connectivity and positions the Company to realize future operating and cost synergies. To consumers: ● Residential telephone service; Golden Telecom (Ukraine) ● Dial-up Internet access; ● Pre-paid calling cards

Golden Telecom (Ukraine) commenced service in 1997 as a competitive local exchange carrier in Kiev and as a 56 provider of mobile services. Today, Golden Telecom (Ukraine) is the leading provider to corporate customers in Kiev and has a substantial presence in all major regional centres of Ukraine. Market Position Strategy

Golden Telecom occupies a leading position in Russian and CIS telecommunications. The The Company’s objective is to be the leading inde- Company is the largest alternative operator in Russia, with an aproximate 35% share of the cor- porate market. Moscow is the primary base of Golden Telecom’s operations with approximately pendent voice, data and Internet services 75% of the Company’s revenues received in Moscow. Golden Telecom also occupies a leading Company in Russia and the CIS. To achieve this position in the Dial-Up Internet Access consumer market, throughout Russia. No other alterna- tive service provider commands such a strong presence in all of these markets. Golden Telecom objective, Golden Telecom intends to: is the number two provider in the corporate market of St. Petersburg and number one among alternative network providers in Nizhniy Novgorod. In Ukraine, Golden Telecom (Ukraine) is the largest independent fixed-line operator and operates in all major Ukrainian cities. Pursue Consolidation Opportunities. The Company intends to pursue consolidation opportunities through selective acquisitions that will allow it to expand its geographical reach, add 2003 Financial Results to its service offerings and improve market share while maintaining operational control. Golden Telecom will target complementary opportunities that will enable it to achieve synergies and economies of scale and seek Golden Telecom demonstrated strong financial results in 2003. Consolidated revenue was US regional opportunities in major cities where it does not have its own local $360.5 million, an increase of 81% over 2002. Earnings before interest, tax, depreciation and network infrastructure. amortization (EBITDA), an important indicator of the Company’s financial health, grew by 87% relative to 2002 and reached US $115.0 million in 2003. Increase Market Share by Offering Bundled Data and Voice Services Over an Integrated Network. Corporate customers increasingly demand integrated telecommunications solutions from one-stop providers that are able to deliver a full service SOURCES OF REVENUE CONSOLIDATED REVENUE (in USD mln) offering in the geographical areas in which these corporate customers Year Ended 31 December 2003 FOR THE YEARS 1998-2003 operate. As a result, Golden Telecom plans to continue to develop and combine its businesses to create a unified service platform for local access, 4% local exchange, domestic and international long distance, data, Internet 9% access and services via turn-key solutions.

53% Extend the Company’s Leading Position in High Growth 34% Data and Internet Markets. Golden Telecom plans to build on its position as a leading provider of data and Internet communication services in Russia and other countries of the CIS by increasing the number of network access points in its network to facilitate the growing demand for data and Internet communications. Business and Consumer Corporate Services Internet Services Carrier and Mobile Mobile Services Operator Services

Source: Company data Source: Annual audited US GAAP consolidated financial statements Reduce Operating Costs and Satisfy Capacity Needs through Network Planning and Optimization. The Company’s network strategy includes building and owning its local exchange and customer access networks. Golden Telecom has entered into long-term lease agreements for long-distance and international fibre optic cable systems to provide regional and global connectivity, supplementing these leased land-based channels with satellite circuits for redundancy and remote connectivity. The Company intends to selectively invest in and to incrementally expand the fibre optic capacity along its heavy traffic and high cost inter-city routes to reduce unit transmission costs and ensure sufficient capacity to meet the growing demand for data and Internet services. Wherever possible, Golden Telecom targets customers and products to fully utilize existing fixed cost network infrastructure. 58

