Edgar Filing: GOLDEN TELECOM INC

SCHEDULE 14A

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement

[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e) (2))

[X] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

GOLDEN TELECOM, INC.
(Name of Registrant as Specified In Its Charter)

Not Applicable
(Name of Person(s) Filing Proxy Statement if other than Registrant)

Payment of Filing Fee (Check the appropriate box):

[ ] No Fee Required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

1) Title of each class of securities to which transaction applies: Common
Stock, par value $0.01 per share.

2) Aggregate number of securities to which transaction applies: 6,972,382
shares of Common Stock.

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): The average
of the high and low prices on the Nasdaq on October 6 was $29.345

4) Proposed maximum aggregate value of transaction: $204,604,550

5) Total fee paid: $16,553

[X] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule, and the date of its filing.

1) Amount Previously Paid:

2) Form, Schedule or Registration Statement No.:

3) Filing Party:

4) Date Filed:

GOLDEN TELECOM, INC. GOLDEN
REPRESENTATIVE OFFICES OF GOLDEN TELESERVICES, INC. TELECOM LOGO
1 KOZHEVNICHESKY PROEZD, 2ND FLOOR
MOSCOW, RUSSIA 115114

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
NOVEMBER 28, 2003
LONDON, ENGLAND

October 31, 2003

Dear Stockholders:

A special meeting of stockholders of Golden Telecom, Inc. (the "Company" or
"Golden Telecom") will be held at the offices of Chadbourne & Parke, Regis
House, 45 King William Street, London EC4R 9AN, United Kingdom on November 28,
2003 at 10:00 a.m. local time, to consider a proposal by the Company's Board of
Directors to issue shares of our common stock in excess of 20% of our
outstanding shares of common stock prior to the issuance of the new shares, in
connection with our acquisition of all of the capital stock of OAO Comincom, an
open joint stock company existing under the laws of the Russian Federation.

This transaction is more fully described in the proxy statement
accompanying this notice to which your attention is directed.

Stockholders of record at the close of business on October 22, 2003 will be
entitled to vote at the special meeting. If you will need special assistance at
the special meeting because of a disability, please notify the Office of the
General Counsel of the Company at the Representative Offices of Golden
TeleServices, Inc., 1 Kozhevnichesky Proezd, 2nd Floor, Moscow, Russia 115114 or
Golden Telecom, Inc., 4400 MacArthur Blvd., N.W., Suite 200, Washington, D.C.,
20007 or through e-mail at specialmeeting@gti.ru. A list of stockholders
entitled to vote at the meeting may be examined at the principal executive
offices of the Company at the Representative Offices of Golden TeleServices,
Inc., 1 Kozhevnichesky Proezd, 2nd Floor, Moscow, Russia 115114.

By Order of the Board of Directors

/s/ Jeffrey A Riddell
JEFFREY A. RIDDELL
Senior Vice President, General Counsel
and Secretary

IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND DATE THE
ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.

GOLDEN TELECOM, INC. GOLDEN
REPRESENTATIVE OFFICES OF GOLDEN TELESERVICES, INC. TELECOM LOGO
1 KOZHEVNICHESKY PROEZD, 2ND FLOOR
MOSCOW, RUSSIA 115114

PROXY STATEMENT

SPECIAL MEETING OF STOCKHOLDERS
November 28, 2003
London, England

A special meeting of stockholders of Golden Telecom, Inc., a Delaware
corporation, will be held at the offices of Chadbourne & Parke, Regis House, 45
King William Street, London EC4R 9AN, United Kingdom on November 28, 2003 at 10
a.m. local time for the purposes set forth in the accompanying notice of special
meeting of stockholders. THE ENCLOSED PROXY IS SOLICITED BY AND ON BEHALF OF OUR
BOARD OF DIRECTORS FOR USE AT THIS SPECIAL MEETING, AND AT ANY ADJOURNMENTS AND
POSTPONEMENTS OF THIS SPECIAL MEETING. The approximate date on which this proxy
statement and the enclosed proxy are being first mailed to stockholders is
November 3, 2003.

If a proxy in the accompanying form is duly executed and returned, the
shares represented by such proxy will be voted as specified. Any person
executing an enclosed proxy may revoke it prior to its exercise by letter
directed to us, in person at the special meeting, by delivery of a later dated
duly executed proxy relating to the same shares or by voting in person at the
special meeting.

Stockholders of record at the close of business on October 22, 2003 are
entitled to vote at the special meeting.

IF YOU RETURN YOUR PROXY CARD TO US AND DO NOT SPECIFY ON YOUR PROXY CARD
HOW YOU WANT TO VOTE YOUR SHARES, WE WILL VOTE THEM "FOR" THE PROPOSAL.

Throughout this proxy statement, the terms "we," "us," "our" and "our
company" refers to Golden Telecom, Inc. and, unless the context indicates
otherwise, our subsidiaries on a consolidated basis.

TABLE OF CONTENTS

PAGE
----

SUMMARY TERM SHEET.......................................... 1
PROPOSAL TO APPROVE THE ISSUANCE OF OUR COMMON STOCK IN
EXCESS OF 20% OF THE AMOUNT OF OUR OUTSTANDING SHARES OF
COMMON STOCK IN CONNECTION WITH OUR ACQUISITION OF OAO
COMINCOM.................................................. 6
GOLDEN TELECOM, INC. SELECTED FINANCIAL DATA................ 8
OAO COMINCOM SELECTED FINANCIAL DATA........................ 10
CONSOLIDATED FINANCIAL STATEMENTS OF OAO COMINCOM........... 12
OAO COMINCOM'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION.............. 41
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS................................................ 55
MATERIAL CONTACTS AND BOARD DELIBERATIONS................... 67
REGULATORY APPROVALS........................................ 71
TERMS OF THE SHARE EXCHANGE AGREEMENT....................... 71
STOCK OWNERSHIP FOLLOWING THE CLOSING....................... 79
TERMS OF THE OTHER TRANSACTION DOCUMENTS.................... 80
GENERAL QUESTIONS........................................... 85
INCORPORATION OF INFORMATION BY REFERENCE................... 87

SUMMARY TERM SHEET

This summary term sheet describes material terms of the acquisition of OAO
Comincom ("Comincom") and in certain cases provides references to other pages of
this proxy statement for you to obtain further information. You should carefully
read this entire proxy statement, including financial information relating to
our company and Comincom before you vote. You are being asked to approve the
issuance by us of shares of our common stock as the consideration in the
acquisition of Comincom. You are not being asked to approve the acquisition
itself, though if the issuance of our shares is not approved by you, the
acquisition cannot occur. The actual terms of our acquisition of Comincom are
contained in our share exchange agreement, which we have filed with the SEC as
an exhibit to Form 8-K on August 20, 2003. You can review this Form 8-K (and the
share exchange agreement) on the SEC's website, www.sec.gov. A summary of the
share exchange agreement is included in this proxy statement. See "TERMS OF THE
SHARE EXCHANGE AGREEMENT".

OVERVIEW

- On August 19, 2003, we executed a share exchange agreement relating to
the acquisition of all of the capital stock of Comincom by SFMT-CIS, Inc.
("SFMT"), a Delaware corporation 100% owned by us. Less than one percent
of the capital stock of Comincom will be held by a designee of SFMT in
order to comply with Russian law. Please see the section entitled
"SUMMARY TERM SHEET -- Our acquisition of Comincom".

- We are seeking your approval of the issuance of shares of our common
stock in excess of 20% of the outstanding amount of our common stock
prior to the issuance of the new shares, in connection with our
acquisition of all of the capital stock of Comincom. We are seeking this
approval because under the Nasdaq Marketplace Rules, to which we are
subject, the number of shares to be issued in this transaction may not
equal or exceed 20% of our outstanding shares of common stock, without
stockholder approval. For purposes of the Nasdaq Marketplace Rules the
percentage of outstanding shares is calculated before giving effect to
the issuance of the shares in question. The shares to be issued to the
stockholders of Comincom upon the consummation of our acquisition of
Comincom would constitute approximately 24.2% of our issued and
outstanding shares of common stock before the acquisition (based on the
number of shares outstanding on September 30, 2003) and 19.5% of our
issued and outstanding shares of common stock immediately following the
acquisition. Please see the section entitled "SUMMARY TERM SHEET -- The
Special Meeting".

THE COMPANIES

OUR COMPANY

- Our company is Golden Telecom, Inc., a Delaware corporation. We are the
leading facilities-based provider of integrated telecommunications and
Internet services to businesses and other high-usage customers and
telecommunications operators in Moscow, Kiev, St. Petersburg,
Krasnoyarsk, Nizhny Novgorod and other major population centres
throughout Russia and other countries of the Commonwealth of Independent
States ("CIS"). We organise our operations into four business groups.
These business groups are Business Services, Operator Services, Consumer
Internet Services, and Mobile Services. We offer all of our integrated
telecommunication services under the Golden Telecom brand and our
internet services under the ROL brand in Russia.

- Our principal executive offices are: Moscow Representative Office, Golden
TeleServices, Inc., 1 Kozhevnichesky Proezd, Moscow, Russia 115114 and
our telephone number, if calling from the United States of America, is
011-7-501-797-9300.

COMINCOM

- Comincom is one of the leading facilities-based operators offering
advanced telecommunications services in Russia and has a regional network
covering more than 30 of Russia's regions. Comincom

owns 100 percent of OAO Combellga ("Combellga"). Combellga offers
integrated telecommunications and Internet services to businesses and
other high-usage customers and telecommunications operators in Moscow,
St. Petersburg, Voronezh, Samara and several other major population
centers throughout Russia. Comincom is licensed to provide local and
intercity telephone communication services, channels leasing services,
telematics services, data transmission services, and local, intercity and
international telephone communication services through dedicated
networks.

- The principal executive offices of Comincom are located at 6, 2nd
Spasonalivkovsky Pereulok, Moscow, Russia, 117909 and Comincom's
telephone number, if calling from the United States of America, is
011-7-095-238-2031.

THE SHARE EXCHANGE AGREEMENT

SFMT will acquire all the issued and outstanding shares of Comincom from
Nye Telenor East Invest AS ("Telenor") pursuant to the terms of a share exchange
agreement. In exchange for all of these shares of Comincom, we will issue to
Telenor a number of shares of our common stock equal to 19.5% of our outstanding
shares of common stock calculated on a post-acquisition basis. For example, if
on the closing date we have 28,783,421 shares of common stock outstanding, we
would issue 6,972,382 shares of our common stock to Telenor. In this example,
35,755,802 shares of our common stock would be outstanding immediately after the
closing of the acquisition. The actual number of shares issued may differ
depending on the number of outstanding shares on the date of closing the
transaction.

The closing of the acquisition of Comincom is subject to conditions
precedent which are customary for this type of transaction, including approval
by the relevant anti-trust authorities (which we have received), approval of the
issuance of our shares of common stock by you and effectiveness of the other
transaction documents entered into by Golden Telecom, Alfa Telecom Limited
("Alfa"), Capital International Global Emerging Markets Private Equity Fund,
L.P. ("Capital"), Cavendish Nominees Limited ("Cavendish") and First NIS
Regional Fund SICAV ("First NIS") (Cavendish and First NIS, together,
"Barings"), OAO Rostelecom ("Rostelecom") and Telenor. The other transaction
documents are a registration rights agreement, a standstill agreement and a
shareholders agreement. These agreements are described below. See "TERMS OF THE
OTHER TRANSACTION DOCUMENTS".

In addition, the share exchange agreement contains other customary
provisions such as restrictions on the conduct of business prior to the closing
and indemnification. For a more detailed discussion of the share exchange
agreement, please refer to "TERMS OF THE SHARE EXCHANGE AGREEMENT" below.

OUR ACQUISITION OF COMINCOM

REASONS FOR THE ACQUISITION

Our objective is to solidify and extend our position as the leading
independent voice, data and Internet services company in Russia and the CIS. To
achieve this objective, we intend to continue to grow organically in our
established markets and to pursue consolidation opportunities through
acquisitions that allow us to improve and expand our service offerings while
maintaining operational control. Our primary criterion when considering
consolidation opportunities is the existence of critical telecommunications
infrastructure that will allow us, if the acquisition is consummated, to achieve
synergies and economies of scale. We have entered into the share exchange
agreement because we believe the acquisition of Comincom presents an excellent
opportunity to help our company further its objectives in a manner that makes
sound financial and strategic sense.

Comincom recorded consolidated revenues of $84.2 million in 2002, an
increase of approximately 34% compared to 2001 consolidated revenues of $62.9
million. Consolidated net income was $9.2 million in 2002, as compared to 2001
consolidated net income of $0.4 million. As of December 31, 2002, Comincom had
consolidated cash and cash equivalents of $1.9 million, consolidated short-term
borrowings of $4.5 million, and consolidated long-term borrowings of $3.9
million. Comincom recorded consolidated

revenues of $49.3 million for the six months ended June 30, 2003, an increase of
approximately 29% compared to the six months ended June 30, 2002 consolidated
revenues of $38.1 million. Consolidated net income was $5.0 million for the six
months ended June 30, 2003, an increase of approximately 43% compared to the six
months ended June 30, 2002 consolidated net income of $3.5 million. As of June
30, 2003, Comincom had consolidated cash and cash equivalents of $3.9 million,
consolidated short-term borrowings of $3.6 million, and consolidated long-term
borrowings of $3.5 million.

Comincom is one of the leading facilities-based providers of integrated
telecommunications and Internet services to businesses and other high-usage
customers and telecommunications operators in Moscow, St. Petersburg, Voronezh,
Samara and several other major population centers throughout Russia. In addition
to Combellga, Comincom has stakes in among other companies, four regional
alternative wireline operators: World Trade Telecom, Zenit Telecom, Nakhodka
Telecom and Sakhalin Telecom. Based on its management estimates, Comincom
believes that it has approximately 12% market share of the Russian alternative
telecommunications market, based on 2002 revenues. Comincom offers a major part
of its integrated telecommunication services under the Combellga and Comincom
brands. Their services primarily consist of:

- Primary telecommunication services. Using its own infrastructure,
consisting of fiber optic backbone, fixed copper and fiber as well as
wireless access network, modern switching network, Internet platform
("IP"), and datacom facilities, Comincom provides a range of services
including local exchange and access services, international and domestic
long-distance telephone services to both end-users and other carriers
through more than 20 access points throughout Russia, international
interconnect services, and radio solutions for long distance vehicles;
and

- Value Added Services. In addition to primary telecommunication services,
Comincom also offers broadband solutions, including Asymmetric Digital
Subscriber Lines ("ADSL"), WEB-hosting and co-location services,
Individual and corporate e-mail solutions, IP-Virtual Private Networking
("VPN") services, and Intelligent Network ("IN") services, including
intelligent routing, voice VPNs, and prepayment card solutions.

Combellga's key customers include embassies, hotels, large office buildings
and large corporate clients. We believe that we will create additional synergies
by offering additional services to a broader range of customers in these key
target areas.

Our company aims to extend our leading position in high growth data and
Internet markets. Comincom owns or controls numbering capacity and network
assets, including fiber optic cable and customer access networks, in key Russian
municipal areas which is consistent with our network development strategy and
which we believe we can further develop to increase our penetration in these
markets. The acquisition will help us to reduce operating costs as a percentage
of revenue and help address our infrastructure needs through network planning
and optimization.

We have identified significant revenue, cost and capital expenditure
synergies which we hope to achieve following the acquisition of Comincom:

- Revenue synergies. Revenue synergies are expected to be achieved mainly
through the harmonization of our sales efforts and product offerings.

- Cost synergies. Cost synergies are expected to be achieved in the areas
of network operations, product and service development, IT systems and
infrastructure, purchasing and corporate overhead functions.

- Capital expenditure synergies. Capital expenditure synergies are
expected to be achieved in the areas of network operations, IT systems
and infrastructure and purchasing.

We have experienced significant growth as a result of acquisitions and
expect such growth to continue. As we grow, including growth as a result of the
acquisition of Comincom, it will become increasingly difficult and more costly
to manage our business.

Acquisition transactions are accompanied by a number of risks, including risks
related to:

- the consolidation of the operations and personnel of the acquired
companies;

- the potential disruption of our ongoing business and distraction of
management;

- the introduction of acquired technology content or rights into our
products and unanticipated expenses related to such integration;

- the potential negative impact on reported earnings;

- the possibility that revenues from acquired businesses and other
synergies may not materialize as anticipated;

- the deterioration of relationships with employees and customers as a
result of the acquisition; and

- contingent liabilities associated with acquired businesses, especially in
the markets where we operate.

We may not be successful in addressing these risks or any other problems
encountered in connection with our completed and future acquisitions and our
operating results may suffer as a result of any failure to integrate these
businesses with our existing operations.

VOTE REQUIRED FOR THE SHARE ISSUANCE

- Under Nasdaq Marketplace Rules, because we will be issuing to Telenor,
the stockholder of Comincom, an amount of our common stock in excess of
20% of the amount of our outstanding common stock calculated before
giving effect to the issuance of the new shares, we are required to
obtain the approval of our stockholders prior to consummating the
acquisition. The minimum vote which will constitute stockholder approval
shall be a majority of the total votes cast on the proposal in person or
by proxy. Alfa, Barings, Capital and Rostelecom, which collectively own
68% of the outstanding shares of common stock as of September 30, 2003,
have indicated that they will vote in favor of the share issuance.

ACCOUNTING TREATMENT

- The acquisition will be accounted for as a purchase of Comincom by our
company. Therefore, the results of operations of Comincom from the date
of the acquisition will be included in our consolidated results of
operations. For purposes of preparing consolidated financial statements,
the purchase price, including the costs associated with the acquisition
at the date of completion will be allocated to the assets and liabilities
of Comincom based on their fair market values, with the excess allocated
to goodwill which is required to be tested for impairment at least
annually.

NO APPRAISAL RIGHTS

- Our stockholders are not entitled to appraisal rights in connection with
the Comincom acquisition.

NO PRE-EMPTIVE RIGHTS

- Certain of our stockholders (namely, Alfa, Barings, Capital and
Rostelecom) have pre-emptive rights with respect to the issuance of our
common stock which were granted to them in a standstill agreement dated
September 5, 2002. Each of these stockholders has waived its pre-emptive
rights in connection with the issuance of our shares in the acquisition.
These pre-emptive rights would have given these stockholders a right to
purchase new securities issued by us. Pre-emptive rights protect against
dilution to some extent by allowing such holders to purchase shares
according to their percentage ownership in each issuance of new
securities. No other stockholders have pre-emptive rights. Because of the
waiver, all of our stockholders, including, Alfa, Barings, Capital and
Rostelecom, will have their ownership interest diluted by the issuance of
our common stock in connection with the acquisition of Comincom.

REGULATORY APPROVALS

- In order to complete the acquisition of Comincom, we are required to
obtain the approval of the Ministry for Antimonopoly Policy and Support
for Entrepreneurship of the Russian Federation and satisfy the
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
These approvals have been obtained. In addition, completion of the
acquisition of Comincom will require compliance with applicable corporate
law of the State of Delaware and the Russian Federation, compliance with
Nasdaq Marketplace Rules as set forth in this proxy statement and
compliance with the United States Securities and Exchange Commission
("SEC") rules and regulations, federal securities laws and applicable
securities and "blue sky" laws of the various states.

THE SPECIAL MEETING

Only stockholders of record at the close of business on October 22, 2003
will be entitled to vote at the special meeting or any adjournment thereof. Such
date is referred to as the "record date" in this proxy statement. We currently
have only a single class of voting capital stock outstanding, namely, shares of
common stock, $.01 par value per share. Each share of common stock issued and
outstanding on the record date is entitled to one vote at this special meeting.
As of the record date, there were 28,790,972 shares of our common stock
outstanding.

The majority of the total votes cast in person or by proxy is required for
the approval of the issuance of shares of our common stock in connection with
our acquisition of Comincom.

We intend to count abstentions both for the purpose of determining the
presence or absence of a quorum and in the total number of shares represented
and voting with respect to the proposal. Accordingly, abstentions will have the
same effect as a vote against the proposal. In instances where brokers are
prohibited from exercising discretionary authority for beneficial owners who
have not returned a proxy (so called "broker non-votes"), those votes will have
no effect on the vote for the issuance of shares of our common stock and will
not be counted for purposes of determining the presence or absence of quorum.

PROPOSAL TO APPROVE THE ISSUANCE
OF OUR COMMON STOCK IN EXCESS OF 20%
OF THE AMOUNT OF OUR OUTSTANDING SHARES
OF COMMON STOCK IN CONNECTION
WITH OUR ACQUISITION OF OAO COMINCOM

We are seeking your approval pursuant to Nasdaq Marketplace Rule
4350(i)(1)(c)(ii), which requires Nasdaq-listed companies to obtain stockholder
approval before issuing 20% or more of their common stock or 20% or more of
their voting power, in connection with an acquisition of the stock or assets of
another company, other than in a public offering for cash. For purposes of the
Nasdaq Marketplace Rules the percentage of outstanding shares is calculated
before giving effect to the issuance of the shares in question.

The shares to be issued to the stockholders of Comincom upon the
consummation of our acquisition of Comincom would constitute 19.5% of our issued
and outstanding shares of common stock following the acquisition. Based on the
number of shares outstanding on September 30, 2003 we would therefore issue
6,972,382 shares of common stock to the stockholder of Comincom upon the
consummation of the acquisition of Comincom, which shares would represent
approximately 24.2% of our issued and outstanding shares on September 30, 2003.

Our Board of Directors has carefully considered the acquisition of
Comincom, has determined that the acquisition is in the best interest of our
stockholders and has unanimously approved the entering into of the share
exchange agreement. Because some members of our Board are affiliated with
stockholders who are parties to a shareholders agreement, a standstill agreement
and a registration rights agreement with Telenor, Comincom's stockholder, and
our company, that will become effective on the closing of the acquisition, our
Board established a special committee, which was established on March 28, 2003.
The members of the special committee were Mr. David Herman and Mr. Michael
North, each of whom is disinterested in this transaction. The special committee
determined that the acquisition of Comincom and the entering into of the
standstill agreement, registration rights agreement and shareholders agreement
is in the best interest of our company and its shareholders. See "TERMS OF THE
TRANSACTION DOCUMENTS" below.

The special committee was initially established to review and evaluate the
advisability of an amendment to our company's certificate of incorporation such
that in certain circumstances where any person desires to become a beneficial
owner of 50% or more of the issued and outstanding shares of our company, such
person would be required to make an offer to purchase any and all of our
company's shares. It was decided not to include such a provision in our
certificate of incorporation. Similar tender offer provisions were subsequently
included in the shareholders agreement among our company, Alfa, Barings,
Capital, Rostelecom and Telenor. On April 1, 2003, the scope of the special
committee's duties was expanded to include exclusive power and authority on
behalf of our company to review, evaluate and determine the advisability of
granting a request for advance approval under Section 203 of the Delaware
General Corporation Law (the "DGCL") in connection with the acquisition of
Comincom and to review, evaluate and determine the advisability of amending the
existing standstill agreement, registration rights agreement and shareholders
agreement, among our company's major shareholders. Section 203 is Delaware's
anti-takeover statute.

The special committee was also given the exclusive power and authority on
behalf of our company to (i) communicate and negotiate with the parties in the
transaction and with respect to the standstill agreement, registration rights
agreement and shareholders agreement, including the requested approval under
Section 203 of the DGCL, (ii) determine whether our company should agree to
approval in advance for Telenor attaining interested stockholder status for the
purposes of Section 203 in connection with the acquisition and amending the
shareholder agreement and standstill agreement among our company's major
shareholders and whether such actions are fair to, and in the best interests of,
our company and all of its shareholders, and (iii) exercise all of the power and
authority possessed by our company's full Board of

Directors to determine whether to grant or deny the request by our company for
approval pursuant to Section 203 of the DGCL.

The special committee considered and determined that it was appropriate to
waive the application of Section 203 of the DGCL, such waiver removing
restrictions under the DGCL on Telenor becoming an interested shareholder of our
company as a result of the transaction.

We currently have a sufficient amount of authorized and unissued shares of
our common stock to issue the shares to the Comincom stockholders as
consideration for our acquisition of Comincom.

Alfa, Barings, Capital and Rostelecom, which collectively own approximately
68% of the outstanding shares of common stock as of September 30, 2003, have
indicated that they will vote in favor of the proposal.

Our Board of Directors has unanimously approved the issuance of the shares
of the common stock to Telenor in connection with the acquisition of Comincom,
subject to stockholder approval.

Accordingly, the Board recommends that you vote in favour of this proposal.

In order to give effect to this proposal the following resolution will be
offered at the special meeting and your vote for this proposal will be deemed a
vote for such resolution:

RESOLVED, THAT THE ISSUANCE BY GOLDEN TELECOM, INC. OF 20% OR MORE OF ITS
COMMON STOCK BEFORE GIVING EFFECT TO THE ISSUANCE IN QUESTION IN CONNECTION WITH
THE ACQUISITION OF OAO COMINCOM, AN OPEN JOINT STOCK COMPANY EXISTING UNDER THE
LAWS OF THE RUSSIAN FEDERATION, BE AND HEREBY IS APPROVED.

GOLDEN TELECOM, INC. SELECTED FINANCIAL DATA

The following selected historical consolidated financial data at December
31, 1998, 1999, 2000, 2001 and 2002, and for all of the years presented are
derived from consolidated financial statements of Golden Telecom, Inc. which
have been audited by Ernst & Young (CIS) Limited, independent auditors. The
selected historical consolidated financial data at June 30, 2002 and 2003 and
for the six months ended June 30, 2002 and 2003 are derived from consolidated
financial statements of Golden Telecom and are unaudited.

The data should be read in conjunction with the consolidated financial
statements, related notes, and other financial information included in this
document or incorporated herein by reference.

