MORNING HEADLINES RUSSIAN CAPITAL MARKETS FRIDAY, MARCH 05, 2004 Sales/TradingLondon (+44 020) 7439 6881 Moscow (+7 095) 995 2400 MARKET NEWS COMMENT Surgutneftegas minori Market: Continue to see support in , and the cells. PM ties attempt to cancel ratified today.RTS closed Thursday at 669.26 up 0.3% or 1.99 points from the previous close. Trading volume Thursday fell to U.S. $45.5 million from U.S. $54.2 million Wednesday. The MICEX closed Thursday at Sibneft charged with 582.11, up 0.1% from the previous close. Trading volume on the MICEX $420 mn more in back was down to $582.1 million from $660.0 million on Wednesday. taxes LUKoil JV to tap Saudi field EVENTS Russia’s cellular sub TO WATCH Mar 11 Golden Telecom 2003 US GAAP results scriber base up 5% in Mar 14 Russia's presidential election scheduled February to 39.9 million Mar 20 SurgutNG AGM Mar 26 Results of March 14 presidential elections to be an URSI: new licenses for nounced Mar 28 Sibneft EGM and 2003 GAAP results Ekaterinburg, Sverd 2003 operating results Apr 1 Russia’s oil export duty set at $35.2 per tonne lovsk region; plans con Apr 6 Sibneft’s EMG expected to be held solidation Apr 15 NW Tel to consider merger with Lensvyaz and Komi's Svyaz

RUSSIAN ADRs, LONDON INDICATORS Changes Changes Price Vol 1 day 1 mo YTD Value 1 day 1 mo YTD $ $ mn % % % $ % % %

Gazprom 34.2 28.2 3.0 14.8 31.9 Urals, bbl 30.7 0.7 15.1 6.5 Lukoil 116.1 79.1 1.7 15.0 24.7 Nickel, t 13150.0 5.6 12.3 20.6 Surgut 31.7 6.2 1.6 12.2 7.8 Eurobond Rus10 112.5 0.1 5.8 7.3 Sibneft 32.2 8.4 1.8 3.0 3.9 Gazprom 09EUR 114.2 0.0 7.6 9.2

Yukos 49.6 42.6 1.0 6.7 18.1 25.9 0.5 0.1 2.4 14.9

UES 31.7 14.0 0.8 4.9 16.2 Source: Bloomberg Mosenergo 8.1 0.1 0.6 2.5 22.7

INDICES 14.1 0.8 1.3 6.6 12.8 MTS 114.4 55.3 4.0 18.9 38.2 Changes Vimpelcom 88.9 33.6 2.5 24.3 21.0 Value 1 day 1 mo YTD

% % %

Norilsk Nickel 72.2 55.3 2.8 1.7 8.6 RTS 669.3 0.3 6.9 18.0

MICEX 592.3 0.1 8.1 15.1 Dow Jones 10588.0 0.0 1.1 1.3

Nasdaq Comp 2055.1 1.1 1.8 2.6 Bovespa 22393.0 0.7 6.2 0.7 FTSE 4559.1 0.8 4.0 1.8

Source: Bloomberg Source: Bloomberg

EQUITIES Changes Mcap Price Volume 52 wk 52 wk 4 wk 1 day 1 1 mo YTD .$ bn (RTS high Low vol, % wk. % % $ MICEX) $ $ $ mn % $mn

Lukoil 24.7 29.1 52.8 1.8 4.9 13.5 24.8 29.3 13.6 49.4 Surgutneftegaz, or 25.9 0.6 33.7 1.2 0.0 9.9 8.2 0.7 0.3 16.5 Surgutneftegaz, pr 0.4 5.1 0.0 0.4 11.9 8.3 0.5 0.2 3.3 Sibneft 15.5 3.3 2.0 0.3 1.2 3.7 14.4 3.7 1.9 2.5 Tatneft 2.9 1.3 2.4 1.0 0.8 2.4 14.7 1.4 0.8 3.9 Yukos 33.8 12.5 36.7 1.1 1.0 6.9 18.5 16.4 9.3 35.3 Gazprom, local 45.3 1.9 70.3 3.4 1.0 24.0 44.4 57.0 24.7 20961.0 Gazprom, ADS 80.8 34.2 28.2 3.0 6.7 14.8 31.9 34.2 11.5 238.2