Focus Operating Activities and Capital Investments in Major Metropolitan Areas. The Company plans to deploy its capital investments primarily in Moscow, Kiev, St. Petersburg, Nizhniy Novgorod, Krasnoyarsk and other major population centres in the CIS where demand for the services is most heavily concentrated. The Company also intends to expand its operations in regional cities with sufficiently strong local economies and where it believes potential exists to grow businesses that complement current operations. The Company considers the recent acquisition of Comincom to be an important part of this strategy. It views Comincom as a highly complementary business that will allow it to increase market share in Moscow and other key metropolitan markets. Golden Telecom expects significant operating synergies in combining these businesses and significant opportunities to optimize its network and capital investment costs. VimpelComVimpelCom 59

VIMPELCOM IS A LEADING PROVIDER OF WIRELESS TELECOMMUNICATIONS SERVICES IN RUSSIA, OPERATING UNDER THE “BEE LINE GSM” BRAND, WHICH IS ONE OF THE MOST RECOGNIZED BRAND NAMES IN RUSSIA. VIMPELCOM’S LICENSE PORTFOLIO COVERS APPROXIMATELY 94% OF RUSSIA’S POPULATION (136 MILLION PEOPLE), INCLUDING MOSCOW AND ST. PETERSBURG. www.vimpelcom.com

Company Profile 2003 Financial Highlights The Strategy for 2004 and Beyond VimpelCom has always been a pioneer in 2003 was another record year for VimpelCom. VimpelCom’s phenomenal subscriber growth wireless telecommunications in Russia and was accompanied by record operating revenue of approximately US $1.34 billion, a 73.8% the Company continues to be a market increase from 2002. Operating income before depreciation and amortization (OIBDA) was VimpelCom’s objective is to become leader in product innovation. In 2003, approximately US $613.2 million, a 90.3% increase as compared to 2002. VimpelCom’s Russia’s leading telecommunications VimpelCom became one of the first opera- OIBDA margin reached 45.9%, compared to 41.9% reported for 2002. Net income reached company, providing mobile voice and tors in the world to introduce on-line prepaid approximately US $234.0 million, an 80.6% increase from 2002. In 2003, VimpelCom genera- data services. As Russia is now the roaming. The Company also introduced ted approximately US $511.9 million in operating cash flows. VimpelCom’s balance sheet fastest growing cellular market in the commercial GPRS (General Packet Radio was strong, with a debt-to-shareholders’ equity ratio at 0.6 as of 31 December 2003. world, VimpelCom’s strategy aims at Services) and MMS (Multimedia Services) securing long-term profitable growth for offerings across the country in 2003. For its SUBSCRIBER GROWTH IN RUSSIA MARKET SHARE IN RUSSIA AT YEAR-END 2003 TOTAL OPERATING REVENUES (in USD mln) the Company with a dedicated focus on traveling customers and foreign visitors, service quality and product innovation. 18% 1400 VimpelCom maintains roaming agreements 12 mln This strategy is based on two funda- 31% with companies from 150 countries and sup- 1300 mental elements: (i) building a unified ports GPRS roaming in 50 countries. 11 mln 14% 1200 network across Russia with the same 10 mln 1,335.5 business processes and solutions for 1100 At the end of 2003, VimpelCom’s total sub- 37% 9 mln network operation and control, IT, mar- scriber base was approximately 11.44 mil- 11,436,900 1000 keting, distribution, customer service VimpelCom MegaFon lion, with approximately 5.66 million sub- 8 mln 900 and billing; and (ii) employing primarily scribers in the Moscow license area and 5.78 MTS Other 7 mln 800 organic “greenfield” growth augmented million subscribers in the regions outside Source: Company data by selective acquisitions. Moscow, Moscow. 700 6 mln which is the most lucrative market in MARKET SHARE IN MOSCOW AT YEAR-END 2003