FOR THE SIX MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------- ------------------
1998 1999 2000 2001 2002 2002 2003
-------- -------- -------- -------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS DATA:
Revenues............................ $ 86,086 $ 97,931 $113,089 $140,038 $198,727 $75,567 $159,138
Cost of revenues (excluding
depreciation and amortization).... 43,574 40,516 50,954 63,685 91,189 32,926 76,735
Gross margin........................ 42,512 57,415 62,135 76,353 107,538 42,641 82,403
Selling, general and administrative
(excluding depreciation and
amortization)..................... 45,327 41,011 45,420 48,935 46,147 19,924 26,823
Depreciation and amortization....... 16,709 28,143 31,851 41,398 29,961 12,250 20,947
Abandonment and restructuring
charge............................ -- 19,813 -- -- -- -- --
Impairment charge................... -- -- -- 31,291 -- -- --
Income (loss) from operations....... (19,524) (31,552) (15,136) (45,271) 31,430 10,467 34,633
Equity in earnings (losses) of
ventures.......................... 2,559 (6,677) (285) 8,155 4,375 487 (29)
Interest income (expense), net...... (3,003) 2,814 7,126 777 (667) (85) (973)
Foreign currency gains (losses)..... (7,452) (2,739) (390) (647) (1,174) (507) 213
Minority interest................... (1,040) (1,477) (431) (117) (527) (227) (215)
Other non-operating expense......... -- -- (148) -- -- -- --
Provision for income taxes.......... 5,184 6,823 990 1,902 4,627 2,149 8,974
Net income (loss) before cumulative
effect of change in accounting
principle......................... (33,644) (46,454) (10,254) (39,005) 28,810 7,986 24,655
Cumulative effect of change in
accounting principle.............. -- -- -- -- 974 974 --
Net income (loss)................... (33,644) (46,454) (10,254) (39,005) 29,784 8,960 24,655
Net income (loss) per share before
Cumulative effect of change in
accounting
principle -- basic(1)............. (3.17) (3.38) (0.43) (1.65) 1.20 0.36 0.90
Cumulative effect of change in
accounting principle.............. -- -- -- -- 0.04 0.04 --
Net income (loss) per
share -- basic(1)................. (3.17) (3.38) (0.43) (1.65) 1.24 0.40 0.90
Weighted average
shares -- basic(1)................ 10,600 13,736 24,096 23,605 24,102 22,593 27,271
Net income (loss) per share before
cumulative effect of change in
accounting
principle -- diluted(1)........... (3.17) (3.38) (0.43) (1.65) 1.17 0.35 0.89
Cumulative effect of change in
accounting principle.............. -- -- -- -- 0.04 0.04 --
Net income (loss) per share --
diluted(1)........................ (3.17) (3.38) (0.43) (1.65) 1.21 0.39 0.89
Weighted average
shares -- diluted(1).............. 10,600 13,736 24,096 23,605 24,517 23,062 27,836

AT DECEMBER 31, AT JUNE 30,
---------------------------------------------------- -------------------
1998 1999 2000 2001 2002 2002 2003
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)

BALANCE SHEET DATA:
Cash and cash equivalents........... $ 14,164 $162,722 $ 57,889 $ 37,404 $ 59,625 $ 51,679 $ 55,305
Investments available for sale...... -- -- 54,344 8,976 -- 1,998 --
Property and equipment, net......... 52,186 62,176 82,377 98,590 166,121 98,278 174,607
Investments in and advances to
ventures.......................... 46,519 45,196 49,629 45,981 721 46,447 512
Goodwill and intangible assets,
net............................... 71,924 53,467 70,045 57,146 127,669 53,403 125,803
Total assets........................ 235,849 366,624 348,456 300,384 435,810 302,944 449,604
Total debt, including current
portion........................... 24,459 28,029 18,997 22,220 40,495 12,582 8,688
Minority interest................... 7,993 2,816 3,337 5,967 2,187 4,761 2,359
Shareholders' equity................ 168,783 288,552 283,193 220,844 307,458 233,557 340,263

---------------

(1) Per share amounts in this table were calculated based upon the assumption
that the 10,600,000 common shares issued in connection with the formation of
the company are outstanding for all periods prior to September 30, 1999.

Refer to Note 3 in the Annual Report on Form 10-K to the Consolidated
Financial Statements for descriptions of recent acquisitions that impact the
comparability of financial information. Other business combinations not
disclosed in the footnotes are as follows:

In February 1998, the company acquired the remaining interest in Sovam
Teleport ("Sovam") for cash consideration of $5.0 million. In July 1998, the
company acquired the remaining interest in GTS-Vox Ltd., the holding company for
TCM, for cash consideration of $37.0 million. In June 1998, the company
increased its beneficial interest in Golden Telecom (Ukraine) to 56.75% for cash
consideration of approximately $9.8 million. The company began consolidating
Sovam in February 1998 and TCM and Golden Telecom (Ukraine) in July 1998.

In August 1999, the company increased its beneficial ownership in TCM from
95% to 100%. Goodwill in the amount of $3.2 million was recorded by the company.

An affiliate of ING Barings which indirectly owned 12.25% of Golden Telecom
(Ukraine), contributed its indirect interest in Golden Telecom (Ukraine) to a
wholly owned subsidiary of Golden Telecom, Inc., upon the consummation of our
initial public offering on September 30, 1999 in exchange for 420,000 newly
issued shares of common stock of the company. In accordance with the
subscription agreement we issued an additional 30,000 shares of common stock in
full and final settlement to the affiliate of ING Barings. Our beneficial
interest in Golden Telecom (Ukraine) increased from 56.75% to 69% as the result
of this transaction.

In June 1999, we acquired the assets of Glasnet, a Moscow based Internet
Services Provider ("ISP"). In July 1999, we acquired a 75% interest in SA Telcom
LLP, a telecommunications and data services provider in Kazakhstan. In December
1999, we acquired the assets of Nevalink, an ISP, and of full-equity ownership
of NevaTelecom. Both Nevalink and NevaTelecom provided telecom and Internet
services to the St. Petersburg market. These acquisitions were purchased for
approximately $2.5 million in cash.

Refer to Note 2 in the Annual Report on Form 10-K to the Consolidated
Financial Statements for a description of the change in method of accounting for
goodwill in 2002.

OAO COMINCOM SELECTED FINANCIAL DATA

The following selected historical consolidated financial data at December
31, 2001 and 2002, and for the two years ended December 31, 2001 and 2002 are
derived from the audited consolidated financial statements of Comincom. The
selected historical consolidated financial data as of December 31, 2000 and as
of June 30, 2002 and 2003, and for the year ended December 31, 2000 and for the
six months ended June 30, 2002 and 2003, are derived from the consolidated
financial statements of Comincom and are unaudited. Selected financial data for
1998 and 1999 has been derived from consolidated financial information of
Comincom and are unaudited.

The data should be read in conjunction with the consolidated financial
statements, related notes, and other financial information included in this
document or incorporated herein by reference.

FOR THE SIX MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------- -------------------
1998 1999 2000 2001 2002 2002 2003
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)

STATEMENT OF OPERATIONS DATA:
Revenue............................. $ 59,833 $ 50,384 $ 54,238 $ 62,906 $ 84,154 $ 38,079 $ 49,272
Operating expenses.................. 26,418 25,288 31,749 35,692 47,840 20,910 27,971
Selling, general and
administrative.................... 7,053 6,752 8,477 9,928 11,431 5,669 4,662
Depreciation and amortization....... 4,733 5,081 8,452 12,887 11,047 5,238 6,680
Operating income.................... 21,629 13,263 5,560 4,399 13,836 6,262 9,959
Other income (loss)................. (10,403) (197) 1,423 (1,162) 607 (187) (274)
Income tax expense.................. 5,795 4,876 4,824 2,413 4,945 2,424 4,599
Minority interests.................. 417 440 459 422 316 154 131
Net income.......................... 5,014 7,750 1,700 402 9,182 3,497 4,955

1998 1999 2000 2001 2002 2002 2003
------- ------- -------- -------- -------- -------- --------
(IN THOUSANDS)

BALANCE SHEET DATA:
Cash and cash equivalents............. $ 988 $ 853 $ 4,068 $ 3,926 $ 1,915 $ 2,509 $ 3,899
Property, plant and equipment, net.... 35,151 41,480 48,585 66,334 83,453 74,561 83,278
Goodwill and intangible assets, net... 218 368 46,755 43,125 44,952 43,051 52,951
Total assets.......................... 50,325 56,852 117,279 137,035 160,320 154,001 176,124
Total debt, including current
portion............................. 8,703 14,165 14,310 9,706 8,362 7,629 7,080
Shareholders' equity.................. 26,089 31,103 83,951 107,595 122,575 116,890 133,658

In June 2003, Telenor acquired the remaining 25% of Comincom, which it did
not previously own. The acquisition triggered a requirement to apply push-down
accounting as of June 2003 for Comincom's consolidated financial statements. As
a result, these financial statements reflect Telenor's basis in Comincom's
assets and liabilities to the extent of Telenor's ownership percentage of
Comincom's common stock during the periods presented. Telenor's ownership of the
Comincom is summarized as follows:

AS OF TELENOR OWNERSHIP
----- -----------------

December 31, 2000........................................... 60%
December 31, 2001........................................... 75%
December 31, 2002........................................... 75%
June 30, 2003............................................... 100%

Telenor's basis represents the allocation of Telenor's share of fair values
to the net assets acquired when Telenor purchased 60% of Comincom in 2000 and
25% of Comincom in 2003. In 2001, Telenor acquired 15% of Comincom newly issued
shares in exchange for cash and 31% of previously acquired Combellga shares.
This transaction has been accounted for as a common control transaction. Based
on Telenor's allocation of fair value to net assets acquired, Telenor's basis in
the net assets of Comincom

differs from Comincom's historical cost basis principally for fixed assets,
intangible assets, goodwill, deferred revenue and costs and deferred taxes.

Effective January 1, 2002, the Group adopted Statement of Financial
Accounting Standard No. 142 "Goodwill and Other Intangible Assets." Accordingly,
the Group ceased the amortization of goodwill and took the net book value of the
goodwill at this date as the carry value. No amounts were transferred out of
goodwill to other intangibles and no amount was posted as a cumulative effect of
a change in accounting principle as a result of the adoption.

OPEN JOINT STOCK COMPANY COMINCOM

US GAAP CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2002 AND 2001 AND THE TWELVE MONTHS THEN ENDED

CONTENTS PAGE
-------- ----

Report of Independent Auditors.............................. 13
Consolidated Statements of Income........................... 14
Consolidated Balance Sheets................................. 15
Consolidated Statements of Cash Flows....................... 16
Consolidated Statements of Changes in Shareholders'
Equity.................................................... 17
Notes to the Consolidated Financial Statements.............. 18

ZAO PRICEWATERHOUSECOOPERS AUDIT
Kosmodamianskaya Nab. 52, Bld. 5
115054 Moscow Russia
Telephone +7 (095) 967 6000
Facsimile +7 (095) 967 6001

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors of OJSC Comincom

We have audited the accompanying consolidated balance sheets of OJSC
Comincom and its subsidiaries (hereafter referred to as "the Group") as of
December 31, 2002 and December 31, 2001 and the related statements of income, of
cash flows and of changes in shareholders' equity for the years then ended.
These consolidated financial statements are the responsibility of the Group's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of OJSC
Comincom and its subsidiaries as of December 31, 2002 and December 31, 2001, and
the results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.

As discussed in note 2 to the financial statements, the Company adopted
SFAS No. 142 "Goodwill and other Intangible Assets" as of January 1, 2002.

/s/ PRICEWATERHOUSECOOPERS

October 6, 2003
Moscow, Russia

OPEN JOINT STOCK COMPANY COMINCOM

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
NOTES 2002 2001
----- ------------ ------------
(IN THOUSANDS OF US$)

REVENUE..................................................... 10 $ 84,154 $ 62,906
Interconnect fees and channel rentals -- third party........ (22,585) (16,231)
Interconnect fees and channel rentals -- related party...... (1,451) (193)
Wages, salaries, other benefits and payroll taxes........... (14,825) (12,631)
Materials, repairs and maintenance, utilities............... (2,639) (1,492)
Selling, general and administrative expenses -- third
party..................................................... (10,879) (9,328)
Selling, general and administrative expenses -- related
party..................................................... (552) (600)
Taxes other than on income.................................. (1,963) (1,200)
Depreciation and amortisation............................... (11,047) (12,887)
Cost of equipment........................................... (2,157) (896)
Other expenses.............................................. (2,220) (3,049)
-------- --------
OPERATING INCOME............................................ 13,836 4,399
-------- --------
Financing income/(loss)..................................... 12 607 (1,162)
-------- --------
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS........... 14,443 3,237
-------- --------
INCOME TAXES
Current tax expense......................................... (4,609) (3,745)
Deferred tax benefit/(expense).............................. (336) 1,332
-------- --------
TOTAL INCOME TAX EXPENSE.................................... 11 (4,945) (2,413)
-------- --------
INCOME BEFORE MINORITY INTERESTS............................ 9,498 824
-------- --------
Minority interests.......................................... (316) (422)
-------- --------
NET INCOME.................................................. $ 9,182 $ 402
======== ========

The accompanying notes are an integral part of these consolidated financial
statements

OPEN JOINT STOCK COMPANY COMINCOM

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, DECEMBER 31,
NOTES 2002 2001
----- ------------ ------------
(IN THOUSANDS OF US$)

ASSETS
CURRENT ASSETS
Cash and cash equivalents................................... 3 $ 1,915 $ 3,926
Trade accounts receivable -- third parties, net of provision
of $3,145 (December 31, 2001: $2,597)..................... 15,013 10,212
Trade accounts receivable -- related parties................ 576 63
Advances paid............................................... 1,038 1,158
Taxes and other receivables................................. 4 5,771 4,358
Inventories................................................. 1,926 1,743
Prepaid expenses and other current assets................... 792 496
Deferred costs.............................................. 270 106
Deferred income taxes....................................... 11 1,246 1,757
-------- --------
TOTAL CURRENT ASSETS........................................ 28,547 23,819
-------- --------
Property, plant and equipment, net.......................... 5 83,453 66,334
Goodwill and intangible assets, net......................... 6 44,952 43,125
Deferred costs.............................................. 686 301
Advances to suppliers of equipment.......................... 2,682 3,456
-------- --------
TOTAL ASSETS................................................ $160,320 $137,035
======== ========

LIABILITIES, SHAREHOLDERS' EQUITY AND MINORITY INTERESTS
CURRENT LIABILITIES
Short-term borrowings....................................... 9 $ 4,479 $ 7,003
Accounts payable, trade -- third parties.................... 12,461 8,880
Accounts payable, trade -- related parties.................. 1,757 155
Accrued liabilities......................................... 939 982
Income and other taxes...................................... 1,547 524
Advances received and other current liabilities............. 3,912 4,597
Dividends Payable........................................... 1,404 343
Deferred revenue............................................ 1,764 755
-------- --------
TOTAL CURRENT LIABILITIES................................... 28,263 23,239
-------- --------
Long-term borrowings........................................ 9 3,883 2,703
Deferred revenue............................................ 4,379 2,103
Deferred income taxes....................................... 11 1,220 1,395
-------- --------
TOTAL LIABILITIES........................................... 37,745 29,440
-------- --------
MINORITY INTERESTS.......................................... -- --
-------- --------
COMMITMENTS AND CONTINGENCIES............................... 15 -- --
-------- --------
SHAREHOLDERS' EQUITY
Share capital............................................... 7 202 202
Additional paid-in capital.................................. 95,190 95,190
Receivables from shareholders............................... -- (7,000)
Retained earnings........................................... 27,183 19,203
-------- --------
TOTAL SHAREHOLDERS' EQUITY.................................. 122,575 107,595
-------- --------
TOTAL LIABILITIES, SHAREHOLDERS' EQUITY AND MINORITY
INTERESTS................................................. $160,320 $137,035
======== ========

The accompanying notes are an integral part of these consolidated financial
statements

OPEN JOINT STOCK COMPANY COMINCOM

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31,
NOTES 2002 2001
----- ------------------ ------------------
(IN THOUSANDS OF US$)

CASH GENERATED BY OPERATING ACTIVITIES.............. 13 $ 24,070 $ 11,303
INVESTING ACTIVITIES
Capital expenditures................................ (30,672) (29,141)
Increase in long term investments................... -- 64
Distribution of profits of joint venture............ (316) (422)
-------- --------
NET CASH USED FOR INVESTING ACTIVITIES.............. (30,988) (29,499)
-------- --------
FINANCING ACTIVITIES
Payments on capital lease........................... (1,987) (1,074)
Loans received...................................... 2,400 --
Repayment of loans.................................. (2,457) (4,084)
Amounts received from shareholder companies......... 7,000 23,240
-------- --------
NET CASH USED FOR FINANCING ACTIVITIES.............. 4,956 18,082
-------- --------
Effect of exchange rate changes on cash and cash
equivalents....................................... (49) (28)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS............. (2,011) (142)
-------- --------
CASH AND CASH EQUIVALENTS AT DECEMBER 31,
2001/2000......................................... 3 3,926 4,068
-------- --------
CASH AND CASH EQUIVALENTS AT DECEMBER 31,
2002/2001......................................... 3 $ 1,915 $ 3,926
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid....................................... 1,306 2,140
Income taxes paid................................... 4,781 4,589

The accompanying notes are an integral part of these consolidated financial
statements

OPEN JOINT STOCK COMPANY COMINCOM

CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY

RECEIVABLES ADDITIONAL TOTAL
SHARE FROM PAID-IN RETAINED SHAREHOLDERS'
CAPITAL SHAREHOLDERS CAPITAL EARNINGS EQUITY
------- ------------ ---------- -------- -------------
(IN THOUSANDS OF US$)

BALANCE AT DECEMBER 31, 2000............. 200 $ -- $64,950 $18,801 $ 83,951
--- ------- ------- ------- --------
Net income............................... -- -- -- 402 402
Share issue.............................. 2 (7,000) 30,240 -- 23,242
--- ------- ------- ------- --------
BALANCE AT DECEMBER 31, 2001............. 202 (7,000) 95,190 19,203 107,595
--- ------- ------- ------- --------
Net income............................... -- -- -- 9,182 9,182
Share issue.............................. -- 7,000 -- -- 7,000
Dividends................................ -- -- -- (1,202) (1,202)
--- ------- ------- ------- --------
BALANCE AT DECEMBER 31, 2002............. 202 $ -- $95,190 $27,183 $122,575
=== ======= ======= ======= ========

The accompanying notes are an integral part of these consolidated financial
statements

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF US$)

NOTE 1: NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Open Joint Stock Company Comincom (hereinafter "the Company" or "Comincom")
was formed in 1990 as a commercial enterprise and was incorporated in 1992 as a
joint stock company under the laws of the Russian Federation. The Company is
owned and controlled by the Telenor Group.

The principal activities of the Company and its subsidiaries (collectively
"the Group") are the provision of telecommunications services and the sale of
telecommunications equipment to companies and individuals located in the Russian
Federation. Telecommunications services mainly include international and
domestic long distance calls, connection fees, Internet and data transfer. The
Group owns several switches and channels and also rents channels from other
telecom operators (both Russian and foreign).

The subsidiary undertakings included in the consolidated financial
statements are Open Joint Stock Company Combellga ("Combellga"), Closed Joint
Stock Company Comincom-Chernozemie and the joint venture between Combellga and
Comstar, another local telecommunication operator. This joint venture has been
set up by the participants to provide telecommunication services in the Park
Place business centre in Moscow and its day-to-day operations are managed and
controlled by Combellga and, therefore, this joint venture is consolidated. This
results in the recording of minority interest amounts for 50% of net income of
the joint venture. Combellga is a telecommunication company incorporated in the
Russian Federation. Combellga was initially formed by Comincom and other
shareholders in 1991.

In June 2003, Telenor acquired the remaining 25% of Comincom which it did
not previously own. The acquisition triggered a requirement to apply push-down
accounting as of June 2003 for Comincom's consolidated financial statements. As
a result, these financial statements reflect Telenor's basis in Comincom's
assets and liabilities to the extent of Telenor's ownership percentage of
Comincom's common stock during the periods presented. Telenor's ownership of the
Company is summarized as follows:

TELENOR
AS OF OWNERSHIP
----- ---------

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates. The preparation of financial statements in conformity
with US GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual outcomes
could differ from those estimates. The most significant estimates made in
preparing these financial statements are the allocation of purchase price to
fair values of net assets for Telenor's acquisition of shares in Comincom, the
useful lives for fixed assets and intangible assets, and provision for bad debt.

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Principles of Consolidation. The consolidated financial statements of the
Group are based on the financial statements of the entities presented in Note 1
"Nature of operations and basis of presentation".

Subsidiary undertakings, which are those entities in which the Company has
an interest of more than one half of the voting rights, or otherwise has power
to exercise control over the operations, are consolidated. Subsidiaries are
consolidated from the date on which control is transferred and are no longer
consolidated from the date that control ceases. All intercompany transactions
and balances between group companies are eliminated.

Foreign Currency and Translation Methodology. The Russian economy is
hyperinflationary. The US$ is the reporting and the functional currency for the
purpose of these financial statements. Accordingly, transactions not already
measured in US$ have been remeasured into US$ in accordance with the relevant
provisions of Statement of Financial Accounting Standards ("SFAS") No. 52,
"Foreign Currency Translation".

Monetary assets and liabilities of Group entities operating in Russia have
been translated at the rate prevailing at the balance sheet date. Non-monetary
assets and liabilities have been translated at historic rates.

Revenues, expenses and cash flows have been translated at average exchange
rates. Translation gains and losses from the remeasurement of assets and
liabilities that are not denominated in US Dollars are credited or charged to
the consolidated statement of income.

Exchange restrictions and controls exist relating to converting the rouble
into other currencies. At present, the rouble is not convertible outside of
Russia and, further, consolidated entities are required to convert 50% of their
hard currency earnings into roubles. Future movements in the exchange rates
between the rouble and the US Dollars will affect the carrying value of rouble
denominated monetary assets and liabilities. Such movements may also affect the
Company's ability to realise non-monetary assets represented in US Dollars in
these consolidated financial statements. Accordingly, any translation of local
currencies to US Dollars should not be construed as a representation that such
amounts have been, could be, or will in the future be converted into US Dollars
at the exchange rate shown or at any other exchange rate.

The official rate of exchange, as determined by the Central Bank of the
Russian Federation, between the Russian rouble and the US Dollar at December 31,
2002 was 31.78 for $1 (30.14 at December 31, 2001).

Revenue Recognition. Revenue is primarily derived from the sale of voice
and data transfer services to customers and is recognized in the period the
related services are provided.

Traffic. Traffic revenue is recorded in the period when the service is
provided determined based on the current tariffs and the service utilised.

Sales of equipment. The revenue from sales of equipment is recognised when
the ownership is transferred to the customers. This equipment mainly represents
switches to be installed in the customers' premises that will be used for
traffic transmission. When a contract with a customer is terminated, the
equipment remains with the customer.

Connection fees. Under SAB 101 connection fees and incremental costs are
deferred over the estimated average customer relationship period of five years.

All revenue figures are recorded net of value added tax ("VAT").

Accounts Receivable. Accounts receivable are presented at realisable value
net of any provision for bad and doubtful debts.

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Cash and Cash Equivalents. Cash and cash equivalents consist of cash on
hand and balances with banks.

Inventory Valuation. Inventories, which include spare parts and ancillary
equipment, are valued at the lower of cost as determined by the weighted average
method and net realisable value.

Pensions. The Group, in the normal course of business, makes payments to
the pension fund, medical insurance, employment fund and social insurance of the
Russian Federation on behalf of its employees. These payments are expensed when
incurred and included within personnel costs.

Property, Plant and Equipment. Property, plant and equipment is recorded
at cost. Depreciation is recorded principally on the straight-line method at
rates based on the estimated useful lives of the assets, which are as follows:

Machinery and equipment..................................... 5-10
Networks.................................................... 10-15
Switches and radio installations............................ 10
Other....................................................... 4-5

In accordance with Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"),
property, plant and equipment held and used by the Group are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of any assets may not be recoverable. For the purposes of
evaluating the recoverability of property, plant and equipment, the
recoverability test is performed using undiscounted net cash flows for property,
plant and equipment.

Profits or losses from the sale of assets are included in operating income.
Capital improvements, renewals and repairs that extend the life of an asset are
capitalised, other repairs and maintenance are expensed as incurred.

Leased Assets. Leases on equipment where the Company substantially assumes
the risks and rewards of ownership are classified as capital leases in
accordance with Statement of Financial Accounting Standards No 13, "Accounting
for Leases" ("SFAS 13"). Capital leases are booked at the present value of the
minimum lease payments. Value added taxes to be offset from the budget are
recognized as part of other current assets. The corresponding lease obligations
net of finance charges are classified as current and non-current capital lease
obligations, depending upon the period in which the amounts are due. Rental
payments are apportioned between finance charges and reduction of the
outstanding liability. The finance charge is allocated to periods during the
lease term so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period.

Leased assets are depreciated on a straight-line basis over the estimated
economic useful life of the assets (or the lease term, if less) in the same
manner as other fixed assets of the same class.

Where the Company does not assume the risks and rewards of ownership, the
rental expense is recognized as a period charge in the statement of operations.

Goodwill and Intangible Assets. Goodwill represents the excess of
acquisition costs over the fair value of the net assets of Comincom acquired by
Telenor, and was amortized on a straight-line basis over its estimated useful
life of ten years until December 31, 2001. Intangible assets consist principally
of numbering capacity and the subscriber base, which are amortised over 10 and 7
years respectively. Effective January 1, 2002, the Group adopted SFAS No. 142
"Goodwill and Other Intangible Assets" and ceased amortising goodwill as of that
date. The management has completed the transitional goodwill test and concluded
that no provision for impairment is required.

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Financial Instruments. The fair value of financial instruments (cash and
cash equivalents, advances, accounts receivable and accounts payable) is
determined with reference to various market information and other valuation
methods as considered appropriate.

Value Added Taxes. In the consolidated balance sheets and the consolidated
statements of cash flows, transactions and balances are presented inclusive of
the associated VAT applicable under the legislation of the relevant jurisdiction
in which the transaction occurred. These taxes are excluded from the
consolidated statements of income since the payment and collection of VAT
generally has no effect on the results of operations.

Income Taxes. Deferred income tax assets and liabilities are recognised
for the future tax consequences attributable to differences between the
consolidated financial statements' carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates in the years in which these temporary
differences are expected to reverse. Valuation allowances are provided against
deferred tax assets that are not expected to be realised.

Recently Issued Accounting Standards. In June 2002, the FASB issued SFAS
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities."
SFAS No. 146 nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity," under which a liability for an exit cost was recognized at
the date of an entity's commitment to an exit plan. SFAS No. 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
at fair value when the liability is incurred. The provisions of this statement
are effective for exit or disposal activities that are initiated after December
31, 2002. The Group believes that the adoption of the provisions of SFAS No. 146
had no material impact on its results of operations, financing position, or cash
flows.

In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities"
FIN 46 addresses consolidation and disclosure by business enterprises of
variable interest entities. The Group believes that the adoption of this
standard will have no material impact on its consolidated financial statements.