UES, or 13.6 0.3 124.1 0.1 0.6 2.4 13.1 0.3 0.1 63.7 UES, pr 0.3 0.4 0.0 5.1 7.9 17.6 0.3 0.1 0.1 Mosenergo 2.3 0.1 7.4 0.5 0.5 1.4 20.2 0.1 0.0 4.5

MTS, ADS 11.3 114.4 55.3 4.0 10.0 18.9 38.2 115.9 40.2 337.9 Vimpelcom, ADS 4.8 88.9 33.6 2.5 6.6 24.3 21.0 89.7 33.9 451.9 Rostelecom, or 1.7 2.4 25.7 0.4 1.3 5.6 14.1 2.4 1.3 6.1 Rostelecom, pr 1.7 1.4 0.0 2.9 11.5 14.6 1.7 0.9 0.9 Golden Telecom 1.0 33.5 1.5 4.7 3.9 14.5 20.3 34.7 13.8 41.2 MGTS 0.8 11.5 0.1 0.0 0.0 0.0 0.0 14.0 6.8 25.0 Ural SI 1.4 0.0 2.9 0.8 5.0 4.3 0.8 0.0 0.0 1.6 Volga Telecom 0.9 3.1 0.1 0.0 1.9 1.3 16.9 3.5 1.4 1.0 South Telecom 0.4 0.1 0.0 3.9 7.2 12.6 0.9 0.1 0.1 0.4

Norilsk Nickel 15.5 72.3 40.4 1.3 4.0 1.8 10.9 75.8 23.3 46.2 3.8 172.0 0.5 1.1 2.6 1.7 41.1 189.5 56.7 2.2

2 Sberbank 6.8 345.0 20.2 0.3 0.6 14.6 32.4 357.0 205.0 14.6 Source: Bloomberg

FIXED INCOME Changes Changes Current YTM CY Spre 1 day 1 1 mo 3 mo 1 day 1 wk 1 mo % % ad % wk. % % % % % % Indices

EMBI+ 285.7 0.0 0.0 3.3 23.6 482 3 28 31 EMBI+ Russia 331.2 0.3 2.4 3.6 22.8 263 12 35 29

Eurobonds

Russia 03 97.3 0.1 0.1 0.2 0.5 3.1 9.7 175 2 12 78 Russia 05 109.0 0 0.1 1.3 3.4 3.2 8.0 8 15 16 8 Russia 07 117.3 0 0.1 0.1 0.0 4.3 8.5 234 3 9 35

Russia 10 112.5 0.0 0.1 0.1 0.4 5.8 7.3 245 19 24 6 Russia 18 134.7 0 0.8 2.2 9.5 7.2 8.2 296 25 35 2 Russia 28 161.7 0 0.1 0.3 1.3 7.3 7.9 318 23 23 12 Russia 30 98.2 0 0.1 0.4 1.3 6.9 5.1 318 19 40 12 Russia EUR 04 102.1 0 0.0 0.2 1.7 3.4 8.8 138 5 17 14

Russia EUR 05 107.1 0 0.0 0.1 2.4 4.1 8.8 155 1 3 13 L MARKETS A Source: Bloomberg

MACROECONOMIC STATISTICS – USA RUSSIAN CAPIT Date Time Statistic For Actual Market Prior Revised From Expects Mat 01 8:30 AM Personal Income Jan 0.2% 0.4% 0.5% 0.3% Mat 01 8:30 AM Personal Spending Jan 0.4% 0.3% 0.3% 0.5% Mat 01 10:00 AM ISM Index Feb 61.4 62.5 62.0 63.6 Mar 04 8:30 AM Initial Claims Feb28 345K 345K 345K 350K Mar 04 8:30 AM Productivity Q4 2.6% 2.7% 2.7% 2.7% Mar 04 10:00 AM Factory Orders Jan 0.5% 0.7% 0.6% 1.1% Mar 05 8:30 AM Nonfarm Payrolls Feb 120K 125K 112K Mar 05 8:30 AM Unemployment Rate Feb 5.6% 5.6% 5.6%