600 779.6 Russia, is gradually approaching satura- VimpelCom was the first Russian company 5 mln tion. Penetration in Moscow has already to list its shares on the NYSE in November 8% 500 4 mln passed the 80% level. Although sub- 1996. VimpelCom’s ADSs are listed on the 400 3 mln 49% scriber growth in Moscow will continue NYSE under the symbol “VIP”. Since its 5,153,100 43% 300 for some time, VimpelCom is getting listing on the NYSE, VimpelCom has been a 427.9 2 mln ready for a new phase of competition leader in corporate governance and trans- 200 1 mln where retention, subscriber loyalty, supe- parency in Russia, being recognized on 100 VimpelCom MegaFon rior quality and customer-friendly prod- numerous occasions as the best in Russian 2,111,500 ucts will play a decisive role. corporate governance by various indepen- 2001 2002 2003 MTS 2001 2002 2003 dent institutions and organizations. Source: Company data Source: Company data Source: Annual audited US GAAP consolidated financial statements KyivstarKyivstar 60

Kyivstar is one of the leading providers of wireless During 2003, Kyivstar registered healthy telecommunications services in Ukraine. The Company is and profitable growth. The Company’s Kyivstar in 2003 subscriber base increased by 63% to licensed to operate mobile, city, long-distance and inter- more than 3 million subscribers while net national phone networks and in addition holds licenses to revenues grew to US $374 million for the build and maintain its own fixed-line networks and to 12 months ended 31 December 2003 – a 50% increase over 2002. Also noteworthy was the fact that EBITDA margin grew from 58% in 2002 organise data transmission networks. The Company’s to 60% in 2003, while net income grew to US $101 million in 2003. mobile communications network is deployed according Also in March 2003, Kyivstar launched US $60 million in 3-year loan notes, following a successful to the GSM 900/1800 standards. US $100 million issuance in November 2002. This Eurobond was the first ever Ukrainian corporate bond issue and first ever 144A offering outside of Ukraine. At the end of 2003, Standard and Poor’s www.kyivstar.net raised the long-term rating to the B (stable) level.

Kyivstar began operations as a mobile operator on 9 December GROWTH IN NET REVENUES AND EBITDA GROWTH IN KYIVSTAR’S SUBSCRIBER BASE 1997 when the first call was performed on its network. By the end (in USD mln) FOR THE YEARS 2001-2003 IN UKRAINE AT END OF YEARS 2001-2003 of 1997, the Company had a total of 506 subscribers, which at the time translated to a 4.2% market share. By November 2001, the 400 number of subscribers reached 1 million. As of 1 July 2004, the 374.0 Company’s subscriber base exceeded 3.6 million, and estimated 350 3.5 mln market share was 43.5%. The network covers more than 980 Ukrainian cities and towns including all regional centres, over 300 3.0 mln 13,000 villages and all the main highways of national and regional 250

EBITDA Margin = 59.8% EBITDA Margin 2.5 mln importance. The Company offers international roaming services 249.2

with the networks of 247 mobile operators from 120 countries on 5 3,036,600 200 223.7 continents. 2.0 mln

150 = 57.6% EBITDA Margin 1.5 mln Kyivstar received ISO 9001:2000 certification in 2001. It was the 140.1 143.6 first Ukrainian company operating on the telecommunications mar- 100 1.0 mln ket to do so. Maintaining international standards ensures mutually 1,855,900

beneficial development of relations with partners and enhances 50 = 28.9% EBITDA Margin 0.5 mln 40.5 About Kyivstar About Kyivstar the development of all processes in the Company. 1,095,200 0 0 2001 2002 2003 2001 2002 2003

EBITDA Net Revenue

Source: Annual audited US GAAP consolidated financial statements Source: Company data MegaFonMegaFon

MEGAFON IS THE THIRD-LARGEST PROVIDER OF WIRELESS TELECOM- MUNICATIONS SERVICES IN RUSSIA. MEGAFON’S LICENSE PORTFOLIO Beyond 2003 COVERS 100% OF RUSSIA’S POPULATION (145 MILLION PEOPLE). www.megafon.ru

Kyivstar is committed to strengthening its positions in MegaFon is a federal GSM 900/1800 mobile operator in Russia which the mobile market of Ukraine and is committed to ranks third after MTS and VimpelCom in terms of key performance indica- providing affordable, flexible and high-quality mobile tors. The Company’s major shareholders, apart from Alfa Telecom which services across a range of market segments to as owns an effective 25.1% equity stake in MegaFon, are Telecominvest, and many customers as possible. Swedish-Finnish company TeliaSonera.