In April 2003, the Financial Accounting Standards Board issued SFAS No. 149
"Amendment of Statement 133 on Derivative Instruments and Hedging Activities".
This Statement amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities under FASB Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Group believes that the adoption of this standard
will have no material impact on its consolidated financial statements.

In May 2003, the Financial Accounting Standards Board issued SFAS No. 150
"Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity". This Statement establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). Many of those instruments were previously classified as equity.
The Group believes that the adoption of this standard will have no material
impact on its consolidated financial statements.

Risks and Concentrations. A description of the Group's major products and
its principal markets, as well as exposure to foreign currency risks are
provided in Note 1 "Nature of operations and basis of presentation" and Note 2
"Summary of significant accounting policies".

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3: CASH AND CASH EQUIVALENTS

DECEMBER 31, DECEMBER 31,
2002 2001
------------ ------------

Cash at bank, US$........................................... $ 121 $3,559
Cash at bank, Russian roubles............................... 1,688 297
Other cash equivalents...................................... 106 70
------ ------
TOTAL CASH AND CASH EQUIVALENTS............................. $1,915 $3,926
====== ======

NOTE 4: TAXES AND OTHER RECEIVABLES

DECEMBER 31, DECEMBER 31,
2002 2001
------------ ------------

VAT recoverable............................................. $4,482 $3,251
Prepaid profit tax.......................................... 1,050 634
Other non-trade receivables................................. 239 473
------ ------
TOTAL TAXES AND OTHER RECEIVABLES........................... $5,771 $4,358
====== ======

VAT recoverable relates to input VAT incurred with respect to goods and
services purchased and available for offset against future output VAT following
the settlement of accounts payable in relation to such goods and services.

NOTE 5: PROPERTY, PLANT AND EQUIPMENT, NET

DECEMBER 31, DECEMBER 31,
2002 2001
------------ ------------

Historical cost............................................. $104,215 $ 75,401
Less: accumulated depreciation.............................. (29,231) (18,615)
-------- --------
Net book value.............................................. 74,984 56,786
Construction in progress.................................... 8,469 9,548
-------- --------
PROPERTY, PLANT AND EQUIPMENT, NET.......................... $ 83,453 $ 66,334
======== ========

Included in property, plant and equipment at 31 December 2002 are
capitalised finance leases with a net book value of $6,838 (as of December 31,
2001: $7,218). Accumulated depreciation on those assets amounted to $2,275 and
$1,413 at December 31, 2002 and December 31, 2001 respectively.

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6: GOODWILL AND INTANGIBLE ASSETS

DECEMBER 31, DECEMBER 31,
2002 2001
------------ ------------

COST
Goodwill.................................................... $35,034 $40,816
Customer base............................................... 3,620 3,620
Numbering capacity.......................................... 9,399 6,333
------- -------
TOTAL COST.................................................. $48,053 $50,769
------- -------
AMORTISATION
Goodwill.................................................... -- (5,782)
Customer base............................................... (1,250) (733)
Numbering capacity.......................................... (1,851) (1,129)
------- -------
TOTAL AMORTISATION.......................................... $(3,101) $(7,644)
------- -------
GOODWILL AND OTHER INTANGIBLE ASSETS, NET................... $44,952 $43,125
======= =======

Effective January 1, 2002 the Group ceased amortising goodwill and took the
net book value of the goodwill at this date as the carrying value. The net
income for the year ended December 31, 2001 before amortisation of the goodwill
was $4,484. No amounts were transferred out of goodwill to other intangibles and
no amount was posted as a cumulative effect of a change in accounting principle
as a result of the adoption.

NOTE 7: SHARE CAPITAL

At December 31, 2002, the total share capital authorised, issued and fully
paid, consists of 129,327 ordinary shares, 511 preference shares and 22,379
convertible preference shares (at December 31, 2001: 99,459 ordinary shares and
541 preference shares, respectively). The nominal value of each class of shares
is RR 1 per share. Additional paid-in capital represents the difference between
the nominal value of the issued shares and the amounts contributed by the
shareholders.

All ordinary shares have equal voting rights. The rights of ordinary
shareholders in the event of liquidation are governed by existing legislation.
Preference shares have no voting rights except on resolutions regarding the
liquidation or reorganisation.

Preferred shareholders generally have rights of preference on payment of
dividends and proceeds from liquidation.

NOTE 8: CAPITAL LEASE OBLIGATIONS

Capital lease obligations are as follows:

COST OF ASSETS COST OF ASSETS
ACQUIRED AT ACQUIRED AT LIABILITY AT LIABILITY AT
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
LESSOR 2002 2001 2002 2001
------ -------------- -------------- ------------ ------------

International Moscow
Bank -- Leasing.................... $7,749 $7,267 $2,225 $3,750
Financial Technologies Group......... 1,364 1,364 86 548
------ ------ ------ ------
TOTAL................................ $9,113 $8,631 $2,311 $4,298
====== ====== ====== ======

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum lease payments:

FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2002 2001
------------ ------------

2002........................................................ $ -- $2,654
2003........................................................ 1,743 1,354
2004........................................................ 884 722
2005........................................................ 97 79
------ ------
TOTAL MINIMUM LEASE OBLIGATIONS............................. 2,724 4,809
------ ------
Interest.................................................... (413) (511)
Present value of net minimum obligations.................... 2,311 4,298
Current portion............................................. 1,495 2,178
Long term obligations....................................... 816 2,120
------ ------
TOTAL FINANCE LEASE PAYABLE................................. $2,311 $4,298
====== ======

NOTE 9: SHORT-TERM AND LONG-TERM BORROWINGS

DECEMBER 31, DECEMBER 31,
2002 2001
------------ ------------

SHORT-TERM BORROWINGS
BANK LOANS
International Moscow Bank; interest of LIBOR plus
3.4%(1)(a)................................................ $2,400 $ --
International Moscow Bank; interest of LIBOR plus
5.5%(1)(b)................................................ 584 1,178
------ ------
TOTAL BANK LOANS............................................ 2,984 1,178
------ ------
MGTS promissory note........................................ -- 2,978
Cable and Wireless PLC...................................... -- 669
Capital lease obligations................................... 1,495 2,178
------ ------
TOTAL SHORT-TERM BORROWINGS................................. $4,479 $7,003
====== ======
LONG-TERM BORROWINGS
BANK LOANS
International Moscow Bank; interest of LIBOR plus
5.5%(1)(b)................................................ $ -- $ 583
------ ------
TOTAL BANK LOANS............................................ -- 583
------ ------
MGTS promissory note(c)..................................... 3,067 --
Capital lease obligations................................... 816 2,120
------ ------
TOTAL LONG-TERM BORROWINGS.................................. $3,883 $2,703
====== ======

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

US Dollar denominated loans;

Details of significant loan balances are summarised below:

(a) International Moscow Bank

The loan is collateralised by property, plant and equipment with
pledge value of $3,644 which does not significantly differ from its
carrying value. The maturity of the loan is November 2003.

Under the terms of the agreement there are a number of covenants
and restrictions. The significant covenants relate to cross-default
provisions, transfer of control over Combellga to another party and sale
and/or purchase of assets worth over 25% of the total assets.

The bank also has a right to write-off amounts overdue on the loan
from the current account opened with this bank.

(b) International Moscow Bank

25% + 1 common shares of Combellga have been pledged as collateral.

This is a Russian rouble denominated promissory note with a face
value of RR89,764 thousand given by the Company to MGTS in 1999 maturing
in April 2002. In 2002 the Company paid to MGTS $611 in cash and issued
a new promissory note for the remaining balance repayable in April 2005.

NOTE 10: REVENUE

FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2002 2001
------------ ------------

ANALYSED BY TYPE:
Domestic traffic............................................ $35,188 $26,451
International traffic....................................... 26,513 24,225
Leased lines................................................ 2,491 2,957
Connection fees............................................. 2,955 1,344
Internet.................................................... 8,792 4,897
Sale and rental of equipment................................ 2,680 1,462
Other....................................................... 5,535 1,570
------- -------
TOTAL REVENUE............................................... 84,154 62,906
------- -------
Revenue -- third party...................................... 83,501 62,665
Revenue -- related party.................................... 653 241
------- -------
TOTAL REVENUE............................................... $84,154 $62,906
======= =======

NOTE 11: INCOME TAXES

The Group calculates deferred income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes", applying the specific provisions for foreign
companies using the US Dollar as the reporting currency.

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SFAS No. 109 requires deferred income taxes to be computed on non-current
assets in local currency by comparing the historic book and tax basis in local
currency after respective depreciation but before indexing for either accounting
or tax purposes. The local currency deferred income tax balance is then
remeasured into US Dollars using the period-end exchange rate.

Deferred income tax assets and liabilities at December 31, 2002 and
December 31, 2001 are as follows:

DECEMBER 31, DECEMBER 31,
2002 2001
------------ ------------

Accounts receivable......................................... $ -- $ 864
Accounts payable............................................ 582 865
Losses carried forward...................................... 123 221
Deferred revenue............................................ 1,665 970
Other assets and liabilities................................ 562 1,146
------- -------
Deferred income tax assets.................................. 2,932 4,066
------- -------
Property, plant and equipment............................... (2,515) (2,819)
Accounts receivables........................................ (130) --
Accounts payables........................................... -- (70)
Other assets and liabilities................................ (261) (815)
------- -------
Deferred income tax liabilities............................. (2,906) (3,704)
------- -------
NET DEFERRED INCOME TAX ASSET............................... $ 26 $ 362
======= =======

A reconciliation between the income tax expense and taxes determined by
applying the statutory tax rate to income before income taxes and minority
interests is presented below:

FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2002 2001
------------ ------------

Income before income taxes and minority interests........... $14,443 $ 3,237
Statutory income tax rate................................... 24% 35%
------- -------
Theoretical income tax charge at statutory rate............. 3,466 1,133
------- -------
(Decrease)/increase due to:
Tax allowances............................................ (255) (3,473)
Non-deductible expenses................................... 1,624 4,710
Remeasurement of non-current assets to US$................ 820 1,258
Other..................................................... (710) (1,485)
Effect of decrease of tax rate from 35% to 24%............ -- 270
------- -------
INCOME TAX EXPENSE.......................................... $ 4,945 $ 2,413
======= =======

Effective January 1, 2002, the standard rate of income tax payable by
companies in the Russian Federation decreased from 35% to 24%. As this tax rate
was enacted before December 31, 2001, the effect of the change on deferred tax
liabilities at December 31, 2001 of $270 has been recognised in these
consolidated financial statements.

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 12: FINANCING INCOME/(LOSS)

FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2002 2001
------------ ------------

Exchange difference......................................... $ (215) $ 1,035
Interest income............................................. 6 2
Income from investing activities............................ 81 106
Interest expense............................................ (1,370) (2,399)
Forgiveness of penalties.................................... 2,002 --
Other, net.................................................. 103 94
------- -------
TOTAL FINANCING INCOME/(LOSS)............................... $ 607 $(1,162)
======= =======

In accordance with the decree of the Ministry of Finance of the Russian
Federation signed on December 31, 2002 the liability of the Group for penalties
on a loan from the Ministry of Finance was forgiven and $2,002 was included as
financing income in 2002 related to the forgiveness of penalties. The principal
of the loan and the interest have been settled during the year ended December
31, 2000.

NOTE 13: CASH GENERATED BY OPERATING ACTIVITIES

FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2002 2001
------------ ------------

NET INCOME.................................................. $ 9,182 $ 402
ADJUSTMENTS TO RECONCILE NET INCOME TO CASH GENERATED FROM
OPERATIONS:
Depreciation and amortisation............................... 11,047 12,887
Loss on disposal of property, plant and equipment........... 728 614
Change in deferred income taxes............................. 336 (1,332)
Foreign exchange gains...................................... 215 (1,034)
Bad debt expenses........................................... 704 672
Minority interests.......................................... 316 422
Gain on forgiveness of penalties on overdue loan............ (2,002) --
Changes in operating working capital:
(Increase)/decrease in receivables........................ (6,018) 1,391
(Increase)/decrease in advances to suppliers.............. 122 438
Increase in inventories................................... (183) (1,074)
(Increase)/decrease in prepaid expenses and other current
assets................................................. (1,709) (2,821)
Reduction/(increase) in trade accounts payable and accrued
liabilities............................................ 6,662 (3,809)
Reduction in advances received and other current
liabilities............................................ 911 3,236
Increase/(reduction) in income and other taxes............ 1,023 (569)
Increase/(reduction) in deferred revenue and costs........ 2,736 1,880
------- -------
CASH GENERATED BY OPERATING ACTIVITIES...................... $24,070 $11,303
======= =======

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 14: RELATED PARTY TRANSACTIONS

Related party transactions are disclosed on the face of each primary
consolidated financial statement. Such transactions primarily comprise provision
of telecommunication services and payments for provision of personnel to
Telenor, the principal shareholder of the Group.

NOTE 15: COMMITMENTS AND CONTINGENCIES

Capital Commitments. The Group is engaged in the construction of a
telecommunication network and equipment purchase programs with estimated future
spending of $1,165 (December 31, 2001: $5,077). These programs are subject to
periodic reviews and actual construction costs may vary from these estimates for
many reasons including, but not limited to, general business conditions,
environmental regulations, exchange rate fluctuations, the cost and efficiency,
of construction labor, equipment and materials, and the availability and cost of
capital. At December 31, 2002 no significant purchase commitments or contracts
were outstanding in connection with such construction programs.

Operating Environment. While there have been improvements in the economic
situation in the Russian Federation in recent years, the country continues to
display some characteristics of an emerging market. These characteristics
include, but are not limited to, the existence of a currency that is not freely
convertible in most countries outside of the Russian Federation, restrictive
currency controls, and relatively high inflation.

The prospects for future economic stability are largely dependent upon the
effectiveness of economic measures undertaken by the governments, together with
legal, regulatory, and political developments.

Taxation. Russian tax, currency and customs legislation is subject to
varying interpretations and changes, occurring frequently. Furthermore, the
interpretation of such legislation by the authorities as applied to the
transactions and activity of the Group may not coincide with that of management.
As a result, such authorities may challenge certain transactions. The periods
remain open to review by the tax and customs authorities with respect to tax
payments for three years.

Regulatory and Tariff Policy. The telecommunications industry is
continuing to undergo significant restructuring and reform and the future
direction and effects of such reforms are unknown at this time. Potential
reforms in tariff setting policies and the restructuring of the sector could
have significant effects on the operations of the Group. On June 18, 2003, the
government of the Russian Federation issued a new Law on Telecommunications. The
management of the Group is currently assessing the impact of this law on the
operations of the Group.

NOTE 16: SUBSEQUENT EVENTS

In June 2003, Telenor completed the acquisition of the remaining 25% shares
of the Company. One of the conditions of this transaction was that the
shareholders waived the 2002 dividends.

In August 2003, Telenor (the Company's sole shareholder) entered into a
share exchange agreement with Golden Telecom, Inc. (GTI) by which GTI will
acquire 100% of Telenor's ownership interest in Comincom. Upon closure, Telenor
will be issued GTI common stock such that Telenor will hold 19.5% of the
outstanding common shares on the date of closing. GTI is a United States
Securities and Exchange Commission registrant and such a transaction requires
the approval of GTI's shareholders. Accordingly, GTI must file a proxy statement
to obtain shareholder approval. To date, GTI shareholder approval has not been
received and accordingly the transaction has not yet closed.

OPEN JOINT STOCK COMPANY COMINCOM

US GAAP CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2002 AND JUNE 30, 2003 AND FOR THE SIX MONTHS ENDED JUNE 30,
2002 AND 2003

CONTENTS PAGE
-------- ----

Consolidated Statements of Income........................... 30
Consolidated Balance Sheets................................. 31
Consolidated Statements of Cash Flows....................... 32
Notes to the Consolidated Financial Statements.............. 33

OPEN JOINT STOCK COMPANY COMINCOM

CONSOLIDATED STATEMENTS OF INCOME

FOR SIX MONTHS ENDED FOR SIX MONTHS ENDED
NOTES JUNE 30, 2003 JUNE 30, 2002
----- -------------------- --------------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS OF US$)

REVENUE......................................... 6 $ 49,272 $38,079
Interconnect fees and channel rentals -- third
party......................................... (13,820) (9,539)
Interconnect fees and rentals -- related
party......................................... (491) (480)
Wages, salaries, other benefits and payroll
taxes......................................... (8,693) (7,461)
Materials, repairs and maintenance, utilities... (2,041) (1,591)
Selling, general and administrative
expenses -- third party....................... (4,445) (5,351)
Selling, general and administrative
expenses -- related party..................... (207) (318)
Taxes other than on income...................... (1,060) (906)
Depreciation and amortization................... (6,680) (5,238)
Cost of equipment............................... (968) (831)
Other expenses.................................. (908) (102)
-------- -------
OPERATING INCOME................................ 9,959 6,262
-------- -------
Financing income/(loss)......................... 7 (274) (187)
-------- -------
INCOME BEFORE INCOME TAXES AND MINORITY
INTERESTS..................................... 9,685 6,075
-------- -------
INCOME TAXES
Current tax expense............................. (3,064) (2,581)
Deferred tax (expense)/credit................... (1,535) 157
-------- -------
TOTAL INCOME TAX EXPENSE........................ 8 (4,599) (2,424)
-------- -------
INCOME BEFORE MINORITY INTERESTS................ 5,086 3,651
-------- -------
Minority interests.............................. (131) (154)
-------- -------
NET INCOME...................................... $ 4,955 $ 3,497
======== =======

The accompanying notes are an integral part of these consolidated financial
statements.

OPEN JOINT STOCK COMPANY COMINCOM

CONSOLIDATED BALANCE SHEETS

JUNE 30, DECEMBER 31,
NOTES 2003 2002
----- ----------- ------------
(UNAUDITED)
(IN THOUSANDS OF US$)

ASSETS
CURRENT ASSETS
Cash and cash equivalents................................... $ 3,899 $ 1,915
Trade accounts receivable -- third parties, net of
provisions of $2,258 (December 31, 2002 $3,145)........... 19,741 15,013
Trade accounts receivable -- related parties................ 472 576
Advances paid............................................... 3,035 1,038
Taxes and other receivables................................. 4,463 5,771
Inventories................................................. 2,738 1,926
Prepaid expenses and other current assets................... 1,484 792
Deferred costs.............................................. 256 270
Deferred income taxes....................................... 8 -- 1,246
-------- --------
TOTAL CURRENT ASSETS........................................ 36,088 28,547
-------- --------
Property, plant and equipment, net.......................... 3 83,278 83,453
Goodwill and intangible assets, net......................... 4 52,951 44,952
Deferred costs.............................................. 599 686
Advances to suppliers of equipment.......................... 3,208 2,682
-------- --------
TOTAL ASSETS................................................ $176,124 $160,320
======== ========

LIABILITIES, SHAREHOLDERS' EQUITY AND MINORITY INTERESTS
CURRENT LIABILITIES
Short-term borrowings....................................... 5 $ 3,590 $ 4,479
Accounts payable, trade -- third parties.................... 16,091 12,461
Accounts payable, trade -- related parties.................. 720 1,757
Accrued liabilities......................................... 1,104 939
Income and other taxes...................................... 3,965 1,547
Advances received and other current liabilities............. 4,936 3,912
Dividends payable........................................... 112 1,404
Deferred revenue............................................ 1,752 1,764
Deferred income taxes....................................... 8 432 --
-------- --------
TOTAL CURRENT LIABILITIES................................... 32,702 28,263
-------- --------
Long-term borrowings........................................ 5 3,490 3,883
Deferred revenue............................................ 4,124 4,379
Deferred income taxes....................................... 8 2,150 1,220
-------- --------
TOTAL LIABILITIES........................................... 42,466 37,745
-------- --------
MINORITY INTERESTS.......................................... -- --
-------- --------
COMMITMENTS AND CONTINGENCIES............................... 9 -- --
-------- --------
SHAREHOLDERS' EQUITY
Share capital............................................... 202 202
Additional paid-in capital.................................. 100,857 95,190
Retained earnings........................................... 32,599 27,183
-------- --------
TOTAL SHAREHOLDERS' EQUITY.................................. 133,658 122,575
-------- --------
TOTAL LIABILITIES, SHAREHOLDERS' EQUITY AND MINORITY
INTERESTS................................................. $176,124 $160,320
======== ========

The accompanying notes are an integral part of these consolidated financial
statements.

OPEN JOINT STOCK COMPANY COMINCOM

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR SIX FOR SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30,
NOTES 2003 2002
----- ------------ ------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS OF US$)

CASH GENERATED BY OPERATING ACTIVITIES............. $13,366 $ 8,568
INVESTING ACTIVITIES
Capital expenditures............................... (9,571) (14,693)
------- --------
NET CASH USED FOR INVESTING ACTIVITIES............. (9,571) (14,693)
------- --------
FINANCING ACTIVITIES
Payments on capital lease.......................... (843) (758)
Repayment of loans................................. (584) (1,534)
Dividend paid...................................... (384) --
Amounts received from shareholder companies........ -- 7,000
------- --------
NET CASH PROVIDED BY (USED FOR) FINANCING
ACTIVITIES....................................... (1,811) 4,708
------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS............ 1,984 (1,417)
------- --------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD... 1,915 3,926
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD......... $ 3,899 $ 2,509
======= ========

The accompanying notes are an integral part of these consolidated financial
statements.

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF US$)

NOTE 1: NATURE OF OPERATIONS AND BASIS OF PRESENTATION

The subsidiary undertakings included in the consolidated financial
statements are Open Joint Stock Company Combellga ("Combellga"), Closed Joint
Stock Company Comincom-Chernozemie and the joint venture between Combellga and
Comstar, another local telecommunication operator. This joint venture has been
set up by the participants to provide telecommunication services in Park Place
business center and its day-to-day operations are managed and controlled by
Combellga and, therefore, this joint venture is consolidated. This results in
the recording of minority interest amounts for 50% of net income of the joint
venture. Combellga is a telecommunication company incorporated in the Russian
Federation. Combellga was initially formed by Comincom and other shareholders in
1991.

Combellga is a telecommunication company incorporated in the Russian
Federation. Combellga was initially formed by Comincom and other shareholders in
1991.

TELENOR
AS OF OWNERSHIP
----- ---------

The financial statements included herein are unaudited and have been
prepared in accordance with generally accepted accounting principles in the
United States of America ("US GAAP") for interim financial reporting. Certain
information and footnote disclosures normally included in complete financial
statements prepared in accordance with US GAAP have been condensed or omitted
pursuant to such US GAAP requirements. In the opinion of management, the
financial statements reflect all adjustments of a normal and recurring nature
necessary to present fairly the Company's financial position, results of
operations and cash flows for the interim periods. These financial statements
should be read in conjunction

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

with the Company's 2002 audited consolidated financial statements and the notes
related thereto. The results of operations for the six months ended June 30,
2003 and 2002 may not be indicative of the operating results for the full year.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Subsidiary undertakings, which are those entities in which the company has
an interest of more than one half of the voting rights, or otherwise has power
to exercise control over the operations, are consolidated. Subsidiaries are
consolidated from the date on which control is transferred and are no longer
consolidated from the date that control ceases. All intercompany transactions
and balances between group companies are eliminated.

Foreign Currency and Translation Methodology. Revenues, expenses and cash
flows have been translated at the average exchange rates. Translation gains and
losses from the remeasurement of assets and liabilities that are not denominated
in US$ are credited or charged to the consolidated statement of income. Monetary
assets and liabilities of Group entities operating in Russia have been
translated at the rate prevailing at the balance sheet date. Non-monetary assets
and liabilities have been translated at historic rates.

Exchange restrictions and controls exist relating to converting the rouble
into other currencies. At present, the rouble is not convertible outside of
Russia and, further, consolidated entities are required to convert 50% of their
hard currency earnings into roubles. Future movements in the exchange rates
between the rouble and the US$ will affect the carrying value of rouble
denominated monetary assets and liabilities. Such movements may also affect the
Company's ability to realise non-monetary assets represented in US$ in these
consolidated financial statements. Accordingly, any translation of local
currencies to US$ should not be construed as a representation that such amounts
have been, could be, or will in the future be converted into US$ at the exchange
rate shown or at any other exchange rate.

The official rate of exchange, as determined by the Central Bank of the
Russian Federation, between the Russian Rouble and the US Dollar at June 30,
2003 and December 31, 2002 was 30.35 and 31.78 respectively for $1.

Revenue Recognition. Revenue is primarily derived from the sale of voice
and data transfer services to customers and is recognized in the period the
related services are provided.

Traffic. Traffic revenue is recorded in the period when the service is
provided determined based on the current tariffs and the service utilised.

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Connection fees. Under SAB 101 connection fees and direct incremental
costs are deferred over the estimated average customer relationship life of 5
years.

All revenue figures are recorded net of Value Added Tax ("VAT").

Accounts Receivable. Accounts receivable are presented at net realisable
value net of any provision for bad and doubtful debts.

Shareholder's Dividends. In 2003, Comincom shareholders waived dividends
declared but not paid for 2002 and 2003. The amount of dividends relating to
2002, net of tax paid by the Company on 2003 dividends, in the amount of $461
are recorded as an increase in equity for 1st half of 2003.

Recently Issued Accounting Standards. In June 2002, the FASB issued SFAS
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities."
SFAS No. 146 nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity," under which a liability for an exit cost was recognized at
the date of an entity's commitment to an exit plan. SFAS No. 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
at fair value when the liability is incurred. The provisions of this statement
are effective for exit or disposal activities that are initiated after December
31, 2002. The adoption of the provisions of SFAS No. 146 had no material impact
on our results of operations, financial position or cash flow.

In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities"
FIN 46 addresses consolidation and disclosure by business enterprises of
variable interest entities. The adoption of the provisions of FIN No. 46 had no
impact on our results of operations, financial position or cash flow.

In April 2003, the Financial Accounting Standards Board issued SFAS No. 149
"Amendment of Statement 133 on Derivative Instruments and Hedging Activities".
This Statement amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities under FASB Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities. Our initial adoption of this statement on July 1, 2003
will not have a material impact on its results of operations, financial
position, or cash flows.

In May 2003, the Financial Accounting Standards Board issued SFAS No. 150
"Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity". This Statement establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). Many of those instruments were previously classified as equity.
Our initial adoption of this statement on July 1, 2003 will not have impact on
our results of operations, financial position, or cash flows.