Source: Yahoo Finance Morning bell

March 05 2004 Friday

NEWS

SURGUTNEFTEGAS MINORITIES ATTEMPT TO CANCEL TREASURY SHARES Several minority investors of Surgutneftegas (SNGS, $0.63, Sell), including Hermitage Capital Management, Prosperity Capital Management and several other investors that manage about $10 billion in Russian assets, have filed a lawsuit in KhantyMansiisk Arbitration Court in an attempt to cancel 62% of Surgutneftegas shares held by its subsidiaries, according Hermitage CEO . Browder believes that the stock held by Surgut subsidiaries should be classified as treasury shares and cancelled because it hasn’t been used in a year. The Russian Law on JointStock Companies states that a company must cancel unissued treasury shares held on its balance sheet if they are not used within one year. The company can neither receive divi dends from those shares, nor vote with them. In Surgutneftegas’ case, its shares are held by its subsidiaries, and both vote and receive dividends. We see no direct violation of the law. However, the minority investors have said they believe the law should be applied more strictly in this case. Surgut’s managers control the company through shares held by the subsidiaries. Canceling the shares would in our view reduce manage ment control over Surgut and make it a takeover target. We believe that Surgut minority investors have lit tle chance of winning the case. SIBNEFT CHARGED WITH $420 MN MORE IN BACK TAXES Sibneft (SIBN, $3.25, Sell) faces an additional claim for $420 million in back taxes from the country’s Tax Min istry, on top of the $1 bn claim received earlier this week. Sibneft has received a letter from the Tax Minis try alleging that its SibneftNoyabrskneftegaz unit underpaid 2000 and 2001 taxes by $420 million. The Ministry also began an audit of the company’s activities in 200304, according to Vedomosti. We believe new claims for underpaid taxes in the more recent period may follow. We believe Sibneft has obeyed the 3 letter of the law. However, we believe the government now wants oil companies to follow the spirit of the law, too, abandoning all taxoptimization schemes. We believe the government is likely to continue pressur ing oil companies until they pay out any backdated taxes avoided earlier. We reiterate our Sell recommen dation on Sibneft shares.

LUKOIL JV TO TAP SAUDI NATURAL GAS FIELD LUKoil (LKOH, $29.0, Buy) CEO , President Abdallah Jum’ah, and Saudi Oil Minister Ali alNaimi are scheduled to sign a 40year contract on Sunday to develop a field known as Con tract Area A, in Riyadh, Saudi Arabia. LUKoil sees an 80% probability of finding a commercial hydrocar bon deposit in the area. LUKoil and Saudi Aramco have formed Luksar, a joint venture 80%owned by LUKoil. The venture is to borrow $215 million from Saudi Hollandi Bank to fund a fiveyear exploration program in the field. Luksar will form an 11member board of directors, comprising eight Lukoil officials, two Saudi Aramco officials and a Saudi government representative, by the end of the month; the board is to appoint a LUKoil manager as general director of the venture, according to LUKoil. Stateowned Saudi Aramco is to buy gas from the field and build pipelines to ship the fuel to customers. LUKoil will market gas condensate from the field. The project is LUKoil’s first in Saudi Arabia , and in our view offers it an important foothold in the country with world’s largest hydrocarbon reserves. We reiterate our Buy recom mendation on LUKoil shares.

RUSSIA’S CELLULAR SUBSCRIBER BASE UP 5% IN FEBRUARY

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TO 39.9 MILLION A The number of mobile subscribers in Russia rose 5% in February 2004, rising by 1.92 million new subscribers, according to an AC&M Consulting monthly report released yesterday. Total subscribers reached 39.9 mil lion as of 29 February 2004, raising the overall penetration rate to 27.5%. Growth was higher than in Janu ary, and slightly exceeded our expectations, which we view positively for the sector. The market breakdown remained almost unchanged, with MTS (MBT, $114.4, Hold) increasing its subscriber base by 4.8% and VimpelCom (VIP, $88.9, Buy) by 5.1%. MTS controls 37% market share, while VimpelCom and MegaFon RUSSIAN CAPIT follow with 31.5% and 17.9%, respectively. The Moscow area market grew by 2.7% in February, with pene tration reaching 71%. VimpelCom’s market share in Moscow is 49%, while MTS controls 43.1%. Vimpel Com remains our favorite in the sector.

URSI: NEW LICENSES FOR EKATERINBURG, SVERDLOVSK REGION; PLANS CONSOLIDATION Uralsvyazinform (URSI, $0.038, Hold) has received licenses to provide cellular services in the city of Ekaterin burg and in Sverdlovsk region. The company will now be able to expand its cellular network to cover all re gions of the Urals where it provides fixedline telecommunications services. Uralsvyazinform has also an Morning bell

March 05 2004 Friday

nounced it will consolidate its cellular subsidiaries and use a single brand. The company currently has over 1.25 million mobile subscribers. We view the information positively for Uralsvyazinform.

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