The foundation of Kyivstar’s marketing strategy lies MegaFon’s mobile services licenses cover 100% of the Russian territory in an accurate positioning of mobile communications with a population of 145 million and the licenses provide the Company with services for different subscriber categories, flexible a strong advantage in the medium term. tariff policies, and fair treatment of our customers. A harmonious combination of strategic foreign MegaFon meets world technology and customer care standards. The largest shareholder experience (Norwegian telecommunica- MegaFon network operated in Moscow and Moscow region, for example, tions company Telenor) and effective use of marketing is built on the basis of the state-of-the-art GSM equipment which will not research results contribute to the marketing success require upgrades in the foreseeable future and allows the Company to offer

of the Company and to general customer perceptions About MegaFon About MegaFon world class services today. of the Kyivstar brand as a reliable, open and friend- ly operator.

Kyivstar’s strategy is also based on the active develop- ment of a reliable technical network. Kyivstar will actively increase both capacity and quality of cover- age. The Company is also targeting an increase in the number of roaming partners, extending co-oper- ation to even more countries in order to provide cus- tomers with more mobile services abroad. 61 TOTAL NUMBER OF SUBSCRIBERS AT YEAR END MegaFon in 2003 7 mln

6 mln

During 2003, MegaFon managed to increase its subscriber base more 5 mln 6,359,000 than two-fold (from 3.1 million subscribers to approximately 6.4 million subscribers) and to bring its share of the mobile services market to 18%. 4 mln 3 mln In 2003, the Company’s net profit grew by almost four times to US

$99 million, its revenue reached US $815 million and EBITDA was a 2 mln 3,051,000 healthy US $326 million. 1 mln

0.5 mln 911,000 256,000 0 Source: Company data 2000 20012002 2003

In 2004, MegaFon will continue to build its federal mobile network based on such important principles as a unified service package, unified rating principles and unified service standards.

The Company’s networks are expected to be put into full commercial operation in the entire Central region of Russia and in various regions of Siberia and Far East by the end of 2004. Also, development of the license areas Future Plans in the Urals and Volga regions will be completed and the quality of coverage in the Moscow license area, North- West region and in the North Caucasus will improve significantly.

Additionally, the Company also actively seeks to obtain 3G licenses to provide third generation mobile services and currently builds and tests pilot 3G networks in Moscow and St. Petersburg.

62 RussianRussian Technologies Technologies

THE RUSSIAN TECHNOLOGIES VENTURE FUND WAS ESTABLISHED BY ALFA GROUP CONSORTIUM DURING 2003 IN ORDER TO EXPLOIT THE COMMERCIAL POTENTIAL OF PROMISING RUSSIAN TECH- NOLOGY PROJECTS IN DOMESTIC AND INTERNATIONAL MARKETS. www.ru-tech.ru