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3: PROPERTY, PLANT AND EQUIPMENT, NET

JUNE 30, DECEMBER 31,
2003 2002
----------- ------------
(UNAUDITED)

Cost........................................................ $103,476 $104,215
Less: accumulated depreciation.............................. (26,443) (29,231)
-------- --------
Net book value.............................................. 77,033 74,984
Construction in progress.................................... 6,245 8,469
-------- --------
PROPERTY, PLANT AND EQUIPMENT, NET.......................... $ 83,278 $ 83,453
======== ========

NOTE 4: GOODWILL AND INTANGIBLE ASSETS

JUNE 30, DECEMBER 31,
2003 2002
----------- ------------
(UNAUDITED)

COST
Goodwill.................................................... $36,499 $35,034
Customer base............................................... 8,200 3,620
Numbering capacity.......................................... 10,065 9,399
Licenses and interconnect arrangements...................... 1,090 --
------- -------
TOTAL COST.................................................. 55,854 48,053
------- -------
AMORTISATION
Customer base............................................... (1,260) (1,250)
Numbering capacity.......................................... (1,643) (1,851)
------- -------
TOTAL AMORTISATION.......................................... (2,903) (3,101)
------- -------
GOODWILL AND OTHER INTANGIBLE ASSETS, NET................... $52,951 $44,952
======= =======

Effective January 1, 2002, the Group adopted SFAS No. 142 "Goodwill and
Other Intangible Assets." Accordingly, the Group ceased the amortization of
goodwill and took the net book value of the goodwill at this date as the carry
value. No amounts were transferred out of goodwill to other intangibles and no
amount was posted as a cumulative effect of a change in accounting principle as
a result of the adoption.

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5: SHORT-TERM AND LONG-TERM BORROWINGS, INCLUDING CAPITAL LEASES

JUNE 30, DECEMBER 31,
2003 2002
----------- ------------
(UNAUDITED)

SHORT-TERM BORROWINGS
BANK LOANS
International Moscow Bank; interest of LIBOR plus 3.4%...... $2,400 $2,400
International Moscow Bank; interest of LIBOR plus 5.5%...... -- 584
------ ------
TOTAL BANK LOANS............................................ 2,400 2,984
------ ------
Capital lease obligations................................... 1,190 1,495
------ ------
TOTAL SHORT-TERM BORROWINGS, INCLUDING CAPITAL LEASES....... $3,590 $4,479
====== ======
LONG-TERM BORROWINGS
MGTS promissory note, interest of 11.0%..................... 3,212 3,067
Capital lease obligations................................... 278 816
------ ------
TOTAL LONG-TERM BORROWINGS, INCLUDING CAPITAL LEASES........ $3,490 $3,883
====== ======

NOTE 6: REVENUE

FOR THE FOR THE
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
2003 2002
----------- -----------
(UNAUDITED) (UNAUDITED)

ANALYSED BY TYPE:
Domestic traffic............................................ $18,653 $14,889
International traffic....................................... 17,174 13,773
Leased lines................................................ 1,339 1,334
Connection fees............................................. 1,456 677
Internet.................................................... 6,780 4,070
Sale and rental of equipment................................ 1,314 1,570
Other....................................................... 2,556 1,766
------- -------
TOTAL REVENUE............................................... 49,272 38,079
------- -------
Revenue -- third party...................................... 49,016 37,810
Revenue -- related party.................................... 256 269
------- -------
TOTAL REVENUE............................................... $49,272 $38,079
======= =======

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7: FINANCING INCOME

FOR THE FOR THE
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
2003 2002
----------- -----------
(UNAUDITED) (UNAUDITED)

Interest expense............................................ $(460) $(620)
Foreign exchange gain....................................... 205 57
Other financing income (cost), net.......................... (19) 376
----- -----
FINANCING INCOME............................................ $(274) $(187)
===== =====

NOTE 8: INCOME TAXES

Deferred income tax assets and liabilities at June 30, 2003 and December
31, 2002 are as follows:

JUNE 30, DECEMBER 31,
2003 2002
----------- ------------
(UNAUDITED)

Accounts payable............................................ $ 616 $ 582
Losses carried forward...................................... -- 123
Deferred revenue............................................ 1,952 1,665
Other assets and liabilities................................ 358 562
------- -------
Deferred income tax assets.................................. 2,926 2,932
------- -------
Property, plant and equipment............................... (3,435) (2,515)
Accounts receivables........................................ (460) (130)
Other assets and liabilities................................ (1,613) (261)
------- -------
Deferred income tax liabilities............................. (5,508) (2,906)
------- -------
NET DEFERRED INCOME TAX (LIABILITY)/ASSET................... $(2,582) $ 26
======= =======

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation between the income tax expense and taxes determined by
applying the statutory tax rate to income before income taxes and minority
interests is presented below:

FOR SIX FOR SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30,
2003 2002
------------ ------------

Income before income taxes and minority interests......... $9,685 $6,075
Statutory income tax rate................................. 24% 24%
------ ------
Theoretical income tax charge at statutory rate........... 2,324 1,458
------ ------
(Decrease)/increase due to:
Tax allowances.......................................... -- 188
Non-deductible expenses................................. 2,259 885
Remeasurement of non-current assets to US$.............. 16 (377)
Effect of change in effective tax rate.................. -- 270
------ ------
INCOME TAX EXPENSE........................................ $4,599 $2,424
====== ======

Effective January 1, 2002, the standard rate of income tax payable by
companies in the Russian Federation decreased from 35% to 24%. At this tax rate
was enacted before December 31, 2001, the effect of the change on deferred tax
liabilities at December 31, 2001 of $270 has been recognised in these
consolidated financial statements.

NOTE 9: COMMITMENTS AND CONTINGENCIES

Capital Commitments. The Group is engaged in the construction of
telecommunication network and equipment purchase programs currently estimated to
amount to $1,400 (June 30, 2002: $1,100). These programs are subject to periodic
reviews and actual construction costs may vary from these estimates for many
reasons including, but not limited to, general business conditions,
environmental regulations, exchange rate fluctuations, the cost and efficiency
of construction labor, equipment and materials, and the availability and cost of
capital. At June 30, 2003 no significant purchase commitments or contracts were
outstanding in connection with such construction programs.

Regulatory and Tariff Policy. The telecommunications industry is
continuing to undergo significant restructuring and reform and the future
direction and effects of such reforms are unknown at this time. Potential
reforms in tariff setting policies and the restructuring of the sector could
have significant effects on the operations of the Group. On June 18, 2003 the
government of the Russian Federation issued a new

OPEN JOINT STOCK COMPANY COMINCOM

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Law on Telecommunications. The management of the Group is currently assessing
the impact of this law on the operations of the Group.

NOTE 10: SUBSEQUENT EVENTS

OAO COMINCOM'S MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis relate to the financial condition and
results of operations of Comincom for the years ended December 31, 2002 and 2001
and for the six months ended June 30, 2003 and 2002. This discussion should be
read in conjunction with the Selected Historical Consolidated Financial Data and
Comincom's Consolidated Financial Statements and the notes related thereto
included elsewhere in this document.

BUSINESS OVERVIEW

Comincom was established in 1991 and is one of the leading facilities-based
providers of integrated telecommunications and Internet services to businesses
and other high-usage customers and telecommunications operators in Moscow. It
also provides services in St. Petersburg, Voronezh, Samara and several other
major population centers throughout Russia. In addition to Combellga, Comincom
has stakes in, among other companies, four regional alternative wireline
operators: World Trade Telecom, Zenit Telecom, Nakhodka Telecom and Sakhalin
Telecom. Based on its management estimates, Comincom believes that it has
approximately a 12% share of the Russian alternative telecommunications market,
based on 2002 revenues. Comincom currently offers a major part of its integrated
telecommunication services under the Combellga and Comincom brands. Comincom's
services primarily consist of:

- Primary Telecommunications Services. Using its own infrastructure
consisting of a fiber optic backbone, fixed copper and fiber as well as
wireless access network, modern switching network, Internet platform
("IP") and datacom facilities, Comincom provides a range of services
including local exchange and access services, international and domestic
long-distance telephone services to both end-users and other carriers
through more than 20 access points in Russia, international interconnect
services, internet access, leased lines, and radio solutions for long
distance vehicles; and

- Value Added Services. In addition to primary telecommunications
services, Comincom also offers broadband access solutions over fiber,
copper (using Asynchronous Digital Subscriber Line "ADSL" technology) and
wireless connections, WEB-hosting and co-location services, individual
and corporate e-mail solutions, IP-Virtual Private Networking ("VPN")
services, and Intelligent Network ("IN") services, including intelligent
routing, voice VPN's and prepayment card solutions.

Most of Comincom's revenue is derived from two sources: (1) business
customers that require access to highly reliable and advanced telecommunications
facilities to sustain their operations and (2) other carriers. Comincom's
business customers include multi-national companies and both large and medium-
sized local enterprises in a broad range of industries, trade and service
sectors, hotels, foreign embassies and government agencies. Customers are
invoiced on a monthly basis and tariffs are mostly denominated in United States
dollars.

Comincom has traditionally competed for customers on the basis of network
quality, customer service and range of services offered. In the past several
years, other telecommunications operators have also introduced high-quality
services in those segments of the business market in which Comincom operates.
Competition with these other operators is intense and frequently results in
declining prices for some of Comincom's services, which adversely affects
Comincom's revenues.

Since early 2000, there has been a recovery in the Russian market, but
downward pressure on pricing has persisted. The downward pricing pressures are
the result of increased competition in Russia and the global trend toward lower
telecommunications tariffs. In 2001, 2002 and the first half of 2003, increases
in Comincom's traffic volume have exceeded the reduction in tariffs on certain
types of voice traffic. This is a contributing factor to increases in Comincom's
revenue during these periods. Comincom expects that this trend of year-over-year
increases in connections and traffic volumes will continue as long as the
Russian economy continues to develop at its current pace.

Although Comincom expects competition to continue to force the general
level of tariffs downward, Comincom also expects to be able to partially
mitigate the effects of this pressure by seeking to further

reduce Comincom's rates for settlement, interconnection and other costs related
to service provision. Comincom will also seek to increase its operating costs at
a slower rate than its growth in revenue.

Comincom has expanded and will continue to expand Comincom's fiber optic
capacity along its heavy traffic and high cost routes to mitigate declines in
traffic margins, reduce its unit transmission costs and ensure sufficient
capacity to meet the growing demand for voice, data and Internet services. As
part of this strategy, Comincom established two STM-1 fiber optic channels on
its Moscow to Stockholm route in 2002 in order to significantly reduce its unit
cost per E-1 fiber optic link on this route.

BASIS OF PRESENTATION AND CRITICAL ACCOUNTING POLICIES

AS OF TELENOR OWNERSHIP
----- -----------------

Telenor's basis represents the allocation of fair values to the net assets
acquired when Telenor purchased 60% of Comincom in 2000 and 25% of Comincom in
2003. In 2001, Telenor acquired 15% of Comincom newly issued shares in exchange
for cash and 31% of previously acquired Combellga shares. This transaction has
been accounted for as a common control transaction. Based on Telenor's
allocation of fair value to net assets acquired, Telenor's basis in the net
assets of Comincom differs from Comincom's historical cost basis principally for
fixed assets, intangible assets, goodwill, deferred revenue and costs and
deferred taxes.

The fundamental objective of financial reporting is to provide useful
information that allows a reader to understand Comincom's business activities.
To assist their understanding, management has identified Comincom's "critical
accounting policies". These policies could have a significant impact on
Comincom's financial statements, either because of the significance of the
financial statement item to which they relate, or because they require judgment
and estimation due to the uncertainty involved in measuring events, which are
continuous in nature.

Revenue recognition policies: Comincom recognizes operating revenues as
services are rendered or as products are delivered to customers. Certain
revenues, such as connection fees, are deferred in accordance with Staff
Accounting Bulletin ("SAB") No. 101. In connection with recording revenue,
estimates and assumptions are required in determining the expected conversion of
the revenue streams to cash collected. In accordance with SAB No. 101, Comincom
also defers direct incremental costs related to connection fees to the extent
they do not exceed the revenues also deferred. Based on an analysis of customer
lives performed by Comincom management on May 15, 2003, Comincom has determined
that the estimated average customer life is 5 years. Deferred revenues are
subsequently recognized over the estimated average customer lives, which
Comincom periodically reassesses. Such reassessments may impact Comincom's
future operating results.

Allowance for doubtful accounts policies: The allowance estimation process
requires Comincom's management to make assumptions based on historical results,
future expectations, the economic and competitive environment, changes in the
creditworthiness of Comincom's customers and other relevant factors. Changes in
the underlying assumptions may have a significant impact on the results of
Comincom's operations, although Comincom's management believes that the
possibility of an adverse outcome is small.

Long-lived asset recovery policies: This policy is in relation to
long-lived assets, consisting primarily of property and equipment and
intangibles, which comprise a significant portion of Comincom's total assets.
Changes in technology or changes in Comincom's intended use of these assets may
cause the estimated period of use or the value of these assets to change.
Comincom performs periodic internal studies to confirm the appropriateness of
estimated economic useful lives for each category of current property and
equipment. Additionally, long-lived assets, including intangibles, are reviewed
for impairment whenever events or changes in circumstances have indicated that
their carrying amounts may not be recoverable. Estimates and assumptions used in
both setting useful lives and testing for recoverability of Comincom's
long-lived assets requires its management to exercise judgment and make
significant estimates based on certain assumptions concerning the expected life
of an asset and expected future cash flows generated from its use.

Valuation allowance for deferred tax asset: Comincom records valuation
allowances related to tax effects of deductible temporary differences and loss
carry forwards when, in the opinion of its management, it is more likely than
not that the respective tax assets will not be realized. Changes in its
assessment of probability of realization of deferred tax assets may impact its
effective income tax rate.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 141, "Business
Combinations", and No. 142, "Goodwill and Other Intangible Assets", effective
for fiscal years beginning after December 15, 2001. Under the new rules,
goodwill and intangible assets deemed to have indefinite lives are no longer
amortized but are subject to annual impairment tests in accordance with SFAS No.
142. Other intangible assets continue to be amortized over their useful lives.
Impairment losses that arise due to the initial application of this standard are
reported as a cumulative effect of a change in accounting principle. Comincom
adopted SFAS No. 141, "Business Combinations" which was effective for business
combinations consummated after June 30, 2001. Comincom adopted SFAS No. 142,
"Goodwill and Other Intangible Assets" on January 1, 2002 and discontinued
amortization of goodwill as of such date.

Comincom completed the transitional impairment test for existing goodwill
as of January 1, 2002. Based on a comparison of the carrying amounts of its
reporting units with their fair values, it was determined that no goodwill was
impaired as of that date. Fair values of the reporting units were established
using the discounted cash flow method.

Upon the adoption of SFAS No. 142, the impact of non-amortization of
goodwill on Comincom's net income for the twelve months ended December 31, 2002
was an increase of approximately $0.3 million.

Amortization expense for intangible assets for the twelve months ended
December 31, 2002 was $1.6 million. Amortization expense for the succeeding five
years is expected to be as follows: 2003 -- $2.1 million, 2004 -- $2.4 million,
2005 -- $2.4 million, 2006 -- $2.4 million and 2007 -- $2.4 million.

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This statement deals with the costs of closing
facilities and removing assets. SFAS No. 143 requires entities to record the
fair value of a legal liability for an asset retirement obligation in the period
it is incurred. This cost is initially capitalized and amortized over the
remaining life of the asset. Once the obligation is ultimately settled, any
difference between the final cost and the recorded liability is recognized as a
gain or loss on disposition. SFAS No. 143 is effective for years beginning after
June 15, 2002. Comincom's adoption of SFAS No. 143 as of January 1, 2003, had no
impact on its consolidated financial position or results of operations for the
period.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," and the accounting and reporting
provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results
of Operations -- Reporting the

Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions," for the disposal of a segment
of a business (as previously defined in that opinion). This statement also
amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements",
to eliminate the exception for the consolidation of a subsidiary for which
control is likely to be temporary. The provisions of the statement became
effective for financial statements issued for fiscal years beginning after
December 15, 2001 and Comincom adopted this new standard from January 1, 2002.
The adoption of the pronouncement had no effect on its results of operations or
financial position.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections", which is effective for fiscal years beginning after May 15, 2002.
The adoption of this standard in 2003 had no material impact on Comincom's
financial position or results of operations.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which requires that a liability
for a cost associated with an exit or disposal activity be recognized when the
liability is incurred. This statement nullifies Emerging Issues Task Force No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)," which required that a liability for an exit cost be recognized
upon the entity's commitment to an exit plan. SFAS No. 146 is effective for exit
or disposal activities that are initiated after December 31, 2002. The adoption
of the provisions of SFAS No. 146 had no material impact on Comincom's results
of operations, financial position or cash flows.

In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires that upon
issuance of a guarantee, the guarantor must recognize a liability for the fair
value of the obligation it assumes under that guarantee. The disclosure
provisions of FIN 45 are effective for financial statements of annual periods
that end after December 15, 2002. The provisions for initial recognition and
measurement are effective on a prospective basis for guarantees that are issued
or modified after December 31, 2002. The adoption of the pronouncement in 2003
had no effect on Comincom's results of operations or financial position.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." This statement amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. Comincom's initial adoption of this statement on July 1, 2003 will not
have a material impact on its results of operations, financial position or cash
flows.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." This
statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. Specifically, it requires that financial instruments within the scope of
the statement be classified as liabilities because they embody an obligation of
the issuer. Under previous guidance, many of these instruments could be
classified as equity or be reflected as mezzanine equity between liabilities and
equity on the balance sheet. Comincom's initial adoption of this statement on
July 1, 2003 will not have impact on its results of operations, financial
position or cash flows.

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities." FIN No. 46 defines the concept of "variable interests" and
requires existing unconsolidated variable interest entities to be consolidated
into the financial statements of their primary beneficiaries if the variable
interest entities do not effectively disperse risks among the parties involved.
FIN No. 46 applies immediately to variable interest entities created after
January 31, 2003, and is effective first fiscal year or interim period beginning
after June 15, 2003. If it is reasonably possible that an enterprise will
consolidate or disclose information about a variable interest entity when FIN
No. 46 becomes effective, the enterprise must disclose information about those
entities in all financial statements issued after January 31, 2003. The
interpretation may be applied prospectively with a cumulative-effect adjustment
as of the date on which it is first applied or by restating previously issued
financial statements for one or more years, with a

cumulative-effect adjustment as of the beginning of the first year restated. The
adoption of the provisions of FIN No. 46 had no impact on Comincom's future
results of operations, financial position or cash flow.

Comincom's functional currency is the US dollar, as the majority of its
cash flows are indexed to or denominated in US dollars. Prior to December 31,
2002, Russia was considered a highly inflationary environment. However, from
January 1, 2003, Russia has ceased to be considered a highly inflationary
economy. As its functional currency is the US dollar, Comincom does not expect
this change to have a material impact on its results of operations or financial
position.

The discussion of Comincom's consolidated results of operations is
organized as follows:

- Consolidated Results of Operations. Consolidated results of operations
for the six months ended June 30, 2003 compared to the consolidated
results of operations for the six months ended June 30, 2002.

- Consolidated Results of Operations. Consolidated results of operations
for the year ended December 31, 2002 compared to the consolidated results
of operations for the year ended December 31, 2001.

- Consolidated Financial Position. Significant changes in consolidated
financial position at June 30, 2003 compared to consolidated financial
position at December 31, 2002.

Consolidated Results of Operations for the Six Months Ended June 30, 2003
compared to the Consolidated Results of Operations for the Six Months Ended
June 30, 2002

REVENUE

Comincom's revenue increased by 29% to $49.3 million for the six months
ended June 30, 2003 from $38.1 million for the six months ended June 30, 2002.
The increase in the number of corporate customers connected to Comincom's
network increased by 38% from approximately 43,700 connections at June 30, 2002
to approximately 60,500 connections at June 30, 2003. The breakdown of revenue
by principal type of revenue is as follows:

CONSOLIDATED REVENUE CONSOLIDATED REVENUE
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, 2003 ENDED JUNE 30, 2002
-------------------- --------------------
(IN MILLIONS)

Revenue
Domestic traffic............................... $18.7 $14.9
International traffic.......................... 17.2 13.8
Leased lines................................... 1.3 1.3
Connection fees................................ 1.5 0.7
Internet....................................... 6.8 4.0
Sale of equipment.............................. 1.3 1.6
Other revenue.................................. 2.5 1.8
----- -----
Total Revenue.................................... $49.3 $38.1

Domestic traffic. Domestic traffic revenue includes revenue from both
corporate customers and other telecommunications operators for calls terminating
within Russia. Although most revenue is volume-based traffic charges, domestic
traffic revenue also includes fixed monthly charges for local telephone
numbering capacity sold to corporate customers. Comincom's revenue from domestic
traffic increased by 26% to $18.7 million for the six months ended June 30, 2003
from $14.9 million for the six months ended June 30, 2002. This increase is
mainly due to growth in the number of corporate customers connected to
Comincom's network and the increased average usage per corporate customer offset
partly by pricing concessions made due to competitive pressures.

International traffic. Comincom's international traffic revenue consists
primarily of outgoing international traffic and a much smaller proportion of
incoming international traffic. International traffic revenue increased by 25%
to $17.2 million for the six months ended June 30, 2003 from $13.8 million for
the six months ended June 30, 2002. This increase is mostly due to increases in
traffic volumes from domestic telecommunications operators, including local
cellular operators. This increase is also due to growth in the number of
corporate customers connected to Comincom's network, partly offset by pricing
concessions due to competitive pressures.

Leased lines. Revenue from leased lines arises from fixed monthly charges
to corporate customers predominantly located in Moscow for connection to
Comincom's fiber based metropolitan access network. Revenue from leased lines
remained unchanged at $1.3 million for the six months ended June 30, 2003 and
$1.3 million for the six months ended June 30, 2002.

Connection fees. Revenue from connection fees represents one-time
installation fees for local numbering capacity and for connection to Comincom's
fiber based metropolitan access network. Comincom's revenue from connection fees
increased by 114% to $1.5 million for the six months ended June 30, 2003 from
$0.7 million for the six months ended June 30, 2002. The increase is primarily a
result of growth in new customers and related new corporate customer connections
between the two periods. This revenue is recognized in accordance with SAB No.
101, with the entire connection fee revenue being initially deferred and
subsequently recognized over the estimated average corporate customer life of 5
years.

Internet. Comincom derives Internet revenue primarily from dedicated
internet access, including broadband access technologies such as ADSL, as well
as from dial-up internet access fees. Revenue from Internet increased by 70% to
$6.8 million for the six months ended June 30, 2003 from $4.0 million for the
six months ended June 30, 2002. This increase reflects growth in the number of
dedicated connections and in Internet traffic volumes for Moscow-based corporate
customers.

Sale of equipment. Revenue from equipment sales represents the sale of
telecommunication equipment such as personal exchanges and routers to corporate
customers as part of Comincom's integrated service offering. Comincom's revenue
from equipment sales and rentals decreased by 19% to $1.3 million for the six
months ended June 30, 2003 from $1.6 million for the six months ended June 30,
2002. This decrease is due in part to the introduction of deferred payment plans
for equipment sales in early 2003 where title only transfers after full payment
has been received.

Other revenue. Other revenue consists primarily of non-recurring revenue
from special projects and revenue from ancillary telecommunications and
integrator services. Comincom's other revenue increased by 39% to $2.5 million
for the six months ended June 30, 2003 from $1.8 million for the six months
ended June 30, 2002. This increase is largely the result of continued growth in
the number of corporate customers and expansion of services offered.

EXPENSES

The following table sets forth Comincom's principal expenses for the six
months ended June 30, 2003 and June 30, 2002:

CONSOLIDATED EXPENSES CONSOLIDATED EXPENSES
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2003 2002
--------------------- ---------------------
(IN MILLIONS)

OPERATING EXPENSES
Interconnect fees and channel rentals........ $14.3 $10.0
Wages, salaries, other benefits and payroll
taxes..................................... 8.7 7.4
Material, repairs and maintenance and
utilities................................. 2.0 1.6
Selling, general and administrative.......... 4.7 5.7
Taxes other than on income................... 1.1 0.9
Depreciation and amortization................ 6.7 5.2
Cost of equipment for resale................. 1.0 0.8
Other expenses............................... 0.9 0.1
----- -----
TOTAL OPERATING EXPENSES....................... 39.4 31.7
Financing income/(loss)........................ (0.3) (0.2)
Provision for income tax....................... 4.6 2.4
Minority interest.............................. 0.1 0.1

Comincom's operating expenses increased by 24% to $39.4 million for the six
months ended June 30, 2003 from $31.7 million for the six months ended June 30,
2002. The principal reason for this increase was an increase in interconnection
charges, wages and salaries and depreciation and amortization. As a percentage
of revenue, operating expenses fell from 83.2% for the six months ended June 30,
2002 to 79.9% for the six months ended June 30, 2003.

Interconnect fees and channel rentals. Interconnect fees and channel
rentals consist primarily of monthly interconnect fees paid to incumbent local
operators, the cost of terrestrial international, long distance and intra-city
capacity and costs related to terminating traffic on the networks of other
operators. Interconnect fees and channel rentals costs increased by 43% to $14.3
million for the six months ended June 30, 2003 from $10.0 million for the six
months ended June 30, 2002. This increase is primarily due to additional
interconnect and channel capacities acquired to support current and expected
future growth in customer connections.

Wages, salaries, other benefits and payroll taxes. Wages, salaries, other
benefits and payroll taxes increased by 18% to $8.7 million for the six months
ended June 30, 2003 from $7.4 million for the six months ended June 30, 2002.
This increase resulted in part from the greater number of full-time employees
during the six months ended June 30, 2003. The total number of full-time
employees increased from 774 at June 30, 2002 to 834 June 30, 2003. The increase
in wages, salaries and other benefits was also attributable to increases in the
salaries of certain Moscow-based employees.

Materials, repairs and maintenance and utilities. Materials, repairs and
maintenance and utilities increased by 25% to $2.0 million for the six months
ended June 30, 2003 from $1.6 million for the six months ended June 30, 2002.
This increase resulted primarily from the higher maintenance and equipment
related costs arising from the expansion of Comincom's network in Moscow.

Selling, general and administrative. Selling, general and administrative
expenses decreased by 18% to $4.7 million for the six months ended June 30, 2003
from $5.7 million for the six months ended June 30, 2002. This decrease
primarily resulted from a write-back of bad debt expense of $0.9 million
collected from customer accounts previously identified as uncollectible and
lower advertising and marketing expenses, partly offset by increases in office
rent.

Taxes other than on income. Taxes other than on income increased to $1.1
million for the six months ended June 30, 2003 from $0.9 million for the six
months ended June 30, 2002, the most significant component of which was the tax
on fixed assets. The tax on fixed assets is calculated as 2% of net fixed assets
recorded in the local accounting records in local currency. This tax base has
increased due to significant capital investments made during this period.