The innovation potential of the Russian market Genesys were built on Russia-originated tech- represents a unique opportunity to create and nologies. Until recently this “immigration Russian Technologies Fund Strategy commercialise new technological products model” was the only practical way for Russia- with considerable growth potential. originated technologies to be exploited for commercial applications in global markets as Russia has a strong scientific and technological western private equity and venture capital base, founded on the heritage of the former funds have historically been reluctant to invest Mission of the Fund. To develop the commercial potential of Russian technologies in Soviet Union which made signifi- in technology companies with world markets and assist in introducing western high technologies in Russia. cant investment into scientific Venture substantial links to Russia. research and development. Strategic Vision. To become the most successful management company amongst Today, Russia is one of the lead- Business Russia’s continuing economic technology venture funds in Russia, as well as to act as a catalyst in the development of ers in the world (ranking fourth development and political stabi- Russia’s new economy. after the US, China and Japan) in in Russia: lization coupled with broade- terms of number of scientists Market ning access to local venture capi- Main Activity. To invest in companies with breakthrough technologies that will occupy (over one-half million) with the Opportunity tal provide the right environment number of post-graduate future for commercialising Russia-origi- competitive positions in existing markets or newly established market segments. scientists growing every year. nated technologies in global mar- Substantial scientific potential of kets. Russian Technologies is Basic Values Russia and emerging scientific developments positioned as a key player in building success- ● Great technology will not make an impact without a strong management team, strategic create favourable conditions for development of ful partnerships with local entrepreneurs planning and investors’ focus. a venture capital industry in Russia. assisting them to achieve their goals to build ● While there will always be many investment proposals, the task of investors is to identify industry leading companies. the market opportunities within. Throughout the 1990’s, a number of Russian scientists immigrated to the United States bringing with them technologies developed during the Soviet era. Companies such as Google, Parametric Technologies, and 63 Philosophy of the Fund Company activity in 2003 and H1 2004

The Fund makes equity investments in technology companies addressing large The Russian Technologies Fund was formed during 2003. The main activities of the existing or expanding new markets. Russian Technologies targets companies with Fund in 2003 were: management teams and specialists capable of demonstrating viable business ● Creation of deal pipeline; models and a solid vision for future business development. ● Team formation; ● The Fund is focused on early stage companies but will typically only invest when Establishing relations with market participants a company has a working prototype based on defendable intellectual property. The Scientific Advisory Board (SAB), chaired by Professor A.P. Kuleshov, was established within the framework of the Fund. The SAB deals with technological Each investment is approached as a partnership with the entrepreneur the basis of expertise and evaluation of projects based on its wide connections within the which is the creation of long-term shareholder value. Russian scientific community, including the Russian Academy of Science. Additionally, SAB helps the Fund to locate and select perspective Russian tech- The Fund is committed to providing financial, technical and operational assistance nologies. throughout the life of a portfolio company to ensure high returns both for the Fund’s investors and shareholders. In April 2004, Russian Technologies executed its first investment, acquiring a 44% share of Ultra Motor Company, Ltd for US $1.1 million. Ultra Motor deals with Russian Technologies will often invest together with western co-investors. In such commercialisation of new fundamental technology and its promotion in the electric cases, the Fund’s participation and particular value-add is mitigation of country- transport market, which in 2003 was valued at US $16.2 billion. This technology is specific, political and technological risks. based on the use of a new powerful electric motor for bicycles and other low power transport vehicles. This technology has been developed in Russia over the past The Fund operates as a financial investor and assumes it will be able to exit from 15 years. the investment process within 3 to 4 years after having achieved a satisfactory return on investment. The ability to project an exit opportunity is regarded as one of Our investment will allow Ultra Motor to introduce its first commercial product to the the major criteria in the investment project selection. Indian market, as well as to reinforce the team of managers and initiate develop- ment of new prototypes of electric vehicles. Mikhail Gamzin, Vladimir Bernstein The majority of the funds investments are made into companies in which the Fund and Joe Bowman have joined the Ultra Motor Board of Directors. can control the early stage project implementation and decision-making on critical issues. The Fund actively participates in portfolio companies via the Board of The Fund is an active participant and sponsor of major events of the Russian tech- Directors. Additionally, the Fund actively contributes to strategic planning, selection nology venture community. In 2003 Russian Technologies Fund was an active par- of the key personnel and securing of financing for subsequent investment rounds ticipant in events such as: The Fourth Russian Venture Fair and “Partnership for using a broad network of business partners, investors and consultants both inside Prosperity & Security” conference in Philadelphia, US. In January 2004 the Fund Russia and on global markets. sponsored The Russian-American Technology Symposium (Stanford, USA) and in March 2004 participated in The Israeli TechTour. In September 2004 the Fund plans A lack of working capital is often the main reason for a start up company going out to be one of the main organizers of The Russian TechTour. of business. Therefore, we strongly adhere to the following principles in financing operating expenses: ● Priority funding of the expenses that are critical to the company’s success; ● A corporate culture of financial discipline; ● Result-oriented motivation of managers and employees 64 Russian Technologies focuses on investments in several primary technology domains:

Information Technologies

New materials

Laser technologies

Bio-technologies and life sciences

Nanotechnology

Energy

Sensors, security and detective systems

Unique engineering solutions ServingServing Our Our Communities Communities

lfa Group and its companies are known for their multi-year tradition of charitable activities A and for the patronage of Russia’s historical, cultural and spiritual heritage. While we aim to achieve leadership in all the businesses we operate, we strive not to lose sight of the importance of giving back to the society and communities in which we do business. Through constant efforts to create the conditions for a flourishing society, we are also laying the foundations for our own long-term success.

Our policy is not to impose global social programmes on our managers but to empower them to decide what is right for their businesses and the local societies where they operate. So while the challenges we address are global, such as education, culture, health, and the environment, the emphasis given to each of these themes differs from region to region. We are committed to both an active involvement in large-scale events and projects, and to targeted smaller contributions to enhance individual opportunity. We help to open the doors to people in our communities to various educational pursuits, and support diverse cultural and art institutions in order to promote a better quality of life. We also conduct our business in ways that protect and preserve the environment and meet or exceed health and safety standards.

Alfa Group and its companies recognize that part of being a successful and well-respected company is being socially responsible. Our commitment is seen in the quality of our products and our processes. We are proud of the level of sponsorship and community service that we have achieved but we do not intend to rest on our laurels. We will continue to seek out new ways of helping the people of Russia, supporting Russia’s national culture and heritage, improving the lives of our employees and their families. In doing this, we create a better future for both the Alfa Group 66 and the communities in which we operate. 67

Humanitarian Activities

● Alfa Bank donated considerable sums to help homeless children, victims of terrorism, and others who suffered personal pain and loss in Moscow and the regions. ● In Orenburg, “TNK against Drugs” program, which included a media campaign including television broadcasts and printed materials, was launched. ● AlfaStrakhovanie, as part of a joint charitable program with Alfa Bank, established insurance compensation for the children of deceased crew members of Kursk submarine to provide them with financial support for pursuing a higher education. ● Alfa-Eco Group, Perekriostok, TNK-BP and VimpelCom financially support municipal social security departments, nursing homes, orphanages, hospitals and clinics, veteran agencies, and military units in Moscow and other cities across Russia. ● Perekriostok provides regular assistance with foodstuffs to invalids, large families, veterans, families with handicapped children and disadvantaged people, as well as to the “RETO Nadezhda” Centre of rehabilitation of drug addiction, and the Khimki hospital in Moscow region. ● VimpelCom contributed financially to the construction of the Temple of Holy Russian Confessors, contributes to the United Way Moscow Fund, and provided free mobile phones service to invalids, veterans and disabled soldiers from the war in Chechnya. ● Kyivstar provided free mobile service to first aid medical teams working with children in Kyiv, and sponsored a restoration of the intensive care department of the Main Children’s Hospital of Ukraine. ● Annually, TNK-BP prepares Christmas gifts and sponsors a New Year’s feast for children at schools and boarding schools in Nizhnevartovsk, Ryazan, Kursk, Moscow and operates three corporate charity foundations in the Republic of Udmurtia, the Saratov region, and the Khanty Mansiysk Autonomous Area. ● Alfa Bank funds the Alfa Chance program that provides scholarships to talented high school graduates from Russian regions to study at prestigious Education Universities in Moscow and St.Petersburg. Support and ● Alfa-Eco Group sponsors musical schools in Tula region, educational organizations in Sakhalin region, and institutions providing employment assistance for Talent teenagers. ● TNK-BP supports a number of youth activities in Nizhnevartovsk including sports clubs and creative groups, mass cultural events, and the payment of Development dedicated scholarships to talented students. ● TNK-BP assigned funds for computerization of rural areas of the Republic of Udmurtia, the Saratov region, provided charitable aid to the Federation for Internet Education of Karelia and in Tyumen as well as to high schools in different cities. ● TNK-BP supports native population and minorities of the North and the Muslim community of Nizhnevartovsk.