Depreciation and amortization. Depreciation and amortization expenses
increased by 29% to $6.7 million for the six months ended June 30, 2003 from
$5.2 million for the six months ended June 30, 2002. Most of this increase
resulted from the higher depreciation expense of $1.5 million for the six months
ended June 30, 2003 as compared to the six months ended June 30, 2002 related to
the property, plant, and equipment added to the company's network to develop
customer connections and support additional customer traffic.

Cost of equipment. Cost of equipment for resale increased by 25% to $1.0
million for the six months ended June 30, 2003 from $0.8 million for the six
months ended June 30, 2002. This increase resulted from lower margins earned on
revenue from customer equipment sales.

Financing income/(loss). Financing income/(loss) was a loss of 0.3 million
for the six months ended June 30, 2003 compared to a loss of $0.2 million for
the six months ended June 30, 2002. Comincom's foreign exchange gains of $0.2
million for the six months ended June 30, 2003 was offset by the $0.5 million of
financing costs for the period. Comincom's financing costs of $0.3 million for
the six months ended June 30, 2002 was partially offset by net foreign exchange
gains of $0.1 million for the period.

Provision for income tax. Comincom's income tax expense was $4.6 million,
or 47% of its income before income taxes and minority interests, for the six
months ended June 30, 2003 as compared to $2.4 million or 40% of its income
before income taxes and minority interests, for the six months ended June 30,
2002. The increase in effective tax rate in 2003 is due primarily to increased
levels of non-deductible amortization of intangible assets which generate a
deferred tax liability and other non-deductible operating costs.

Consolidated Results of Operations for the Year Ended December 31, 2002
Compared to the Consolidated Results of Operations for the Year Ended December
31, 2001

REVENUE

Comincom's revenue increased by 34% to $84.2 million for the year ended
December 31, 2002 from $62.9 million for the year ended December 31, 2001. The
increase in the number of corporate customers connected to Comincom's network
increased by 40% from approximately 37,000 connections at December 31, 2001 to
approximately 51,700 connections at December 31, 2002. The breakdown of revenue
by principal types is as follows:

CONSOLIDATED REVENUE CONSOLIDATED REVENUE
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31,
2002 2001
-------------------- --------------------
(IN MILLIONS)

Revenue
Domestic traffic............................... $35.2 $26.5
International traffic.......................... 26.5 24.2
Leased lines................................... 2.5 2.9
Connection fees................................ 3.0 1.3
Internet....................................... 8.8 4.9
Sale of equipment.............................. 2.7 1.5
Other revenue.................................. 5.5 1.6
----- -----
Total Revenue.................................... $84.2 $62.9

Domestic traffic. Revenue from domestic traffic increased by 33% to $35.2
million for the year ended December 31, 2002 from $26.5 million for the year
ended December 31, 2001. This increase is mainly due to growth in the number of
corporate customers connected to Comincom's network and the increased average
usage per corporate customer, partly offset by pricing concessions made due to
competitive pressures.

International traffic. Revenue from international traffic increased by 10%
to $26.5 million for the year ended December 31, 2002 from $24.2 million for the
year ended December 31, 2001. This increase is mostly due to increases in
traffic volumes from domestic telecommunications operators, including local
cellular operators. This increase is also due to growth in the number of
corporate customers connected to Comincom's network, partly offset by pricing
concessions due to competitive pressures.

Leased lines. Revenue from leased lines decreased by 16% to $2.5 million
for the year ended December 31, 2002 from $2.9 million for the year ended
December 31, 2001. This decrease is due to a combination of pricing pressures
and a migration of customers to ADSL and other Internet-based connections that
are included in the "Internet" line item below.

Connection fees. Revenue from connection fees increased by 131% to $3.0
million for the year ended December 31, 2002 from $1.3 million for the year
ended December 31, 2001. The increase is consistent with the growth in new
corporate customers and related new connections. This revenue is recognized in
accordance with Staff Accounting Bulletin No. 101, with the entire connection
fee revenue being initially deferred and subsequently recognized over the
estimated average customer life of five years.

Internet. Revenue from Internet increased by 80% to $8.8 million for the
year ended December 31, 2002 from $4.9 million for the year ended December 31,
2001. This increase is largely the result of increases in revenue from a higher
number of dedicated connections, growth in Internet traffic volumes, and the
migration of customers to ADSL and other Internet-based connections from leased
lines revenue above.

Sale of equipment. Revenue from equipment sales and rentals increased by
80% to $2.7 million for the year ended December 31, 2002 from $1.5 million for
the year ended December 31, 2001. This increase resulted primarily from the
growth in Comincom's customer base as well as growth in more complex client
projects which Comincom's provides fully integrated telecommunications services
to its customers.

Other revenue. Other revenue increased by 244% to $5.5 million for the
year ended December 31, 2002 from $1.6 million for the year ended December 31,
2001. This increase is largely the result of continued growth in the number of
corporate customers and expansion of services offered.

EXPENSES

The following table sets forth Comincom's principal expenses for the years
ended December 31, 2002 and December 31, 2001:

CONSOLIDATED EXPENSES CONSOLIDATED EXPENSES
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31,
2002 2001
--------------------- ---------------------
(IN MILLIONS)

OPERATING EXPENSES
Interconnect fees and channel rentals........ $24.0 $16.4
Wages, salaries, other benefits and payroll
taxes..................................... 14.8 12.6
Material, repairs and maintenance and
utilities................................. 2.6 1.5
Selling, general and administrative.......... 11.4 9.9
Taxes other than on income................... 2.0 1.2
Depreciation and amortization................ 11.1 12.9
Cost of equipment for resale................. 2.2 0.9
Other expenses............................... 2.2 3.1
----- -----
TOTAL OPERATING EXPENSES....................... 70.3 58.5
Financing and foreign exchange loss (gain)..... 0.6 (1.2)
Provision for income tax....................... 4.9 2.4
Minority interest.............................. 0.3 0.4

Comincom's operating expenses increased by 20% to $70.3 million for the
year ended December 31, 2002 from $58.5 million for the year ended December 31,
2001. The principal reason for this increase was an increase in interconnection
charges resulting from higher traffic volumes and the expansion of its network
as well as an increase in wages and salaries and selling, general and
administrative expenses. As a percentage of revenue, operating expenses fell
from 93.0% for the year ended December 31, 2001 to 83.5% for the year ended
December 31, 2002. The principal reason for the decrease as a percentage of
revenue was stopping the amortization of goodwill as of January 1, 2002.

Interconnect fees and channel rentals. Interconnect fees and channel
rentals costs increased by 46% to $24.0 million for the year ended December 31,
2002 from $16.4 million for the year ended December 31, 2001. This increase is
primarily due to additional interconnect and channel capacities acquired to
support current and expected future growth in customer connections.

Wages, salaries, other benefits and payroll taxes. Wages, salaries, other
benefits and payroll taxes increased by 17% to $14.8 million for the year ended
December 31, 2002 from $12.6 million for the year ended December 31, 2001. This
increase is due to the higher number of full time employees during the year
ended December 31, 2002. The total number of full time employees increased from
747 at December 31, 2001 to 793 December 31, 2002. Comincom also increased the
salaries of certain Moscow-based employees.

Materials, repairs and maintenance and utilities. Materials, repairs and
maintenance and utilities increased by 73% to $2.6 million for the year ended
December 31, 2002 from $1.5 million for the year ended December 31, 2001. This
increase resulted primarily from higher maintenance and equipment related costs
arising from the expansion of Comincom's network in Moscow.

Selling, general and administrative. Selling, general and administrative
expenses increased by 15% to $11.4 million for the year ended December 31, 2002
from $9.9 million for the year ended December 31, 2001. This increase is mainly
due to higher levels of advertising and increased commission expenses to
building owners of major business centers in Moscow.

Taxes other than on income. Taxes other than on income increased by 67% to
$2.0 million for the year ended December 31, 2002 from $1.2 million for the year
ended December 31, 2001. Comincom
50

incurred primarily fixed asset and revenue related taxes during the relevant
periods. The tax on fixed assets is calculated as 2% of net fixed assets
recorded in the local accounting records in local currency. Taxes on fixed
assets increased for the year ended December 31, 2002 as a result of significant
investments made during the periods. The increase in fixed asset tax was offset
by a decrease in revenue related taxes, due to changes in local legislation that
reduced the revenue related tax rates.

Depreciation and amortization. Depreciation and amortization expenses
decreased by 14% to $11.1 million for the year ended December 31, 2002 from
$12.9 million for the year ended December 31, 2001. The decrease is in part due
to the adoption of SFAS No. 142 which requires that goodwill no longer be
amortized effective from January 1, 2002 and which reduced Comincom's
amortization expense by $4.5 million. This decrease is offset by an increase in
depreciation expense of $1.0 million for the year ended December 31, 2002 as
compared the year ended December 31, 2001, related to $27.9 million in capital
expenditures to support additional customer traffic.

Cost of equipment for resale. Cost of equipment for resale increased by
144% to $2.2 million for the year ended December 31, 2002 from $0.9 million for
the year ended December 31, 2001. The increase is partly related to the growth
in revenue from the sale of equipment and partly due to Comincom's willingness
to accept lower margins earned on revenue from customer equipment sales.

Financing income/(loss). Financing income increased by $1.8 million to
$0.6 million for the year ended December 31, 2002 from a $1.2 million loss for
the year ended December 31, 2001. The improvements in Comincom's financing
income primarily resulted from the forgiveness of a penalty previously owed by
Comincom on an overdue loan. In accordance with the decree of the Ministry of
Finance of the Russian Federation signed on December 31, 2002, Comincom's
liability on a loan from the Ministry of Finance was forgiven and outstanding
penalties of $2.0 million were included in 2002 financing income. The principal
and interest on the loan were settled during the year ended December 31, 2000.
In addition, the market-driven decreases in interest rates and an overall
decrease in Comincom's interest bearing debt contributed to a decrease of $1.0
million in interest expense in 2002 compared to 2001. The $3.0 million reduction
in financing cost was offset in part by a $0.8 million reduction in Comincom's
foreign exchange gains due to the combined impact of movements in exchange rates
and changes in the amount of net monetary assets denominated in foreign
currencies.

Provision for income tax. Comincom's current income tax expense was $4.9
million, or 34% of its income before income taxes and minority interests, for
the year ended December 31, 2002 as compared to $2.4 million, or 75% of its
income before income taxes and minority interests, for the year ended December
31, 2001. The significant reduction in Comincom's effective tax rate is mainly
due to the adoption of certain provisions of SFAS No. 142 which requires that
goodwill no longer be amortized effective from January 1, 2002 and which reduced
Comincom's income before taxes and minority interests by $4.5 million for the
year ended December 31, 2001. This decrease as a percentage of income before
income taxes and minority interests is also due to a reduction in the statutory
income tax rate from 35% to 24%, effective from January 1, 2002, partly offset
by the cancellation of the capital investment allowances.

Significant Changes in Consolidated Financial Position at June 30, 2003
Compared to Consolidated Financial Position at December 31, 2002

ACCOUNTS RECEIVABLE

Accounts receivable increased by $4.6 million between December 31, 2002 and
June 30, 2003. This increase is mainly as a result of increased revenue during
the six months ended June 30, 2003 and a relative increase in Comincom's sales
to carriers, whose payment terms are typically longer than those of corporate
customers. A decrease of $0.9 million in Comincom's allowance for doubtful
accounts between December 31, 2002 and June 30, 2003 also contributed to the
increase in accounts receivables during the period. The reduction in the
allowance primarily resulted from improvements in the structure of Comincom's
accounts receivable due to factors such as continued economic growth in Russia,
improved solvency of Comincom's clients, and the successful in its ongoing
efforts to manage cash collection from its customers efficiently.

ACCOUNTS PAYABLE

Accounts payable increased by $2.6 million from December 31, 2002 to June
30, 2003 mainly as a result of increased purchases of network equipment and
increased interconnection fees with other operators to support the growth in
Comincom's operations as well as its efforts to extend payment terms with its
suppliers to further strengthen its liquidity position.

DEBT OBLIGATIONS

Comincom's debt obligations decreased by $1.3 million at June 30, 2003 as
compared to December 31, 2002 mainly as a result of scheduled repayments of its
capital lease obligations to the International Moscow Bank.

INCOME AND OTHER TAXES PAYABLE

The $2.4 million increase in income and other taxes payables as at June 30,
2003 as compared to December 31, 2002 is the result of the growth in Comincom's
taxable profits and related tax expense during the period.

SHAREHOLDERS' EQUITY

The increase in shareholders' equity is the result of net income of $5.0
million for the six months ended June 30, 2003 and the reversal of a previously
declared but unpaid shareholder dividend of $0.5 million, as well as the effect
of push down accounting to reflect Telenor's basis in the 25% of Comincom
acquired in June 2003.

INCOME TAXES

Comincom's effective rate of income tax differs from the Russian statutory
rate due principally to the impact of certain non-deductible expenses including
amortization of goodwill and certain acquired intangible assets. Further,
Russian tax regulations include limitations for tax deductibility of various
operating costs.

On January 1, 2002, changes in tax regulations were introduced in Russia.
The corporate income tax rate was reduced from 35% to 24%. At the same time, it
was no longer possible to reduce taxable income by deducting certain capital
expenditures. Further, it became necessary to calculate taxes on an accruals
basis while before January 1, 2002 companies could choose between a cash basis
and accruals basis. Comincom changed calculations from a cash basis to accruals
basis.

LIQUIDITY AND CAPITAL RESOURCES

Comincom's cash balances were $3.9 million and $1.9 million as of June 30,
2003 and December 31, 2002, respectively. Comincom normally uses its cash to
finance its operating activities and make necessary capital investments to
maintain and develop its operations. Comincom did not have any investments
available for sale or restricted cash balances as at June 30, 2003 or December
31, 2002.

During the six months ended June 30, 2003, Comincom had net cash inflows of
$13.4 million from its operating activities, compared to $8.6 million during the
six months ended June 30, 2002. During the twelve months ended December 31, 2002
and 2001, Comincom had net cash inflows of $24.1 million and $11.3 million,
respectively. The increases in net cash inflows from operating activities in the
six months ended June 30, 2003 as compared to the same period in 2002 and in the
year ended December 31, 2002 as compared to 2001 are mainly due to the fact that
customer revenues increased at a greater rate that its operating expenses for
the period. Comincom used cash of $9.6 million and $14.7 million for investing
activities for the six months ended June 30, 2003 and 2002, respectively, and
$31.0 and $29.5 million for investing activities for the twelve months ended
December 31, 2002 and 2001, respectively, which were principally attributable to
building its telecommunications networks and related purchases of fixed assets.

Comincom had working capital of $3.4 million as of June 30, 2003 and
working capital of $0.3 million as of December 31, 2002. The increase in its
working capital between December 31, 2002 and June 30, 2003 primarily relates to
the fact that its cash and other current assets increased at a greater rate than
its current liabilities due to continued growth in its revenues, net income and
operating cash flows during the six months ended June 30, 2003. At June 30,
2003, Comincom had total debt, including capital lease obligations, of
approximately $7.1 million, of which $3.6 million were current maturities. At
December 31, 2002, Comincom had total debt, including capital lease obligations,
of approximately $8.4 million, of which $4.5 million had short-term maturities.
At December 31, 2001, Comincom had total debt, including capital lease
obligations, of approximately $9.7 million, of which $7.0 million had short-term
maturities. During the year ended December 31, 2002, a ruble denominated
promissory note payable to MGTS, the incumbent fixed line operator in Moscow,
maturing in April 2002 was restructured and extended to 2005. In November 2002,
a credit line of $2.4 million was obtained from International Moscow Bank to
enable Comincom to pursue increased market growth. At December 31, 2002, the
loans from International Moscow Bank had US dollar denominated interest rates of
LIBOR plus 3.4% and LIBOR plus 5.5%. The interest on leasing agreements range
from LIBOR plus 11% to LIBOR plus 16% and the MGTS promissory note carries an
interest rate of 11% denominated in Rubles.

CONTRACTUAL OBLIGATIONS

As of June 30, 2003, Comincom had the following contractual obligations,
including short- and long-term debt arrangements, capital lease arrangements and
purchase obligations:

PAYMENTS DUE BY PERIOD
--------------------------
LESS THAN 1 - 3 4 - 5
TOTAL 1 YEAR YEARS YEARS THEREAFTER
------ --------- ------ ----- ----------
(IN MILLIONS)

Short- and long-term debt................ $5,612 $2,400 $3,212 $ -- --
Capital lease obligations................ 1,468 1,190 278 -- --
Purchase obligations..................... 1,400 1,400 -- -- --
------ ------ ------ ----- -----
Total contractual cash obligations....... $8,480 $4,990 $3,490 $ -- $ --
====== ====== ====== ===== =====

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK AND TREASURY AND
CURRENCY EXPOSURE MANAGEMENT

MOVEMENTS IN THE U.S. DOLLAR/RUSSIAN RUBLE EXCHANGE RATE MAY ADVERSELY AFFECT
COMINCOM'S FINANCIAL POSITION, CASH FLOWS AND NET INCOME.

The ruble is generally non-convertible outside Russia so Comincom's ability
to hedge against further devaluation by converting to other currencies is
significantly limited. Further, Comincom's ability to convert rubles into other
currencies in Russia is subject to rules that restrict the purposes for which
conversion and the payment of foreign currencies are allowed. Much of Comincom's
operating costs are indexed to or denominated in US dollars, including supplier
arrangements, employee compensation expense, capital expenditure agreements and
interest expense.

Comincom's treasury function has managed Comincom's funding, liquidity and
exposure to interest rate and foreign currency exchange rate risks. Comincom's
treasury operations are conducted within establish Comincom guidelines. In
accordance with Comincom's policy, Comincom does not enter into any treasury
management transactions of a speculative nature.

Comincom has taken specific steps to minimize its exposure to fluctuations
in foreign currency. Although local currency control regulations require
Comincom to collect virtually all of its revenue in local currency, Comincom
generally either prices or invoices in US dollars or indexes its invoices and
collections to the applicable dollar exchange rate. Customer contracts may
include clauses allowing additional invoicing if the applicable exchange rate
changes significantly between the invoice date and the date of

payment and there are penalty clauses for overdue payments. Maintaining the
dollar value of Comincom's revenue subjects it to additional tax on exchange
gains.

Although Comincom is attempting to match revenue, costs, borrowing and
repayments in terms of their respective currencies, Comincom may experience
economic loss and a negative impact on earnings as a result of foreign currency
exchange rate fluctuations.

Comincom's cash and cash equivalents are held largely in interest bearing
accounts denominated in Russian rubles, US Dollars and Euro. Book value as at
December 31, 2002 and 2001 approximates fair value.

The following table provides information about Comincom's financial
instruments in their local currency as at December 31, 2002 and 2001 and, where
applicable, presents such information in US dollar equivalents (in thousands).
The table summarizes information on instruments that are sensitive to foreign
currency exchange rates, including foreign currency denominated debt
obligations.

2002 2003
2003 2004 2005 THEREAFTER TOTAL TOTAL
------ ------ ------ ---------- ------ ------
(IN MILLIONS)

Cash equivalents........................ $1,915 $ -- $ -- $ -- $1,915 $3,926
Long-term debt, including current
portion Fixed rate.................... -- -- 3,067 -- 3,067 2,978
Average interest rate................. -- -- 11.00% -- 11.00% 12.00%
Long-term debt, including current
portion Variable rate................. 4,479 732 84 -- 5,295 6,728
Average interest rate................. 8.84% 15.40% 13.00% -- -- --

A SIGNIFICANT CHANGE IN THE MARKET INTEREST RATE COULD ADVERSELY AFFECT
COMINCOM'S OPERATING CASH FLOWS.

Comincom is exposed to market risk from changes in interest rates and faces
exposure to adverse movements in foreign currency exchange rates. Comincom's
interest expenses are most sensitive to changes in the general level of US
interest rates. Comincom has developed risk management policies that establish
guidelines for managing foreign currency exchange rate risk and Comincom also
periodically evaluates the materiality of foreign currency exchange exposures
and the financial instruments available to mitigate this exposure.

UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

On August 27, 2003, Golden Telecom finalized the acquisition of 100% of OOO
Sibchallenge Telecom ("Sibchallenge"), an alternative wireline operator in
Krasnoyarsk, Russia. Sibchallenge owns 100% of the ownership interest in ZAO
Tel, an Internet services provider, also based in Krasnoyarsk. The total
purchase price of approximately $15.4 million consisted of cash consideration of
$15.0 million and $0.4 million in estimated direct transaction costs, including
an investment banking fee of $0.3 million paid to Belongers Ltd., an affiliate
of Alfa Telecom Limited, a shareholder of the Company. The purchase price was
determined through arms' length negotiations between the Company and the
previous shareholders of Sibchallenge. The Company began consolidating
Sibchallenge upon the date of closure.

On August 19, 2003, GTI and wholly-owned subsidiaries of GTI entered into
share exchange agreements with Telenor to acquire 100% of the issued and
outstanding shares of capital stock of Comincom held by Telenor. Upon closure,
Telenor will be issued GTI common stock such that Telenor will hold 19.5% of the
outstanding common shares on the date of closing. For purposes of these
condensed pro forma consolidated financial statements, the assumed closing date
is June 30, 2003 resulting in 6,705,921 shares of GTI common stock assumed
issued in conjunction with this transaction. The purchase price was determined
through arms' length negotiation between the Company and Telenor. For purposes
of this transaction, the 6,705,921 million shares were valued at $23.11 per
share. The estimated total purchase price of approximately $156.6 million
consisted of approximately $155.0 million in GTI common stock and direct
transaction costs of approximately $1.6 million. Pursuant to a Shareholders'
Agreement, Telenor will be represented on the Company's Board of Directors. The
Company will begin to consolidate the financial position and results of
operations of Comincom upon the date of closure, estimated to be before the end
of 2003. The Company was advised by JP Morgan PLC.

The acquisition of 100% of Comincom will further strengthen the Company's
position in the key Moscow and St. Petersburg communications markets, and
position the Company to realize future operating and cost synergies. Comincom
provides telecommunications services, principally to major hotels, business
offices and mobile communication companies through its telecommunications
network in Russia, including Moscow, St. Petersburg, Voronezh, Samara and
several other major population centers. The Company intends to use the assets of
Comincom in the manner in which they were previously used.

The following unaudited condensed pro forma consolidated financial
statements give effect to the acquisition by GTI of 100% of Sibchallenge for
approximately $15.4 million in cash consideration, including estimated direct
transaction costs of $0.4 million. In addition, the following unaudited
condensed pro forma consolidated financial statements also give effect to the
acquisition by GTI of 100% of Comincom and the related issuance of GTI's common
shares and direct transaction costs. The final purchase price allocation will be
calculated based on the transaction value and the fair values of Comincom's
identifiable assets and liabilities at the date of closure. Therefore, the
actual goodwill amount, as well as other balance sheet items, could differ from
the preliminary unaudited condensed pro forma consolidated financial statements
presented herein, and in turn affect items in the preliminary condensed pro
forma consolidated statement of operations, such as intangible asset
amortization and income taxes.

The accompanying condensed pro forma consolidated balance sheet as of June
30, 2003 and accompanying condensed pro forma consolidated statements of
operations for the year ended December 31, 2002 and for the six month period
ended June 30, 2003 were prepared based on the Company's interpretation of
guidance issued by the United States Securities and Exchange Commission ("SEC")
(specifically Section 11.02 of Regulation S-X). The unaudited condensed pro
forma consolidated income statements for the year ended December 31, 2002 and
for the six month period ended June 30, 2003 give effect to the acquisitions as
if the transactions had occurred on January 1, 2002. The unaudited condensed pro
forma balance sheet as of June 30, 2003 gives effect to the acquisitions as if
the transactions had occurred on June 30, 2003.

GTI has presented these unaudited condensed pro forma consolidated
financial statements for illustrative purposes only. The unaudited condensed pro
forma consolidated financial statements are not necessarily indicative of the
actual results of operations or financial position that would have occurred had

the acquisitions occurred on the dates indicated, nor are they necessarily
indicative of future operating results or financial position. No account has
been taken within the unaudited condensed pro forma consolidated financial
statements to any synergy or any severance and restructuring costs that may, or
may be expected to, occur following the acquisition. The unaudited condensed pro
forma consolidated financial statements are only a summary and should be read in
conjunction with the historical consolidated financial statements and related
notes of GTI and Comincom and other information included or incorporated by
reference in this document.

The estimated total purchase price of Comincom of approximately $156.6
million consists of approximately $155.0 million in GTI's common stock,
representing 6,705,921 newly issued shares and estimated direct transactions
costs of approximately $1.6 million. The value of the common stock was
determined based on the average closing price of the Company's common stock for
the five day period beginning on June 26, 2003 and ending on July 2, 2003 in
accordance with the guidance set forth in Emerging Issues Task Force Technical
Bulletin ("EITF") 99-12, "Determination of the Measurement Date for the Market
Price of Acquirer Securities Issued in a Purchase Business Combination" ("EITF
99-12").

GOLDEN TELECOM, INC.

CONDENSED PRO FORMA BALANCE SHEET
AS OF JUNE 30, 2003
(UNAUDITED)
(IN THOUSANDS OF US$)

PRO FORMA
PRO FORMA COMBINED
COMBINED GOLDEN
GOLDEN TELECOM,
GOLDEN PRO FORMA TELECOM & PRO FORMA COMINCOM &
TELECOM COMINCOM ADJUSTMENTS COMINCOM SIBCHALLENGE ADJUSTMENTS SIBCHALLENGE
--------- -------- ----------- --------- ------------ ----------- ------------
NOTE 1 NOTE 3 NOTE 4

ASSETS
CURRENT ASSETS
Cash and cash
equivalents.............. $ 55,305 $ 3,899 $ (1,600)(A) $ 57,604 $ 200 $(15,400)(A) $ 42,404
Accounts receivable, net... 50,639 20,213 (806)(H) 70,046 539 (219)(H) 70,366
VAT receivable............. 9,901 4,146 -- 14,047 186 -- 14,233
Prepaid expenses........... 8,386 1,484 -- 9,870 144 -- 10,014
Other current assets....... 14,139 6,346 (256)(F) 20,229 997 (542)(F) 20,684
--------- -------- --------- --------- ------- -------- ---------
TOTAL CURRENT ASSETS......... 138,370 36,088 (2,662) 171,796 2,066 (16,161) 157,701
Property and equipment,
net........................ 174,607 83,278 (4,295)(E) 253,590 7,825 -- 261,415
Goodwill and intangible
assets:
Goodwill, net.............. 71,703 36,499 (36,499)(C) 116,717 -- 87 (C) 116,804
-- -- 45,014 (C) -- -- -- --
Intangible assets, net..... 54,100 16,452 18,223 (D) 88,775 -- 10,760 (D) 99,535
--------- -------- --------- --------- ------- -------- ---------
Net goodwill and
intangible assets...... 125,803 52,951 26,738 205,492 -- 10,847 216,339
Restricted cash.............. 1,136 -- -- 1,136 -- -- 1,136
Other non-current assets..... 9,688 3,807 (599)(F) 12,896 2,169 (2,169)(F) 12,896
--------- -------- --------- --------- ------- -------- ---------
TOTAL ASSETS................. $ 449,604 $176,124 $ 19,182 $ 644,910 $12,060 $ (7,483) $ 649,487
========= ======== ========= ========= ======= ======== =========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and
accrued expenses......... $ 52,114 $ 17,915 $ (806)(H) $ 69,223 $ 1,718 $ (219)(H) $ 70,722
VAT payable................ 8,262 2,492 -- 10,754 65 -- 10,819
Debt maturing within one
year..................... 1,399 2,400 -- 3,799 -- -- 3,799
Current capital lease
obligation............... 1,859 1,190 -- 3,049 -- -- 3,049
Other current
liabilities.............. 13,798 8,705 (1,752)(F) 21,110 869 (791)(F) 21,248
-- -- 359 (G) -- -- 60 (G) --
--------- -------- --------- --------- ------- -------- ---------
TOTAL CURRENT LIABILITIES.... 77,432 32,702 (2,199) 107,935 2,652 (950) 109,637
Long-term debt, less current
portion.................... 760 3,212 -- 3,972 -- -- 3,972
Long-term capital lease
obligation, less current
portion.................... 4,670 278 -- 4,948 -- -- 4,948
Long-term deferred tax
liability.................. 9,070 2,150 4,189 (G) 15,409 -- 2,821 (G) 18,230
Other non-current
liabilities................ 15,050 4,124 (4,124)(F) 15,050 3,219 (3,165)(F) 15,104
--------- -------- --------- --------- ------- -------- ---------
TOTAL LIABILITIES............ 106,982 42,466 (2,134) 147,314 5,871 (1,294) 151,891
Minority interest............ 2,359 -- -- 2,359 -- -- 2,359
SHAREHOLDERS' EQUITY
Preferred stock, $0.01 par
value.................... -- -- -- -- -- -- --
Common stock, $0.01 par
value.................... 277 202 67 (B) 344 -- -- 344
(202)(I) -- -- -- --
Additional paid-in
capital.................. 454,358 100,857 154,907 (B) 609,265 2,956 (2,956)(I) 609,265
(100,857)(I)
Accumulated earnings
(deficit)................ (114,372) 32,599 (32,599)(I) (114,372) 3,233 (3,233)(I) (114,372)
--------- -------- --------- --------- ------- -------- ---------
TOTAL SHAREHOLDERS' EQUITY... 340,263 133,658 21,316 495,237 6,189 (6,189) 495,237
--------- -------- --------- --------- ------- -------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY....... $ 449,604 $176,124 $ 19,182 $ 644,910 $12,060 $ (7,483) $ 649,487
========= ======== ========= ========= ======= ======== =========

See accompanying notes to unaudited condensed pro forma financial statements.
57

GOLDEN TELECOM, INC.

CONDENSED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(UNAUDITED)
(IN THOUSANDS OF US$, EXCEPT PER SHARE DATA)

PRO FORMA
PRO FORMA COMBINED
COMBINED GOLDEN
GOLDEN TELECOM
GOLDEN PRO FORMA TELECOM & PRO FORMA COMINCOM, &
TELECOM COMINCOM ADJUSTMENTS COMINCOM SIBCHALLENGE ADJUSTMENTS SIBCHALLENGE
-------- -------- ----------- --------- ------------ ----------- ------------
NOTE 1 NOTE 3 NOTE 4

REVENUE:
Telecommunication services....... $158,439 $49,016 $(1,440)(O) $205,133 $4,029 $(582)(O) $209,462
(882)(L) (409)(L)
Revenue from related parties..... 699 256 955 -- -- 955
-------- ------- ------- -------- ------ ----- --------
TOTAL REVENUE..................... 159,138 49,272 (2,322) 206,088 4,029 (991) 209,126
OPERATING COSTS AND EXPENSES:
Access and network services
(excluding depreciation and
amortization................... 76,735 18,220 (1,434)(O) 93,386 1,819 (582)(O) 94,340
(135)(L) (283)(L)
Selling, general and
administrative (excluding
depreciation and
amortization).................. 26,823 14,413 (6)(O) 41,230 887 -- 42,117
Depreciation and amortization.... 20,947 6,680 1,025 (J) 28,345 547 448 (J) 29,340
-------- ------- -------- ------ ----- --------
(307)(K)
-------
TOTAL OPERATING COSTS AND
EXPENSES......................... 124,505 39,313 (857) 162,961 3,253 (417) 165,797
-------- ------- ------- -------- ------ ----- --------
INCOME FROM OPERATIONS............ 34,633 9,959 (1,465) 43,127 776 (574) 43,329
OTHER INCOME (EXPENSE):
Equity in losses of ventures..... (29) -- -- (29) -- -- (29)
Interest income.................. 605 -- -- 605 -- -- 605
Interest expense................. (1,578) (479) -- (2,057) (193) -- (2,250)
Foreign currency gains
(losses)....................... 213 205 -- 418 (139) -- 279
Minority interest................ (215) (131) -- (346) -- -- (346)
-------- ------- ------- -------- ------ ----- --------
TOTAL OTHER INCOME (EXPENSE)...... (1,004) (405) -- (1,409) (332) -- (1,741)
-------- ------- ------- -------- ------ ----- --------
Income before income taxes........ 33,629 9,554 (1,465) 41,718 444 (574) 41,588
Income taxes...................... 8,974 4,599 (352)(M) 13,221 160 (138)(M) 13,243
-------- ------- ------- -------- ------ ----- --------
NET INCOME........................ $ 24,655 $ 4,955 $(1,113) $ 28,497 $ 284 $(436) $ 28,345
======== ======= ======= ======== ====== ===== ========
Basic earnings per share of common
stock:
Net income per
share -- basic............. 0.90 $ 0.84 $ 0.83
======== ======== ========
Weighted average common shares --
basic............................ 27,271 6,706 33,977 33,977
======== ======= ======== ========
Diluted earnings per share of
common stock:
Net income per
share -- diluted........... $ 0.89 $ 0.82 $ 0.82
======== ======== ========
Weighted average common shares --
diluted.......................... 27,836 6,706 34,542 34,542
======== ======= ======== ========

See accompanying notes to unaudited condensed pro forma financial
statements.
58

GOLDEN TELECOM, INC.

CONDENSED PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2002
(UNAUDITED)
(IN THOUSANDS OF US$, EXCEPT PER SHARE DATA)

REVENUE:
Telecommunication services........ $285,271 $83,501 $(3,319)(O) $364,698 $5,238 $ (272)(O) $368,846
(755)(L) (818)(L)
Revenue from related parties...... 1,727 653 -- 2,380 -- -- 2,380
-------- ------- ------- -------- ------ ------- --------
TOTAL REVENUE....................... 286,998 84,154 (4,074) 367,078 5,238 (1,090) 371,226
OPERATING COSTS AND EXPENSES:
Access and network services
(excluding depreciation and
amortization.................... 134,467 30,799 (3,319)(O) 161,841 2,906 (272)(O) 163,910
(106)(L) (565)(L)
Selling, general and
administrative (excluding
depreciation and
amortization)................... 58,003 28,472 -- 86,475 812 -- 87,287
Depreciation and amortization..... 38,872 11,047 2,049 (J) 51,354 802 897 (J) 53,053
(614)(K)
-------- ------- ------- -------- ------ ------- --------
TOTAL OPERATING COSTS AND
EXPENSES.......................... 231,342 70,318 (1,990) 299,670 4,520 60 304,250
-------- ------- ------- -------- ------ ------- --------
INCOME (LOSS) FROM OPERATIONS....... 55,656 13,836 (2,084) 67,408 718 (1,150) 66,976
OTHER INCOME (EXPENSE):
Equity in earnings of ventures.... (4,139) -- -- (4,139) -- -- (4,139)
Interest income................... 2,077 190 -- 2,267 -- -- 2,267
Interest expense.................. (4,306) (1,370) -- (5,676) (529) -- (6,205)
Forgiveness of penalties.......... -- 2,002 -- 2,002 -- -- 2,002
Foreign currency gains (losses)... (1,792) (215) -- (2,007) 158 -- (1,849)
Minority interest................. (527) (316) -- (843) -- -- (843)
-------- ------- ------- -------- ------ ------- --------
TOTAL OTHER INCOME.................. (8,687) 291 -- (8,396) (371) -- (8,767)
-------- ------- ------- -------- ------ ------- --------
Income (loss) before income taxes... 46,969 14,127 (2,084) 59,012 347 (1,150) 58,209
Income taxes........................ 10,382 4,945 (500)(M) 14,827 290 (276)(M) 14,841
-------- ------- ------- -------- ------ ------- --------
Income (loss) before cumulative
effect of change in accounting
principle......................... 36,587 9,182 (1,584) 44,185 57 (874) 43,368
Cumulative effect of change in
accounting principle.............. 974 -- -- 974 -- -- 974
-------- ------- ------- -------- ------ ------- --------
NET INCOME (LOSS)................... $ 37,561 $ 9,182 $(1,584) $ 45,159 $ 57 $ (874) $ 44,342
======== ======= ======= ======== ====== ======= ========
Basic earnings per share of common
stock:
Income before cumulative effect of
a change in accounting
principle....................... 1.36 $ 1.32 $ 1.30
Cumulative effect of a change in
accounting principle............ 0.04 0.03 0.03
-------- -------- --------
Net income per share -- basic..... 1.40 $ 1.35 $ 1.33
======== ======== ========
Weighted average common
shares -- basic................... 26,748 6,706 33,454 33,454
======== ======= ======== ========
Diluted earnings per share of common
stock:
Income before cumulative effect of
a change in accounting
principle....................... $ 1.34 $ 1.30 $ 1.28
Cumulative effect of a change in
accounting principle............ 0.04 0.03 0.03
-------- -------- --------
Net income per share -- diluted... $ 1.38 $ 1.33 $ 1.31
======== ======== ========
Weighted average common
shares -- diluted................. 27,163 6,706 33,869 33,869
======== ======= ======== ========

See accompanying notes to unaudited condensed pro forma financial statements.
59

GOLDEN TELECOM, INC.

NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS
JUNE 30, 2003
(UNAUDITED)

NOTE 1 HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF GOLDEN TELECOM, INC.

These columns reflect GTI's historical consolidated balance sheet as of
June 30, 2003 and statement of operations for the six month period ended June
30, 2003 prepared and presented in accordance with accounting principles
generally accepted in the United States of America ("US GAAP").

NOTE 2 HISTORICAL PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 2002 OF GOLDEN TELECOM, INC.

In September 2002, subsidiaries of the Company completed the acquisition of
50% of EDN Sovintel LLC ("Sovintel") that the Company did not own. This column
reflects GTI's historical unaudited pro forma combined results of operations to
give effect to the Sovintel business combination as if it had occurred on
January 1, 2002. The table below summarizes the historical results of GTI for
the year ended December 31, 2002 and the historical results for Sovintel for the
period from January 1, 2002 to September 16, 2002, along with pro forma
adjustments necessary to present pro forma combined results for the year ended
December 31, 2002.

HISTORICAL PRO FORMA
------------------- COMBINED
GOLDEN PRO FORMA GOLDEN
TELECOM SOVINTEL ADJUSTMENTS TELECOM
-------- -------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Revenue................................... $198,727 $101,261 $(12,990) $286,998
Operating costs and expenses.............. 167,297 75,386 (11,341) 231,342
-------- -------- -------- --------
Income (loss) from operations............. 31,430 25,875 (1,649) 55,656
Other operating income (expense).......... 2,007 (113) (10,581) (8,687)
-------- -------- -------- --------
Income (loss) before income taxes......... 33,437 25,762 (12,230) 46,969
Income taxes.............................. 4,627 6,647 (892) 10,382
Cumulative effect of a change in
accounting principle.................... 974 -- -- 974
-------- -------- -------- --------
Net income (loss)......................... $ 29,784 $ 19,115 $(11,338) $ 37,561
======== ======== ======== ========
Net income per share -- basic............. $ 1.24 $ 1.40
======== ========
Weighted average common shares -- basic... 24,102 26,748
======== ========
Net income per share -- dilutive.......... $ 1.21 $ 1.38
======== ========
Weighted average common
shares -- dilutive...................... 24,517 27,163
======== ========

As described in the Company's 8-K/A dated September 17, 2002, the nature of the
principal pro forma adjustments were to provide (a) amortization of intangible
assets over estimated useful lives; (b) for the effect of purchase accounting to
fixed assets on depreciation; (c) interest expense on debt assumed; (d)
elimination of connection fee revenue and costs; and (e) elimination of
previously recorded equity in earnings of Sovintel.

GOLDEN TELECOM, INC.

NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3 HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF OAO COMINCOM

These columns reflect Comincom historical consolidated income statements
for the year ended December 31, 2002 and for the six months ended June 30, 2003
and balance sheet as of June 30, 2003 prepared and presented in accordance with
US GAAP.

Certain reclassifications have been made to Comincom's historical
consolidated income statements to conform to the presentation format in these
unaudited condensed pro forma consolidated financial statements. Such
reclassifications have no impact on revenue, income from operations, income
before income taxes and minority interests or net income.

Certain reclassifications have also been made to Comincom's historical
consolidated balance sheet to conform to the presentation format in these
unaudited condensed pro forma consolidated financial statements. Such
reclassifications have no impact on total assets or shareholder's equity.

NOTE 4 HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF OOO SIBCHALLENGE

These columns reflect Sibchallenge's historical consolidated income
statements for the year ended December 31, 2002 and for the six months ended
June 30, 2003 and balance sheet as of June 30, 2003 prepared and presented in
accordance with US GAAP.

Certain reclassifications have been made to Sibchallenge's consolidated
income statements to conform to the presentation format in these unaudited
condensed pro forma consolidated financial statements. Such reclassifications
have no impact on revenue, income from operations, income before income taxes
and minority interests or net income.

Certain reclassifications have also been made to Sibchallenge's balance
sheet to conform to the presentation format in these unaudited condensed pro
forma consolidated financial statements. Such reclassifications have no impact
on total assets or shareholder's equity.

NOTE 5 ALLOCATION OF PURCHASE PRICE

ACQUISITION OF COMINCOM

The acquisition of 100% of Comincom will be accounted for as a purchase
business combination in accordance with US GAAP. As the transaction will reflect
the acquisition of 100% interest in Comincom, the Company will record the net
assets of Comincom at 100% of their estimated fair values.

The estimated total purchase price of approximately $156.6 million consists
of approximately $155.0 million of GTI's common stock, representing an estimated
6,705,921 shares and estimated direct transaction costs of approximately $1.6
million. Under US GAAP, securities issued in a purchase business combination
should be valued at market prices for a reasonable period before and after the
measurement date in determining the fair value of the securities issued. For the
purposes of these unaudited pro forma consolidated financial statements, the
purchase consideration has been estimated using a closing date of the
transaction, the measurement date, of June 30, 2003. Accordingly, the GTI shares
issued in consideration are valued based on a weighted average for the five
consecutive trading days between June 26 and July 2, 2003, which was $23.11 per
share.

GOLDEN TELECOM, INC.

NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)

The following is the actual condensed balance sheet of Comincom as of June
30, 2003 reflecting preliminary purchase price accounting adjustments to the net
assets acquired:

JUNE 30, 2003
--------------
(IN THOUSANDS)

ASSETS:
Current assets............................................ $ 35,832
Property and equipment.................................... 78,983
Telecommunications service contracts intangible assets.... 14,804
Contract based customer relationship intangible assets.... 19,871
Goodwill.................................................. 45,014
Other assets.............................................. 3,208
--------
Total assets......................................... $197,712
========

LIABILITIES:
Current liabilities....................................... $ 31,309
Non-current liabilities................................... 9,829
--------
Net assets........................................... $156,574
========
Consideration and acquisition costs:
GTI shares consideration............................... 154,974
Direct transaction costs............................... 1,600
--------
Total purchase consideration and acquisition costs..... $156,574
========

The purchase allocation will be finalized upon closure of the acquisition
by GTI of 100% of the outstanding shares of capital stock of Comincom and
completion of the valuation of certain tangible and intangible assets. The final
purchase price allocation will be calculated based on the transaction value and
the fair values of Comincom's identifiable assets and liabilities at the date of
closure. Therefore, the actual goodwill amount, as well as other balance sheet
items, could differ from the preliminary unaudited condensed pro forma
consolidated financial statements presented herein, and in turn affect items in
the preliminary condensed pro forma consolidated statement of operations, such
as intangible asset amortization and income taxes. The excess purchase price
over the fair value of the net tangible and intangible assets acquired of
approximately $45.0 million has been assigned to goodwill and is not deductible
for tax purposes. In accordance with the Financial Accounting Standards Board's
Statement on Financial Accounting Standard ("SFAS") No. 141, "Business
Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets", the
Company will not amortize the goodwill recorded in connection with the
acquisition of 100% of Comincom. The goodwill will be tested for impairment at
least annually. The impact of a one dollar change in the average closing price
used to value the shares of common stock for the purpose of this transaction
would result in an increase or decrease in goodwill of approximately $6.7
million.

ACQUISITION OF SIBCHALLENGE

The acquisition of 100% of Sibchallenge was accounted for as a purchase
business combination in accordance with US GAAP. As the transaction reflects the
acquisition of 100% interest in Sibchallenge, the Company will record the net
assets of Sibchallenge at 100% of their estimated fair values.

GOLDEN TELECOM, INC.

NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)

The total purchase price of approximately $15.4 million consisted of cash
consideration of approximately $15.0 million and approximately $0.4 million in
direct transaction costs, including an investment banking fee of $0.3 million
paid to Belongers Limited., an affiliate of Alfa Telecom Limited, a shareholder
of the Company.

The following is the actual condensed balance sheet of Sibchallenge as of
June 30, 2003 reflecting preliminary purchase price accounting adjustments to
the net assets acquired (in thousands of USD):

JUNE 30, 2003
--------------
(IN THOUSANDS)

ASSETS:
Current assets............................................ $ 1,524
Property and equipment.................................... 7,825
Telecommunications service contracts intangible assets.... 10,760
Goodwill.................................................. 87
-------
Total assets........................................... $20,196
=======
LIABILITIES:
Current liabilities....................................... $ 1,921
Non-current liabilities................................... 2,875
-------
Net assets............................................. $15,400
=======
Consideration and acquisition costs:
Cash consideration........................................ 15,000
Direct transaction costs.................................. 400
-------
Total purchase consideration and transaction costs.......... $15,400
=======

These unaudited condensed pro forma consolidated financial statements
reflect the preliminary allocation of the purchase price to assets acquired and
liabilities assumed based on their fair values on an assumed closing date of
June 30, 2003. The final purchase price allocation will be calculated based on
the transaction value and the fair values of Sibchallenge's identifiable assets
and liabilities at the date of closure. Therefore, the actual goodwill amount,
as well as other balance sheet items, could differ from the preliminary
unaudited condensed pro forma consolidated financial statements presented
herein, and in turn affect items in the preliminary condensed pro forma
consolidated statement of operations, such as intangible asset amortization and
income taxes. The excess purchase price over the fair value of the net tangible
and intangible assets acquired of approximately $0.1 million has been assigned
to goodwill and is not deductible for tax purposes. In accordance with the
Financial Accounting Standards Board's Statement on Financial Accounting
Standard ("SFAS") No. 141, "Business Combinations" and SFAS No. 142 "Goodwill
and Other Intangible Assets", the Company will not amortize the goodwill
recorded in connection with the acquisition of 100% of Comincom. The goodwill
will be tested for impairment at least annually.

NOTE 6 CONDENSED PRO FORMA BALANCE SHEET ADJUSTMENTS

The accompanying unaudited condensed pro forma consolidated balance sheet
includes the adjustments necessary to give effect to the business combination as
if it had occurred on June 30, 2003 and to reflect the allocation of the
estimated acquisition cost to the estimated fair value of tangible and
intangible assets acquired and liabilities assumed as noted above, including the
elimination of Comincom's and Sibchallenge's equity accounts.

GOLDEN TELECOM, INC.

NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)

As discussed above, an element of the business combination consideration
for Comincom was paid in the form of GTI shares, and was valued based upon the
guidance of EITF 99-12. Goodwill amounts computed as of the estimated pro forma
June 30, 2003 closing date were a function of both this share price
determination and the resulting tangible and intangible net assets existing as
of June 30, 2003.

Adjustments included in the June 30, 2003 pro forma consolidated balance
sheet are summarized as follows:

(A) Direct transaction costs of approximately $1.6 million were paid
for Comincom. Cash consideration of approximately $15.4 million, including
direct transaction costs of approximately $0.4 million was paid for
Sibchallenge.

(B) An element of the purchase price of Comincom will be paid in the
form of GTI shares consideration, representing an estimated 6,705,921
shares with an assigned value of $155.0 million.

(C) The Company recorded approximately $45.0 million in goodwill on
the Comincom transaction and eliminated approximately $36.5 million of
previously recorded goodwill and recorded approximately $0.1 million in
goodwill on the Sibchallenge transaction.

(D) The Company has assigned approximately $5.3 million to
telecommunications service contracts intangible assets and approximately
$12.9 million to contract based customer relationship intangible assets in
the Comincom transactions. These identified intangible assets will be
amortized over a weighted-average period of approximately 9 years, and are
non-deductible for Russian tax purposes. The value assigned to the
intangible assets reflects 100% of the appraised value, corresponding to
the 100% of Comincom that will be purchased.

The Company has assigned approximately $10.8 million to
telecommunications service contracts intangible assets in the Sibchallenge
acquisition. These identified intangible assets will be amortized over a
weighted-average period of approximately 10 years, and are non-deductible
for Russian tax purposes. The value assigned to the intangible assets
reflects 100% of the appraised value, corresponding to the 100% of
Sibchallenge currently purchased.

(E) Property and equipment's estimated fair market value was computed
using the net current replacement cost valuation method. The preliminary
value assigned to property and equipment in the accompanying pro forma
balance sheet represents 100% of these estimated fair values.

(F) The Company has eliminated approximately $5.9 million in
previously recorded Comincom deferred revenues and approximately $0.9
million in previously recorded Comincom deferred costs. The Company has
eliminated approximately $4.0 million in previously recorded Sibchallenge
deferred revenues and approximately $2.7 million in previously recorded
deferred costs. These purchase accounting adjustments relate to previous
connection fee deferrals in accordance with Staff Accounting Bulletin No.
101 ("SAB 101"). The purchase price accounting adjustments were made under
the guidance provided by EITF 01-03, "Accounting in a Business Combination
for Deferred Revenue of an Acquiree".

GOLDEN TELECOM, INC.

NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)

(G) For Comincom, the Company has recorded a pro forma adjustment to
deferred taxes which consists of the following (amounts in thousands of
USD):

Property and equipment adjustment -- Note 6(E).............. $(4,295)
Deferred revenue and cost adjustment -- Note 6(F)........... 5,021
Intangible asset adjustment -- Note 6(D).................... 18,223
-------
Total adjustments to timing differences..................... 18,949
Russian statutory tax rate.................................. 24%
-------
Pro forma deferred tax liability adjustment................. $ 4,548
=======

For Sibchallenge, the Company has recorded a pro forma adjustment to
deferred taxes which consists of the following (amounts in thousands of
USD):

Deferred revenue and cost adjustment -- Note 6(F)........... 1,245
Intangible asset adjustment -- Note 6(D).................... 10,760
-------
Total adjustments to timing differences..................... 12,005
Russian statutory tax rate.................................. 24%
-------
Pro forma deferred tax liability adjustment................. $ 2,881
=======

(H) Elimination entries related to operational activity between
Comincom and the Company, Sibchallenge and the Company, and Comincom and
Sibchallenge.

(I) Elimination of Comincom and Sibchallenge equity accounts upon
consolidation.

NOTE 7 CONDENSED PRO FORMA STATEMENTS OF OPERATIONS ADJUSTMENTS

The unaudited condensed pro forma statements of operations include
adjustments necessary to give effect to the merger as if it had occurred on
January 1, 2002.

Adjustments included in the condensed pro forma consolidated statement of
operations are summarized as follows:

(J) Amortization of intangible assets over estimated useful lives
(average 9 years for Comincom and 10 years for Sibchallenge).

(K) Effect of purchase accounting adjustments to fixed assets on
depreciation expense.

(L) Elimination of connection fee revenues and costs associated with
the deferred revenue and cost adjustment referenced in Note 6 (F) above

GOLDEN TELECOM, INC.

NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)

(M) The following is a pro forma tax computation based on a Russian
statutory rate of 24% applied to the incremental variation of reported net
earnings for pro forma combined GTI and Comincom, exclusive of the
following implied permanent differences:

FOR THE SIX
FOR THE TWELVE MONTHS
MONTHS ENDED ENDED
DECEMBER 31, 2002 JUNE 30, 2003
----------------- -------------
(IN THOUSANDS)

Combined pre-tax net income (loss), previously
reported.............................................. $61,096 $43,183
Pro forma combined pre-tax net income (loss), reported
herein................................................ 59,012 41,718
------- -------
Net change in reported pre-tax income................... $ 2,084 $ 1,465
======= =======
Less -- permanent taxation differences:
Transactions costs, deductible in USA................. $ 1,600 $ --
Valuation allowance, transaction costs................ (1,600) --
------- -------
Net change in taxable items............................. $ 2,084 $ 1,465
======= =======
Russian statutory tax rate.............................. 24% 24%
------- -------
Incremental reduction in taxes.......................... $ 500 $ 352
======= =======

The following is a pro forma tax computation based on a Russian
statutory rate of 24% applied to the incremental variation of reported net
earnings for pro forma combined GTI and Sibchallenge, exclusive of the
following implied permanent differences:

FOR THE SIX
FOR THE TWELVE MONTHS
MONTHS ENDED ENDED
DECEMBER 31, 2002 JUNE 30, 2003
----------------- -------------
(IN THOUSANDS)

Combined pre-tax net income (loss), previously
reported.............................................. $47,316 $34,073
Pro forma combined pre-tax net income (loss), reported
herein................................................ 46,166 33,499
------- -------
Net change in reported pre-tax income................... $ 1,150 $ 574
======= =======
Less -- permanent taxation differences:
Transactions costs, deductible in USA................. $ 400 $ --
Valuation allowance, transaction costs................ (400) --
------- -------
Net change in taxable items............................. $ 1,150 $ 574
======= =======
Russian statutory tax rate.............................. 24% 24%
------- -------
Incremental reduction in taxes.......................... $ 276 $ 138
======= =======

(O) Elimination entries related to operational activity between
Comincom and the Company, Sibchallenge and the Company and Comincom and
Sibchallenge.