● TNK-BP and Alfa Bank were co-sponsors of Paul McCartney’s historic concert on Red Support of Culture and Square in Moscow, a part of his European tour “Back in the World 2003”. The concert was attended by over 35,000 persons, including President Vladimir Putin. 68 National Heritage ● Alfa Bank is a trustee of the State Academic Bolshoi Theatre and one of the famous patrons of the fine and performing arts in Moscow and the regions. The Opera “La Traviata” by G. Verdii, a new project of Arturo Toscanini, was staged at the Bolshoi in 2003 under Alfa Bank’s sponsorship. ● In St. Petersburg Alfa Bank presented the exhibition “Joseph Brodsky: Urania. Leningrad- Venice-New-York”. The Bank has set up a Joseph Brodsky Memorial Fund to erect a monument to a great Russian poet and Nobel Laureate and open a museum in his honor. ● Alfa Bank sponsored Robbie Williams’s concert in Moscow, and provided assistance to “Ballet Stars of St. Petersburg” program in Royal Albert Hall in London, Andrei Makarevich’s performances in the Far East of Russia, Yury Bashmet’s and “Solisty Moskvy” concerts in Lipetsk. Alfa Bank was a sponsor of the unique exhibition “Kasimir Malevich: Suprematism” at the Solomon R. Guggenheim Museum in New York from May to September 2003, providing American audiencies with a rare opportunity to view the work of this historic Russian artist. This exhibition was named a Best Monographic Museum Show in the USA in 2002-2003 by US Art Critics Association. ● Alfa Bank’s regional branches sponsored the Dmitry Khvorostovsky’s concert in Yekaterinburg, Oleg Tabakov’s Moscow Theatre-Studio performances in Nizhniy Novgorod, the 7th International Jazz Festival “Eurasia - 2003” in Orenburg and the theatre festival “Kuzbass Kovcheg” in Kemerovo. ● Alfa-Eco Group finances cultural programs in Nizhniy Novgorod region, sponsored the publication of books about the Marshall R. Y. Malinovsky Military Academy, and the Moscow State University trustees, and provided funds to monasteries in Moscow region. ● Golden Telecom supported the exhibition “Atyrau Telecom 2003” and the international annual musical contest “Asia Dausy-2003” in Kazakhstan. ● TNK-BP sponsored the “Musical Kremlin” International Festival in Moscow, and holds the “Samotlor Nights” festival annually. Sporting Initiatives

● Alfa Bank was a general sponsor of the 8th Annual President of Russia Golf Cup and Junior Golf Development Program. Alfa Bank also financed International Nordic Holiday in Murmansk. ● Alfa-Eco Group sponsored the international chess festival “Alfa-Eco Voronezh Cup-2003” and finances support for young talented chess-players in Voronezh region. ● MegaFon organized and sponsored the Moscow Championship on Adidas Streetball Challenge as part of Moscow City Day celebrations. ● TNK-BP organized and financed competitions and tournaments in various 69 sports in the Siberian regions.