MATERIAL CONTACTS AND BOARD DELIBERATIONS

In a letter dated December 21, 2001, Mr. V. Bulgak, Chairman of the Boards
of Directors of OAO Comincom and ZAO Combellga wrote to Mr. Petr Aven, Chairman
of the Board of Directors of our company. Mr. Bulgak's letter discussed the
telecommunications business in Russia and favorable trends in the
telecommunications business internationally. Mr. Bulgak proposed a merger of our
company and Comincom and Combellga. Mr. Bulgak suggested several possible
advantages of merging the companies.

On April 10, 2002, our company, Comincom, Telenor East Invest AS (which
later assigned its rights to Telenor) and certain Russian investors who at that
time held shares in Comincom signed a Mutual Confidentiality, Non-Disclosure and
Non-solicitation Agreement ("Confidentiality Agreement") with a term of one
year.

On May 15, 2002, Mr. Sergei Stefanovich, Director of Business Development
of our company, met with Mr. Kjell Morten Johnsen and Mr. Tron Ostby, both of
Telenor, to discuss a tentative timetable for the transaction. The Telenor
representatives were accompanied by representatives of Morgan Stanley.

On May 21, 2002, Mr. Aven initiated a discussion with our company's Board
of Directors regarding the possible acquisition of Comincom/Combellga. He noted
that valuation of Comincom/Combellga prepared by our company was significantly
lower than that prepared by the shareholders of Comincom/ Combellga.

On May 22, 2002, Stan Abbeloos, the company's Chief Operating Officer, and
Sergei Stefanovich met with Mr. Johnsen, Mr. Ostby and representatives of Morgan
Stanley. The participants in the meeting discussed the initial valuation
presentation that was produced by Morgan Stanley reflecting a proposed exchange
ratio of 29-33% of our company's shares for 100% of Comincom/Combellga shares.

On July 9, 2002, the Board of Directors resolved to retain JPMorgan plc
("JPMorgan") to act as our company's financial advisor with respect to the
proposed acquisition of Comincom/Combellga. On July 12, 2002, our company
retained JPMorgan to act as its financial advisor in the transaction.

On July 23, 2002, representatives of JPMorgan and Morgan Stanley met to
discuss the transaction process.

On August 8, 2002, Mr. Stefanovich and representatives of JPMorgan met with
Mr. Johnsen, Mr. Ostby and representatives of Morgan Stanley. The parties agreed
on many of the transaction procedures, including anticipated timing, information
sharing, valuation parameters and follow-on steps. The parties agreed to proceed
with a view to presenting key details of the transaction to our company's Board
of Directors on September 10, 2002.

On September 10, 2002, the Board resolved to propose to Telenor 17% of our
company's shares on a post-transaction basis in exchange for 100 percent of the
shares in Comincom.

On September 17, 2002, Mr. Alexander Vinogradov, our company's President
and Chief Executive Officer, wrote on behalf of our company to Telenor with an
offer of 17% of our company's issued and outstanding shares on a
post-transaction basis in return for the target companies. Representatives of
JPMorgan met with representatives of Morgan Stanley in London on September 18,
2002 to discuss our company's proposal.

On September 25, 2002, representatives of JPMorgan and Morgan Stanley met
in London and agreed that the companies' trading multiples should serve as a
natural benchmark on which to assess the value of Comincom/Combellga.

On October 10, 2002, Mr. Stefanovich and Mr. Jeffrey Riddell, General
Counsel and Senior Vice President of our company, and representatives of
JPMorgan met with Mr. Johnsen, Mr. Ostby, representatives of Morgan Stanley and
representatives of the law firm, Coudert Brothers, counsel to Telenor, in the
offices of Coudert Brothers in London to discuss valuation, corporate governance
and information exchange issues.

On October 23, 2002, representatives of our company met with
representatives of Telenor in Moscow to discuss valuation and corporate
governance issues in relation to the proposed transaction.

On November 2, 2002, in response to the meeting on October 23, 2002, Mr.
Johnsen wrote a letter to Mr. Vinogradov outlining Telenor's proposal regarding
key terms of the transaction. Telenor proposed that it receive approximately
22.6%-23.4% of our company's issued and outstanding shares on a post-transaction
basis in exchange for 100% shares of Comincom/Combellga.

On November 5, 2002, Golden Telecom's Board of Directors met to discuss
Telenor's proposal and rejected the proposal.

On November 11, 2002, Mr. Petr Aven, our Chairman of the Board, wrote to
Mr. Johnsen, proposing up to a maximum of 20% of the post-transaction
outstanding shares for Comincom, subject to the completion of legal and
financial due diligence. The letter also stated that Telenor's proposal
regarding corporate governance issues should be subject to further negotiation.

On November 14, 2002, Mr. Johnsen responded in writing to Mr. Aven's letter
rejecting Golden Telecom's proposal. Mr. Johnsen suggested that the parties
conduct further due diligence as a way of bridging the valuation gap between the
parties.

On December 10, 2002, Mr. Aven wrote to Mr. Johnsen and suggested that
Telenor put forward its proposal regarding corporate governance issues that
would provide suitable protection to our company's minority shareholders. On
January 14, 2003, Mr. Johnsen responded to Mr. Aven and Mr. Vinogradov with a
revised proposal regarding corporate governance issues.

On January 24, 2003, Golden Telecom and Telenor exchanged revised business
plans and estimated 2002 financial results for Golden Telecom and
Comincom/Combellga, respectively.

On January 28, 2003, representatives of Golden Telecom and JPMorgan
interviewed the management of Comincom/Combellga with respect to
Comincom/Combellga's operations and financial position. On January 29, 2003,
representatives of Telenor, Comincom/Combellga and Morgan Stanley interviewed
the management of Golden Telecom with respect to the company's operations and
financial position.

On February 3, 2003, representatives of JPMorgan and Morgan Stanley held
discussions regarding adjustments to the EBITDA calculation for Golden Telecom
and Comincom/Combellga in order to bring them to the same accounting base for
the purposes of valuation.

On February 18, 2003, Mr. Aven reported to the Board that the company
conducted limited operational due diligence on Comincom/Combellga. The Board
resolved to offer to the principals of Comincom/Combellga up to 19% of the
company's outstanding shares on a post-transaction basis for 100% of the shares
of Comincom.

On February 21, 2003, based on the revised business plan and additional
information on Comincom/ Combellga received during the management interviews,
Golden Telecom made a revised proposal to Telenor for Comincom/Combellga by
offering Telenor 18.2%-18.7% of the outstanding shares of Golden Telecom on a
post-transaction basis. This proposal was rejected by Telenor. Mr. Johnsen
indicated that Telenor was prepared to accept no less than 21% of the
outstanding shares of Golden Telecom on a post-transaction basis.

On March 4, 2003, Golden Telecom, in a letter from Mr. Vinogradov to Mr.
Johnsen, reiterated its proposal to Telenor of 18.2-18.7% of the outstanding
shares of Golden Telecom on a post-transaction basis for 100% of the shares of
Comincom/Combellga. Since there was still a significant gap in valuation between
the parties, it was proposed that the negotiations be suspended until the
differences between the parties narrowed.

On March 7, 2003, Golden Telecom, Alfa and Telenor met to discuss the
valuation deadlock and key corporate governance issues.

On March 12, 2003, Mr. Andrei Shtyrba of Alfa Bank wrote Mr. Johnsen
stating that Alfa was prepared to propose to Golden Telecom's Board of Directors
that the Board approve the transaction on the basis of Golden Telecom offering
approximately 19.5% of the issued and outstanding shares of Golden Telecom on a
post-transaction basis. On March 14, 2003, Mr. Ostby wrote to Mr. Shtyrba and
indicated that Telenor was willing to accept the exchange ratio of 19.5%.

Thereafter representatives of Telenor and us held various discussions and
commenced the preparation of a term sheet. On March 21, 2003, Coudert Brothers,
circulated a draft of the term sheet. Over the next eight weeks, we, Telenor and
representatives for each of us held various meeting and telephone conference
calls to negotiate terms.

On March 28, 2003 the Board of Directors established a special committee
consisting of Mr. David Herman and Mr. Michael North, each of whom is a
disinterested director in this transaction. The special committee was
established to review and evaluate the advisability of an amendment to our
company's certificate of incorporation such that in certain circumstances where
any person desires to become a beneficial owner of 50% or more of the issued and
outstanding shares of our company, such person would be required to make an
offer to purchase any and all of our company's shares. Similar provisions were
subsequently included in the shareholders agreement among our company, Alfa,
Barings, Capital, Rostelecom and Telenor.

On April 1, 2003, Mr. Vinogradov provided an update on the
Combellga/Comincom transaction to the Board. The Board resolved to propose 19.5%
of the company's post-transaction outstanding shares in exchange for all of the
issued and outstanding shares of Comincom. The Board also resolved to expand the
scope of the special committee to include exclusive power and authority on
behalf of our company to review, evaluate and determine the advisability of
granting a request for advance approval under Section 203 of the DGCL in
connection with the acquisition of Comincom/Combellga and the advisability of
amending the shareholders agreement among our company's major shareholders. The
special committee was also given the exclusive power and authority on behalf of
our company to (a) communicate and negotiate with the parties in the transaction
and to the shareholders agreement and standstill agreement, including the
requested approval under Section 203 of the DGCL, (b) determine whether our
company should agree to approval for the attainment of interested stockholder
status by Telenor for the purposes of Section 203 in connection with the
acquisition and amending the shareholder agreement and standstill agreements
among our company's major shareholders and whether such actions are fair to, and
in the best interests of, our company and all of its stockholders, and (c)
exercise all of the power and authority possessed of our Company's full Board of
Directors to determine whether to grant or deny the request by our company for
approval pursuant to Section 203 of the DGCL.

On April 1, 2003, the special committee met and elected Mr. North as Chair
of the special committee. The special committee participated in a telephone
conference call with representatives of JPMorgan to review the advisability of
the amendment to our company's certificate of incorporation. The special
committee also participated in a telephone conference call with attorneys from
the law firm of Potter Anderson, counsel to the special committee, to discuss
the advisability of the amendment.

On April 25, 2003, the special committee discussed the mandatory tender
provisions and resolved to instruct our company's management to include the
substance of the amendment in the agreements to be negotiated by our company and
its major shareholders and that such agreements be presented to the special
committee for final review prior to execution.

On May 20, 2003, Mr. Jeff Riddell, Senior Vice President, General Counsel
and Corporate Secretary reported to the Board on the Comincom/Combellga
transaction. He noted that our company was continuing negotiations with the
sellers and reported that the parties finalized the term sheet. A copy of the
term sheet was distributed to the directors.

On May 21, 2003, our company, Telenor (as assignee of Telenor East Invest
AS), Comincom and the Strategic Russian Investors executed an amendment to the
Confidentiality Agreement under which the parties agreed to negotiate
exclusively which each other regarding the transaction and not to engage in any

other transaction which could be reasonably expected to diminish the likelihood
of the consummation of the transaction. Such exclusivity provisions were to
apply to the parties from May 20, 2003 to August 1, 2003.

On May 22, 2003 the parties executed a non-binding term sheet that set
forth the principal terms for the transaction including the requirement for a
tender offer with a minimum acceptance condition in the event that a person
desired to gain control of our company. See "Description of Other Transaction
Documents".

From June 4 to July 25, 2003, Golden Telecom and Telenor conducted detailed
legal, financial and operating due diligence of Comincom/Combellga and Golden
Telecom, respectively.

On June 10, 2003, our counsel, Chadbourne & Parke LLP, distributed the
first draft of the share exchange agreement and Telenor's counsel distributed
the first draft of the shareholders agreement, standstill agreement and
registration rights agreement. During the next week, counsel for us and Telenor
exchanged comments on the agreements. On June 16 and 17, 2003, Telenor and its
financial and legal advisors met with us and our financial and legal advisors in
London to negotiate the agreements. At the conclusion of these meetings, it was
agreed that many of the key open issues had been resolved but that until Telenor
delivered the audited consolidated financial statements that were specified in
the term sheet we would not be able to verify the assumptions made in valuing
the Comincom shares and consequently we were not in a position to sign any of
the agreements.

In late June 2003, revised drafts of the agreements reflecting the points
agreed to in the June London meetings were exchanged.

On June 28, 2003, the drafts of the shareholders agreement, standstill
agreement and registration rights agreement were distributed for review to the
shareholders who would be party to them.

On July 3, 2003, Mr. Riddell provided an update on the Comincom/Combellga
transaction to the Board. The Board authorized our company's management on
behalf of the company to negotiate and enter into transaction documents for the
purchase of Comincom/Combellga.

On July 3, 2003, representatives of JPMorgan and Morgan Stanley held
discussions regarding a post-closing adjustment mechanism, depending on the
relative financial performance of Golden Telecom and Comincom/Combellga between
signing of the share exchange agreement and closing of the transaction, to be
incorporated into the share exchange agreement.

On July 9, 2003, the special committee met to discuss the status of the
Comincom/Combellga transaction.

During July 2003, we held discussions with Telenor and its accountants
regarding the status of the Comincom and Combellga financial statements.

On July 30, 2003, we meet with Telenor and its counsel to continue
discussions on the agreements.

During the first week of August 2003, negotiations were held to finalize
the agreements.

On August 8, 2003, our Board approved the form of share exchange agreement
and the special committee of the Board approved the other transaction agreements
and authorized a waiver under Delaware General Corporation Law Section 203, the
Delaware anti-takeover statute.

On August 19, 2003, the Comincom/Combellga transaction agreements were
executed.

REGULATORY APPROVALS

In order to complete the acquisition of Comincom, we are required to obtain
the approval of the Ministry for Antimonopoly Policy and Support for
Entrepreneurship of the Russian Federation ("Anti-monopoly Ministry") and
satisfy the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976 ("HSR Act"). On August 27, 2003, we received permission from the
Anti-monopoly Ministry to acquire Comincom. On September 26, 2003, we received
early termination of the waiting period under the HSR Act. In addition,
completion of the acquisition of Comincom will require compliance with
applicable corporate law of the State of Delaware and the Russian Federation,
compliance with Nasdaq Marketplace Rules as set forth in this proxy statement
and compliance with the United States Securities and Exchange Commission rules
and regulations, federal securities laws and applicable securities and "blue
sky" laws of the various states.

TERMS OF THE SHARE EXCHANGE AGREEMENT

GENERAL

Our wholly owned subsidiary, SFMT, will acquire Comincom pursuant to the
terms of a share exchange agreement in a transaction that involves Golden
Telecom issuing shares of its common stock equal to 19.5% of the outstanding
shares of its common stock calculated on a post-acquisition basis in exchange
for all the issued and outstanding capital stock of Comincom. The full text of
the share exchange agreement is included as an exhibit to the Form 8-K which we
filed with the SEC on August 20, 2003. You can review this Form 8-K and the
share exchange agreement on the SEC's website, www.sec.gov. The following is a
description of the material terms of the share exchange agreement and is
qualified in its entirety by reference to the full share exchange agreement.

THE CLOSING

The closing of the acquisition is to take place five business days after
the satisfaction or waiver of all of the conditions precedent. One of the
conditions to the closing is your approval of the issuance of the shares of our
common stock.

THE TRANSACTION

Golden Telecom, SFMT and Telenor entered into the share exchange agreement
on August 19, 2003. Pursuant to the share exchange agreement, SFMT will acquire
from Telenor 129,292 shares of common stock of Comincom, nominal value 1 Ruble
per share, 541 shares of Class A non-convertible preferred stock of Comincom,
nominal value 1 Ruble per share, and 29,838 shares of Class B convertible
preferred stock of Comincom, nominal value 1 Ruble per share. There are also 5
shares of common stock issued by Comincom owned by a designee of Telenor which
are to be transferred to a designee of ours. In exchange for all of these
shares, we will issue to Telenor a number of shares of our common stock equal to
19.5% of our outstanding shares of common stock on a post-acquisition basis. For
example, if on the closing date we have 28,783,421 shares of common stock
outstanding, we would issue 6,972,382 shares of our common stock to Telenor. In
this example, 35,755,802 shares of our common stock would be outstanding
immediately after the closing of the acquisition. The actual number of shares
issued may differ depending on the number of outstanding shares on the date of
closing the transaction.

POST CLOSING ADJUSTMENT

The share exchange agreement provides for a post closing adjustment to be
made based on our company's and Comincom's results through September 30, 2003.
Any adjustment will be paid to the appropriate party in cash, not shares.

Within thirty days of the closing, (a) our company is required to deliver
to Telenor a balance sheet prepared for our company on a consolidated basis in
accordance with Generally Accepted Accounting

Principles in the United States ("US GAAP") and reviewed in accordance with
Statement on Auditing Standards ("SAS 100") as of the closing, together with a
supporting schedule setting forth a determination of our company's indebtedness
on a consolidated basis as of the closing (the "Company Closing Statement"), and
(b) Telenor is required to deliver to us a balance sheet prepared for Comincom
and Comincom's subsidiaries on a consolidated basis in accordance with US GAAP
and reviewed in accordance with SAS 100 as of the closing, together with a
supporting schedule setting forth a determination of the indebtedness of
Comincom and its subsidiaries on a consolidated basis as of the closing (the
"Comincom's Closing Statement", and together with the Company Closing Statement,
the "Closing Statements"). In preparing the Company Closing Statement, any
adjustment caused to our financial results that arises from the acquisition by
us of the telephone service provider, Sibchallenge Telecom, and an Internet
service provider, Tel, in Krasnoyarsk, Russia, shall not be taken into account,
and the Company Closing Statement shall be prepared as if such acquisitions did
not occur, provided that if such adjustment would negatively affect our
consolidated net cash position by more than $20.0 million, then the amount in
excess of $20.0 million by which such adjustment would affect such net cash
position shall be taken into account in preparing the Company Closing Statement.
In preparing the Comincom Closing Statement, any adjustment caused to Comincom's
consolidated financial results that results from (a) the payment of fees to
PricewaterhouseCoopers and American Appraisal for their services in connection
with the acquisition, which in any event shall not exceed $190,000 in the
aggregate, and (b) the payment of any fees of PricewaterhouseCoopers for its
services in connection with the preparation of the financial materials to be
provided by Telenor in connection with this proxy statement which in any event
shall not exceed $100,000 in the aggregate, shall not be taken into account, and
Comincom's Closing Statement shall be prepared as if such fees had not been
paid.

We will cause our employees (and the employees of our subsidiaries and
affiliates) to assist Telenor in the preparation of the Comincom Closing
Statement and to assist Telenor's auditor in connection with its review of the
Comincom Closing Statement.

We and Telenor will seek in good faith to resolve any differences that may
exist with respect to the matters specified in any notice of disagreement
delivered in accordance with the share exchange agreement. If Telenor and we
cannot reach agreement on such matters, an independent accounting firm of
recognized international standing will be engaged (the "Unaffiliated Firm") to
resolve the matters which remain in dispute with respect to the disputed Closing
Statements. The Unaffiliated Firm will resolve the differences submitted to it
based solely upon the information provided to the Unaffiliated Firm by us and
Telenor pursuant to the terms of the share exchange agreement (and not by
independent review). The Unaffiliated Firm's authority will be limited to
resolving disputes with respect to whether the disputed Closing Statements were
properly prepared with respect to the individual items on the Closing Statements
in dispute. The decision of the Unaffiliated Firm will be, for all purposes,
conclusive, non-appealable, final and binding upon us and Telenor. The fees of
the Unaffiliated Firm will be borne by us and Telenor in the same proportion
that the US Dollar amount of disputed items lost by a party bears to the total
US Dollar amount in dispute resolved by the Unaffiliated Firm. Telenor and we
will each bear the fees, costs and expenses of our own accountants and all of
our other expenses in connection with matters contemplated by such disputes.

Upon resolution of the disputed items (if any) under the Closing
Statements, the Closing Statements shall be deemed to be the Final Closing
Statements for all purposes. Using the relevant numbers set forth below for
September 30, 2003 and December 31, 2003, a straight-line interpolation of
indebtedness (adjusted for cash) for each party for the period between September
30, 2003 and the closing shall be calculated (the "Required Indebtedness"). The
Required Indebtedness for each party shall be compared

to the appropriate amount of indebtedness set out in the Final Closing
Statements (the "Closing Indebtedness").

OUR COMPANY OUR COMPANY
COMINCOM RESULTS FOR COMINCOM RESULTS FOR RESULTS FOR THE RESULTS FOR THE
THE NINE MONTHS THE TWELVE MONTHS NINE MONTHS TWELVE MONTHS
ENDED 9/30/03 ENDED 12/31/03 ENDED 9/30/03 ENDED 12/31/03
-------------------- -------------------- --------------- -----------------

Indebtedness (Adjusted for
Cash)...................... $2.7 $(0.6) $(41.0) $(50.0)

If this comparison shows that the Comincom has failed to meet its Required
Indebtedness target (by having more indebtedness and/or less cash such that the
net cash position of Comincom is less than the amount of such target), Telenor
shall pay to our company the difference between its Closing Indebtedness and its
Required Indebtedness. If this comparison shows that we have failed to meet our
Required Indebtedness target (by having more indebtedness and/or less cash such
that our net cash position is less than the amount of such target), we shall pay
to Telenor the difference between our Closing Indebtedness and our Required
Indebtedness.

CONDITIONS TO CLOSING

The closing of the acquisition of Comincom is subject to conditions
precedent which are customary for this type of transaction, including approval
by the relevant anti-trust authorities in Russia and the United States (which we
have received), approval of the issuance of our shares of common stock by our
shareholders and effectiveness of the other transaction documents entered into
by Golden Telecom, Alfa, Barings, Capital, Rostelecom, and Telenor. The other
transaction documents are a registration rights agreement, a standstill
agreement and a shareholders agreement. These agreements are described below.
See "TERMS OF THE OTHER TRANSACTION DOCUMENTS".

In addition there are financial conditions that each side to the
transaction must satisfy. The material financial conditions are described
immediately below. The indebtedness (adjusted for cash) of Comincom at December
31, 2002 on a consolidated basis calculated in accordance with US GAAP shall not
exceed $6.1 million. For the financial year ending December 31, 2002, Comincom's
audited accounts, calculated in accordance with US GAAP, shall show consolidated
Earnings Before Interest, Taxes and Amortization (which is commonly referred to
as EBITDA) of no less than $26.7 million.

Comincom's accounts for the 2003 period ending on the last day of the
quarter ending immediately preceding the closing date shall show consolidated
EBITDA of no less than the target specified in the table below and consolidated
indebtedness and capital expenditures of no more than the targets specified in
the table below; provided that (a) with respect to their consolidated EBITDA, at
any date of determination, if the target for such date does not exceed by more
than 1% their consolidated EBITDA as at such date, and, with respect to their
consolidated indebtedness, as at any date of determination, if such amount does
not exceed the target for such date by more than 2.5%, and, with respect to
their consolidated capital expenditures, if such amount does not exceed the
target for such date by more than 5%, then the relevant target shall be deemed
to have been meet, (b) if following June 30, 2003, Comincom achieves one of the
subsequent pre-closing date targets for EBITDA, on a cumulative basis, any
failure to have achieved any preceding target shall be deemed to have been
waived, and (c) if, with respect to the incurrence of indebtedness or capital
expenditures, as the case may be, Comincom has exceeded such targets but, by the
closing date, has achieved the most recent subsequent pre-closing date targets
for indebtedness or capital expenditures, as the case may be, then such failure
shall be deemed to have been waived. The targets with respect to consolidated
EBITDA, indebtedness and capital expenditures for Comincom for the 2003 periods
ending on the last day of the first nine months and the

full year of 2003, respectively, are outlined in the table below (all figures in
the table below are in millions of US Dollars):

NINE MONTHS TWELVE MONTHS
ENDED 9/30/03 ENDED 12/31/03
------------- --------------

EBITDA................................................... $23.8 $33.3
Indebtedness (Adjusted for Cash)......................... 2.7 (0.6)
Capital Expenditures..................................... 17.0 21.5

In making any determination as to whether the above referenced targets have
been met, any adjustment caused to Comincom's and its subsidiaries' consolidated
financial results that results from (a) the payment of fees to
PricewaterhouseCoopers and American Appraisal for their services in connection
with the acquisition, which in any event shall not exceed $190,000 in the
aggregate, and (b) the payment of any fees of PricewaterhouseCoopers for its
services in connection with the preparation of the financial materials to be
provided by Telenor in connection with this proxy statement which in any event
shall not exceed $100,000 in the aggregate, shall not be taken into account, and
such determination shall be made as if such fees had not been paid.

Comincom shall have delivered to us Comincom's profit and loss statement
and balance sheet, each prepared in accordance with US GAAP, for each quarter
beginning with the quarter ending September 30, 2003 through the last full
quarter prior to the closing. Further, neither Comincom nor its subsidiaries
shall have declared a moratorium on any of its indebtedness, be unable or admit
its inability to pay its debts as they generally fall due or shall have passed a
resolution to wind up or liquidate themselves. Our indebtedness at December 31,
2002 on a proportionately consolidated basis calculated in accordance with US
GAAP shall not exceed $21.1 million. For the financial year ending December 31,
2002, our audited accounts, calculated in accordance with US GAAP, shall show
proportionately consolidated EBITDA of no less than $100.6 million.