Environment, Health and Safety

● Alfa-Eco Group provides financial assistance to ecological organizations in Perm region and sponsors ecological programs in Nizhniy Novgorod region. ● As a member of World Wildlife Fund Alfa Bank regularly contributes to nature conservation initiatives. ● TNK-BP’s business units in Nyagan, Udmurtia, and the Saratov region have been certified under ISO for product quality, environment protection and management system parameters. Also, as part of TNK-BP’s “Clear Water” program, the Company regularly purchases treatment units in extraction areas. ● TNK-BP continuously improves working conditions for its employees by building new roads, new hostels on remote deposits and the means of transportation for improved travel and rotation of workers in the field. TRADE HOUSE PEREKRIOSTOK RUSSIAN TECHNOLOGIES Chief Executive Officer: Alexander Kosiyanenko General Director: Mikhail Gamzin ContactContact Address: 89 Dmitrovskoye Shosse, Address: 23A Naberezhnaya Tarasa Shevchenko, Moscow, 127486, Russia Sector B, Floor 6, Moscow, 121151, Russia Tel.: +7 (095) 232-59-24 Tel.: +7 (095) 255-83-64 InformationInformation Fax: +7 (095) 956-35-25 Fax: +7 (095) 255-83-65 E-mail: [email protected] E-mail: [email protected]

ALFA BANK GROUP ALFA TELECOM* CTF HOLDINGS LTD Chairman of the Board: Mikhail Fridman Managing Director: Pavel Kulikov Director: Franz Wolf President: Peter Aven Address: 21 Novy Arbat Street, Moscow, 119019, Russia Head Office: 4 Irish Place, Suite 2, Gibraltar Address: 27 Kalanchevskaya Street, Moscow, 107078, Russia Tel.: +7 (095) 981-44-47 Tel.: (350) 41977 Tel.: +7 (095) 929-91-91, (095) 974-25-15 Fax: +7 (095) 981-44-48 Fax: (350) 41988 E-mail: [email protected] E-mail: [email protected]

ALFASTRAKHOVANIE GOLDEN TELECOM, INC. MOSCOW CONTACT INFORMATION INSURANCE GROUP President and CEO: Alexander Vinogradov Director of Corporate Development, Finance and Control: Address: 1 Kozhevnichesky Proezd, Nigel Robinson Chief Executive Officer: Vladimir Skvortsov Moscow, 115114, Russia Deputy Director of Corporate Development, Finance and Address: 31B Shabolovka, Moscow, 115162, Russia Tel: +7 (095) 797-93-00 Control: David Gould Tel: +7 (095) 788-09-99 Fax: +7 (095) 797-93-32 Manager of Corporate Relations: Maria Klepilina Fax: +7 (095) 785-08-88 E-mail: [email protected] Address: 6 Sechenovskiy Pereulok, Building 3, 3rd Floor, E-mail: [email protected] Moscow, 109034, Russia Tel.: +7 (095) 787-00-77 Fax: +7 (095) 201-36-00 E-mail: [email protected] TNK-BP VIMPELCOM CEO and President: Robert Dudley Chief Executive Officer: Alexander Izosimov Address: 18 Schipok Street, Building 2, Vice-President, International and Investor Relations: Moscow, 115093, Russia Valery Goldin Tel.: +7 (095) 777-77-07 Address: 10 8th Marta Street, Moscow, 127083, Russia Fax: +7 (095) 777-77-07 Tel: +7 (095) 725-07-00 E-mail: [email protected] Fax: +7 (095) 721-00-17 E-mail: [email protected]

ALFA-ECO GROUP KYIVSTAR Chief Executive Officer: Alexander Savin President: Igor Litovchenko 70 General Director: Alexander Fain Address: 51 Krasnozvezdniy Prospect, Address: 12 Krasnopresnenskaya Naberezhnaya, Kiev, 03110, Ukraine Moscow, 123610, Russia Tel: + 380 (44) 247-39-10 Tel.: +7 (095) 967-00-00, (095) 967-00-66 Fax: + 380 (44) 245-72-08 Fax: +7 (095) 967-00-76 E-mail: [email protected] E-mail: [email protected]

* For inquiries regarding MegaFon, please contact us through Alfa Telecom.