Our accounts for the 2003 period ending on the last day of the quarter
ending immediately preceding the closing date shall show proportionately
consolidated EBITDA of no less than the target specified in the table below and
proportionately consolidated indebtedness and capital expenditures of no more
than the target specified below; provided that (a) with respect to our
proportionately consolidated EBITDA, as at any date of determination, if the
target for such date does not exceed by more than 1% our proportionately
consolidated EBITDA as at such date, and, with respect to our proportionately
consolidated indebtedness, as at any date of determination, if such amount does
not exceed the target for such date by more than 2.5%, and, with respect to our
proportionately consolidated capital expenditures, as at any date of
determination, if such amount does not exceed the target for such date by more
than 5%, then we shall be deemed to have met such target, (b) if following June
30, 2003, we achieve one of the subsequent pre-closing date targets for EBITDA,
on a cumulative basis, any failure by us to have achieved any preceding target
shall be deemed to have been waived, and (c) if, with respect to the incurrence
of indebtedness or capital expenditures, as the case may be, we have exceeded
such targets but, by the closing date, have achieved the most recent subsequent
pre-closing date targets for indebtedness or capital expenditures, as the case
may be, then such failure shall be deemed to have been waived. Our targets with
respect to proportionately consolidated EBITDA, indebtedness and capital
expenditures for the 2003 periods ending on the last day of the first nine
months and the full year of 2003, respectively, are outlined in the table below
(all figures in the table below are in millions of United States Dollars):

NINE MONTHS TWELVE MONTHS
ENDED 9/30/03 ENDED 12/31/03
------------- --------------

EBITDA................................................... $ 87.5 $122.4
Indebtedness (Adjusted for Cash)......................... (41.0) (50.0)
Capital Expenditures..................................... 45.0 59.5

In making any determination as to whether the above referenced targets have
been met, any adjustment caused to the financial results of our company for the
relevant quarter that results from the

acquisition by us of the telephone service provider, Sibchallenge Telecom, and
an Internet service provider, Tel, in Krasnoyarsk, Russia, shall not be taken
into account, and such determination shall be made as if such acquisitions did
not occur, provided that if such adjustment would negatively affect our
consolidated net cash position by more than $20.0 million, then the amount in
excess of $20.0 million by which such adjustment would affect our cash position
shall be taken into account.

We shall have delivered to Comincom our company's profit and loss statement
and balance sheet, each prepared in accordance with US GAAP, for each quarter
beginning with the quarter ending September 30, 2003 through the last full
quarter prior to the closing. Further, neither our company nor any of its
subsidiaries shall have declared a moratorium on any of its indebtedness, be
unable or admit its inability to pay its debts as they generally fall due or
shall have passed a resolution to wind up or liquidate themselves.

INDEMNIFICATION AND GUARANTY

The share exchange agreement provides for Telenor to indemnify us for
breaches of their representations and warranties or the non-performance by
Telenor of their covenants in the agreement. We may not seek indemnity from
Telenor unless our aggregate losses for such breaches or non-performance exceed
$2,750,000 and to reach that aggregate amount we may only bring individual
claims that are at least equal to $250,000. Telenor is not required to indemnify
us in an amount in excess of the sum of the notional price of the acquisition,
our costs and expenses in the transaction and any amounts expended by us in
pursuing claims against Telenor. The notional price shall be determined by
multiplying the average of the market price of a share of our company's common
stock for each of the ten trading days immediately preceding the closing by the
number of our company shares issued in the transaction, provided, that if the
share exchange agreement is terminated and the closing does not occur, then the
maximum amount of the indemnity shall be the amount obtained by multiplying the
average market price of a share of our company's common stock for each of the
ten trading days immediately preceding such termination date by the number of
shares of our company's common stock that would have represented 19.5% of our
company's outstanding common stock assuming the acquisition had been consummated
on such termination date (the "Notional Price").

The share exchange agreement also provides for us to indemnify Telenor for
breaches of our representations and warranties or the non-performance by us of
our covenants in the agreement. Telenor may not seek indemnity from us unless
their aggregate losses for such breaches or non-performance exceed $11.0 million
and to reach that aggregate amount they may only bring individual claims that
are at least equal to $250,000. We are not required to indemnify Telenor in an
amount in excess of the sum of the Notional Price, Telenor's costs and expenses
in the transaction and any amounts expended by Telenor in pursuing claims
against our company.

We have agreed to provide to Telenor a guaranty of complete payment when
due and performance of each covenant, agreement and obligation of SFMT under the
share exchange agreement. An affiliate of Telenor has agreed to provide to us
and SFMT a guaranty of complete payment when due and performance of each
covenant, agreement and obligation of Telenor under the share exchange
agreement.

CONDUCT OF BUSINESS

Pursuant to the share exchange agreement, Telenor has agreed to cause
Comincom and each of its subsidiaries, prior to the closing date, (a) to conduct
its business in the ordinary course in accordance with present policies and as
previously conducted, (b) to preserve its business organization intact, (c)
consistent with efficient and economical management, to retain the services of
its present officers, employees and agents to the end that the Comincom and each
of its subsidiaries may retain their goodwill and preserve their business
relationships with customers, suppliers and others, (d) to maintain or renew all
existing authorizations necessary for them to carry out their business as
currently conducted and to comply with all of the terms and conditions of the
authorizations and (e) report to us, as and when requested in writing,
concerning the status of the business and operations of Comincom or any of its
subsidiaries. Telenor shall

not, and shall not permit Comincom or any its subsidiaries to, take any action
that would, or that could reasonably be expected to, result in any of the
conditions to the closing not being satisfied. Prior to the closing date,
Telenor shall not permit Comincom or any of its subsidiaries to engage in any of
the following, without our prior written approval:

- changing or altering their corporate structure or amending their charter
documents or by-laws or other governing or organizational documents, or
initiating or undertaking any liquidation or dissolution;

- issuing or selling any shares of their capital stock, any ownership,
membership or equity interests, or any other securities or issuing any
securities convertible into or exchangeable for, or options, warrants to
purchase, scrip, rights to subscribe for, calls or commitments of any
character whatsoever relating to, or entering into any contract,
understanding or arrangement with respect to the issuance of, any
ownership, membership or equity interests, any shares of their capital
stock or any of their other securities, or entering into any arrangement
or contract with respect to the purchase, redemption or voting of their
ownership, membership or equity interests or shares of their capital
stock, or adjusting, splitting, reacquiring, redeeming, combining or
reclassifying any of their securities, or making any other changes in
their capital structure;

- directly or indirectly, establishing any new subsidiary, or making any
equity investment in, or advancing any funds to, any person involving an
aggregate amount for Comincom and its subsidiaries in excess of $10,000
(or the equivalent thereof in any other currency) other than trade
advances or prepayments made in the ordinary course of business;

- incurring (contingently or otherwise) any indebtedness, other than in the
ordinary course of business, but in no event shall the aggregate of such
amount incurred by Comincom and its subsidiaries exceed $2.5 million (or
the equivalent thereof in any other currency);

- incurring (contingently or otherwise) any other obligation or liability
except for normal operating purposes in the ordinary course of business;

- declaring, setting aside or paying any dividends (in cash or in kind) on,
or making any distributions in respect of, any capital stock or other
ownership, membership or equity interests (except in case such dividends
or distributions are due to Comincom or any its Subsidiaries);

- entering into, amending or affirmatively renewing or terminating any
contract, commitment, lease (whether of real property or any personal
(movable) property) or other agreement, except on an arm's length basis
and in the ordinary course of business;

- guaranteeing or entering into any obligation to guarantee the obligation
of any person, provided that the aggregate potential liability under all
of such guarantees in combination with any indebtedness incurred as
described above shall not exceed $2.5 million (or the equivalent thereof
in any other currency), and provided further that a guarantee or
assumption of obligations in favor of Comincom or any its subsidiaries
shall not be subject to this restriction;

- mortgaging, pledging or subjecting to any lien, any of their assets,
properties or business;

- selling or otherwise transferring or leasing any properties or assets or
canceling any debt or claim or waiving any right, or purchasing or
otherwise acquiring or leasing any properties or assets, in each case
except in the ordinary course of business;

- permitting to lapse any right with respect to any intellectual property
or other intangible asset necessary for the conduct of their business;

- granting any increase in wages or salary rates or in employment,
retirement, severance, termination or other benefits or paying any bonus,
or making any loan to any officer, director or employee, other than
increases or bonuses in the ordinary course consistent with past practice
or required by any agreement in effect on the date the share exchange
agreement was signed and which was disclosed to us, or entering into any
employment contract with any person except in accordance with any
76

budget or business plan, or adopting any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, plan, fund
or other arrangement for the benefit or welfare of any of their
employees;

- accelerating the collection of accounts receivable, delaying the payment
of accounts payable or deferring maintenance and other expenses, reducing
inventories, or otherwise increasing cash on hand, in a manner
inconsistent with past practice or not in the ordinary course of
business;

- repaying any indebtedness, except as required by existing debt
instruments;

- making any material tax election, settling or compromising any liability
for taxes, preparing and filing tax returns or declarations other than in
accordance with applicable law and on a basis consistent with their past
practices or, other than in the ordinary course of business, engaging in
any transaction or operating the business in a manner that would directly
or indirectly result in any liability to them for taxes;

- making any changes in the type or amount of their insurance coverages,
other than any increase in coverage amount or renewal of a policy in the
ordinary course of business;

- making any material change in its accounting methods or practices; or

- agreeing, in writing or otherwise, to do any of the foregoing.

Pursuant to the share exchange agreement we agreed to, and to cause each of
our key subsidiaries to, prior to the closing date, (a) conduct its business in
the ordinary course in accordance with present policies and as previously
conducted, (b) consistent with efficient and economical management, retain the
services of its present officers and management to the end that we and each of
the key subsidiaries may retain its goodwill and preserve its business
relationships with customers, suppliers and others, and (c) report to Telenor,
as and when requested in writing, concerning the status of our business and
operations or the business and operations of any of our key subsidiaries. For
purposes of the share exchange agreement our key subsidiaries means each of the
following 13 wholly-owned subsidiaries:

LLC EDN Sovintel, GTS-Vox, Ltd., SFMT-Rusnet, Inc., SFMT-CIS, Inc., LLC
Golden Telecom (Ukraine), LLC Invest-Holding, CellUkraine Ltd., LLC GTS
Ukrainian TeleSystems, GTS Mobile Services, Inc., GTS Finance, Inc., ROL
Holdings Ltd., LLC Business Communications Agency (ADS) and Golden
TeleServices, Inc.

We shall not, and shall not permit any of the key subsidiaries to, take any
action that would, or that could reasonably be expected to, result in any of the
conditions to closing not being satisfied. Prior to the closing date, we shall
not, and shall not permit any of our key subsidiaries to, engage in any of the
following, without the prior written approval of Telenor:

- except as otherwise disclosed to Telenor or as may be required by
applicable law, and in such case, only to the extent necessary, changing
or altering our or any of our key subsidiaries' corporate structures or
amending any of our or our key subsidiaries' charter documents or by-laws
or other governing or organizational documents, or initiating or
undertaking any liquidation or dissolution;

- solely in relation to shares of capital stock of our company and except
for option grants under our equity incentive plan within the limits in
effect when the share exchange agreement was signed or the issuance of
shares of our common stock upon exercise of options under the incentive
plan, issuing or selling any shares of our company's capital stock or any
other securities or issuing any securities convertible into or
exchangeable for, or options, warrants to purchase, scrip, rights to
subscribe for, calls or commitments of any character whatsoever relating
to, or entering into any contract, understanding or arrangement with
respect to the issuance of any shares of our company's capital stock or
any of our other securities, or entering into any arrangement or contract
with respect to the purchase, redemption or voting of our company's
capital stock, or adjusting, splitting, reacquiring, redeeming, combining
or reclassifying any of our company's securities, or making any other
changes in our capital structure;

- declaring, setting aside or paying any dividends in the form of shares of
capital stock or other securities on any capital stock or other
ownership, membership or equity interests of our company or any of our
key subsidiaries (except in case such dividends are due to our company or
any key subsidiary);

- except as previously disclosed to Telenor, selling or otherwise
transferring or leasing any properties or assets or canceling any debt or
claim or waiving any right, other than in the ordinary course of
business, transfers among our company or any of its subsidiaries or in
any case where the amount involved does not exceed $2.0 million (or the
equivalent thereof in any other currency);

- granting to any employee, officer or director of Golden Telecom or any
key subsidiary any retirement, severance, termination or other
severance-related benefits in respect of which the aggregate potential
liability to Golden Telecom or any key subsidiary is in excess of
$250,000 (or the equivalent thereof in any other currency), or adopting
any profit sharing or similar plan;

- incurring any indebtedness other than in the ordinary course of business,
provided that the aggregate amount of such indebtedness incurred shall
not exceed $5.0 million (or the equivalent thereof in any other
currency), or indebtedness incurred by our company or any of our
subsidiaries under a loan agreement to be entered into by our company and
certain of its subsidiaries with the European Bank for Reconstruction and
Development;

- changing the manner in which our company or any key subsidiary accounts
for its tax liabilities, or deviating from past practice in preparing and
filing any tax returns, unless required to do so by applicable law;

- making any material change in its accounting methods or practices, except
as may be required by applicable law;

- taking any action to delist our capital stock from the Nasdaq national
market; or

- agreeing, in writing or otherwise, to do any of the foregoing.

STOCK OWNERSHIP FOLLOWING THE CLOSING

On the record date and immediately after the closing of the acquisition and
assuming that we do not issue any other shares between the record date and the
closing and that none of the following shareholders disposes of any of their
shares of Golden Telecom common stock before the closing or acquires any
additional shares, our principal stockholders and their ownership of common
stock will be:

PERCENTAGE OF PERCENTAGE OF
OUTSTANDING OUTSTANDING
NUMBER OF SHARES NUMBER OF SHARES
SHARES OWNED OWNED SHARES OWNED
IMMEDIATELY IMMEDIATELY OWNED IMMEDIATELY
BEFORE THE BEFORE THE IMMEDIATELY AFTER THE
SHAREHOLDER CLOSING CLOSING AFTER CLOSING CLOSING
----------- ------------ ------------- ------------- -------------

Alfa Telecom Limited(1).................... 10,731,707 37.3 10,731,707 30.0
PO Box 3339 Geneva Place
333 Waterford Drive
Road Town, Tortola
British Virgin Islands
Nye Telenor East Invest AS................. 0 0 6,974,211 19.5
Snaroyveien 30
N-1331 Fornebu
Norway
OAO Rostelecom............................. 4,024,067 14.0 4,024,067 11.3
1st Tverskaya-Yamskaya 14
Moscow, Russia
125047
European Bank of Reconstruction and 3,003,564 10.4 3,003,564 8.4
Development..............................
One Exchange Square
London EC2A 2JN
Capital International Global
Emerging Markets Private Equity 2,166,405 7.5 2,166,405 6.1
Fund L.P...................................
c/o Capital International, Inc.
11100 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025
First NIS Regional Fund SICAV(2)(3)(4)..... 723,906 2.5 723,906 2.0
c/o Bank of Bermuda (Luxemburg) S.A.
13 rue Goethe
B.P. 413
L-2014 Luxemburg
Cavendish Nominees Limited(2)(3)(4)........ 1,845,769 6.4 1,845,769 5.2
c/o International Private Equity Services
13-15 Victoria Road, P.O. Box 431
St. Peter Port
Guernsey, Channel Islands, GY1 3ZD

---------------

(1) Based on information provided in Amendment No. 7 to Schedule 13D filed with
the Securities and Exchange Commission on August 29, 2003, we understand
that Alfa Telecom Limited is a wholly-owned subsidiary of Alfa Finance
Holdings S.A. As a consequence of its ownership interests in the majority
shareholders of Alfa Finance, CTF Holdings Limited may be deemed to have the
power to direct the voting of the majority of shares of Alfa Finance. CTF
Holdings Limited is a wholly-owned subsidiary of Crown Finance Foundation.
As a result of these relationships, each of Alfa Finance, CTF Holdings
Limited and Crown Finance Foundation may be deemed to beneficially own the
shares held for the account of Alfa Telecom Limited. In addition, Alfa
Telecom Limited has granted Alfa

Capital Holdings (Cyprus) Limited ("Alfa Capital Holdings") an option to
purchase 1,609,756 of the shares reported herein. Alfa Capital Holdings is a
wholly-owned subsidiary of ABH Financial Limited, which is a wholly-owned
subsidiary of Alfa Finance.

(2) Shares beneficially owned by The Barings Vostok Private Equity Fund L.P. and
The NIS Restructuring Facility (together, "Barings") are held in the name of
Cavendish Nominees Limited, as nominee. Of the 1,845,769 shares held of
record by Cavendish Nominees Limited, 1,491,485 shares are beneficially
owned by The Barings Vostok Private Equity Fund L.P. and 354,284 shares are
beneficially owned by The NIS Restructuring Facility.

(3) First NIS Regional Fund SICAV and the Barings Funds holding shares through
Cavendish Nominees Limited may be deemed to be members of a group pursuant
to Rule 13(d)(5) under the Securities Exchange Act of 1934, as amended.
However, such persons disclaim group status.

(4) First NIS Regional Fund SICAV and the Barings Funds holdings shares through
Cavendish Nominees Limited are advised by Barings Vostok Capital Partners
Limited, as investment adviser. Mr. Michael Calvey is the Managing Partner
of Barings Vostok Capital Partners Limited. Mr. Calvey disclaims beneficial
ownership of the shares held by First NIS Regional Fund SICAV and the
Barings Funds holdings shares held by Cavendish Nominees Limited.

TERMS OF THE OTHER TRANSACTION DOCUMENTS

GENERAL

We currently have entered into a shareholders agreement and a standstill
agreement with Alfa, Barings, Capital and Rostelecom. We also have entered into
various registration rights agreements with these shareholders. In connection
with the acquisition of the capital stock of Comincom these agreements are being
terminated and new agreements have been executed that include Telenor as a
party. The old agreements will terminate and the new agreements will become
effective upon the closing of the acquisition of Comincom. The full text of each
of these agreements has been filed as an exhibit to the Form 8-K that we filed
with the SEC on August 20, 2003. This Form 8-K and the exhibits to the Form 8-K,
including each of these agreements may be viewed at the SEC's website,
www.sec.gov. The following is a description of the material terms of these
agreements and is qualified in its entirety by reference to the full agreements.

SHAREHOLDERS AGREEMENT

We have previously entered into a shareholders agreement with Alfa,
Barings, Capital and Rostelecom. In connection with the acquisition of Comincom
the parties have agreed to terminate the existing agreement and enter into a new
shareholders agreement which will include Telenor as a party. The terms of the
new agreement are very similar to the existing agreement.

Under the terms of the new agreement our Board of Directors will be set at
ten (10) members. In addition, each shareholder agrees to vote its shares to
elect designees to our Board of Directors initially as follows:

(A) three directors designated by Alfa;

(B) two directors designated by Telenor;

(D) one director designated by Capital (who shall be an independent
director);

(E) one director designated by Barings (who shall be an independent
director); and

(F) one director (who shall be an independent director and, if at such
time there is no other director who is a financial expert as defined in the
NASDAQ Marketplace Rules and SEC rules, a financial expert) designated by
the directors sitting on the Board on the date of the Board meeting at

which the Board adopts the resolutions concerning our annual meeting of
stockholders including the resolution in which our Board nominates
individuals to stand for election as directors for the year following the
annual meeting of stockholders.

The agreement provides the procedures to remove and replace directors
designated by the shareholders. In addition, subject to the detailed provisions
in the agreement dealing with the designation of directors by the shareholders
who are party to the agreement, the right to designate directors shall be
allocated among Alfa, Barings, Capital, Rostelecom and Telenor as follows:

PERCENT OF ISSUED AND OUTSTANDING SHARES
OF OUR COMPANY'S VOTING STOCK OWNED BY
SUCH SHAREHOLDER NUMBER OF DESIGNEES TO BOARD
---------------------------------------- -----------------------------------------

Ten percent (10%) or less................ 0
More than ten percent (10%) but less than 1
twenty percent (20%)...................
More than twenty percent (20%) but less 2
than thirty percent (30%)..............
More than thirty percent (30%) but less 3
than forty percent (40%)...............
Forty percent (40%) or more.............. 3; plus the right to designate an
independent director (who shall be a
financial expert and qualified and
willing to serve on the audit committee)

provided that the size of the Board shall not be increased beyond ten members,
and a shareholder who would be entitled to designate an additional director due
to such shareholder's acquisition of additional shares of voting stock may only
exercise such right when another shareholder loses the right to designate a
director.

The agreement also governs the transfer of shares of our company stock by
Alfa, Barings, Capital, Rostelecom and Telenor, including rights of first offer
and tag along rights. Consistent with the existing agreement, we have provided
to these shareholders preemptive rights which will allow them to purchase their
pro rata share of any additional voting stock that we may issue. In addition,
during the first two years following the closing, Barings, Capital and
Rostelecom shall be entitled to designate one director so long as their
respective ownership interest in us does not fall below 3% of our issued and
outstanding voting shares.

The agreement also imposes limited restrictions on the ability of these
shareholders to compete with us.

In order to prevent a party from acquiring control of us without paying a
premium for that control, we have included a requirement in the agreement that
no party to the shareholders agreement (together with its affiliates) may
acquire more than fifty percent of our voting stock (50%) unless such share or
shares are acquired by such shareholder and/or one of its affiliates pursuant to
a "Tender Offer". For purposes of the shareholders agreement "Tender Offer"
means an offer made by a shareholder who is party to the agreement or any of its
affiliates in accordance with Section 14 of the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder, to purchase
any and all of our company's issued and outstanding shares, which, subject to
the exceptions described below, is accepted by our company's stockholders
holding a simple majority of the issued and outstanding shares of our voting
stock, excluding any shares of voting stock held by such shareholder and its
affiliates.

Exceptions to this restriction are, if at any time (a) a third party
investor makes a bona fide tender offer to purchase such percentage of the
issued and outstanding shares of our voting stock that when aggregated with any
of the issued and outstanding shares of our voting stock then owned by such
investor and its affiliates would equal more than fifty percent (50%) of the
issued and outstanding shares of our voting stock, and a shareholder who is a
party to the agreement or any of its affiliates thereafter makes a Tender Offer
during the period in which the tender offer made by such third party investor is
still in effect,

or (b) a third party investor makes a bona fide tender offer during the period
in which a Tender Offer made by a shareholder or any of its affiliates is still
in effect, then the requirement in the definition of "Tender Offer" that the
Tender Offer made by such shareholder be accepted by our stockholders holding a
simple majority of the issued and outstanding shares of our voting stock
(excluding any shares of voting stock held by such shareholder and its
affiliates) shall not apply.

If any person shall, individually or together with any of its affiliates
acquire beneficial ownership of any share or shares of our voting stock from a
shareholder who is a party to the agreement (other than in a public sale) and,
after giving effect thereto, such person and its affiliates own ten percent or
more of the issued and outstanding shares of our voting stock, then such person
shall be required to become bound by the Tender Offer requirement. Each
shareholder who is a party to the agreement agrees to cause any such person to
which shares are so transferred to become bound by the Tender Offer requirement.

Except with respect to Tender Offers and participation in an auction in
accordance with the new standstill agreement, each shareholder who is a party to
the agreement agrees that it will not, nor will it permit any of its affiliates
to, engage in any Business Combination (as defined in the Delaware General
Corporation Law) with us without the prior approval of our Board, which approval
will be effective only if it includes the affirmative vote of a majority of the
disinterested directors. If no disinterested directors are in office, then each
such shareholder agrees that such shareholder will not, nor will it permit any
of its affiliates to, engage in any Business Combination with us unless such
Business Combination is approved in accordance with Section 203(a)(3) of the
DGCL.

The agreement shall become effective on the closing date of the acquisition
of Comincom and remain in effect until the earlier of:

(a) the date on which all of the parties agree in writing to the
termination of the agreement; and

(b) the date on which any person owns, individually or collectively
with its affiliates, more than fifty percent of the issued and outstanding
shares of our voting stock;

provided that (a) any shareholder who ceases to own at least three percent
of the issued and outstanding shares of our voting stock shall cease to be
a party to, or have any rights or obligations under, the agreement from and
after the date of the relevant transfer (or dilution); and (b) no such
transfer, dilution or termination shall be deemed to relieve any party of
any obligations under the agreement accruing, or resulting from actions or
omissions of such party occurring, prior to the date of such transfer,
dilution or termination.

STANDSTILL AGREEMENT

We have previously entered into a standstill agreement with Alfa, Barings,
Capital and Rostelecom. In connection with the acquisition of Comincom, the
parties have agreed to terminate the existing agreement and enter into a new
standstill agreement which will include Telenor as well. The terms of the new
agreement are very similar to the existing agreement.

Under the terms of the agreement each shareholder who is a party to the
agreement agrees that such shareholder will not, nor will it permit any of its
affiliates to, directly or indirectly, in any manner acquire, or agree to
acquire, any shares of our voting stock, if the acquisition of such shares of
voting stock would increase the ownership of the shareholder and its affiliates
to more than (i) the percentage of the shares of voting stock then outstanding
(calculated on a fully diluted basis) set forth opposite each such shareholder's
name in the column headed "Fully Diluted" below, or (ii) the percentage of the
shares of

voting stock then outstanding (calculated on a non-fully diluted basis) set
forth opposite such shareholder's name in the column headed "Non-Fully Diluted"
below:

SHAREHOLDER FULLY DILUTED NON-FULLY DILUTED
----------- ------------- -----------------

Alfa..................................................... 43.00% 49.99%
Telenor.................................................. 35.00% 40.00%
Rostelecom............................................... 30.00% 35.00%
Capital.................................................. 17.20% 20.00%
Barings.................................................. 17.20% 20.00%

This restriction will not apply to the following acquisitions or
circumstances:

(a) the acquisition by a shareholder of shares of voting stock in a
Tender Offer (see our discussion of what is a tender offer for purpose of
the agreement in the summary of the shareholder agreement above);

(b) if our Board determines to conduct an auction of our company, in
which case, each shareholder may participate in such auction on the same
terms as all other bidders; or

(c) if any person other than Alfa, Barings, Capital, Rostelecom or
Telenor or any of their respective affiliates acquires, or has entered into
a binding agreement to acquire, beneficial ownership of greater than
fifteen percent of our voting stock, as evidenced by a Schedule 13D filing
made by such person.

Each shareholder who is a party to the agreement agrees that it will not
make, nor will it permit any of its affiliates to make, or in any way
participate in, any "solicitation" of "proxies" (as such terms are used in the
proxy rules of the United States Securities and Exchange Commission) to vote any
shares of voting stock in connection with the election of members of the Board
(other than proxies to vote any shares of voting stock beneficially owned by
such shareholder and/or any of its affiliates or in connection with a Tender
Offer made by such shareholder or any of its affiliates).

Each shareholder who is a party to the agreement also agrees that it will
not make, nor will it permit any of its affiliates to make, or in any way
participate in any "solicitation" of "proxies" (as such terms are used in the
proxy rules of the United States Securities and Exchange Commission) to vote any
shares of voting stock, with respect to any matter, other than the election of
directors of our company, which may be submitted to a vote of the stockholders
of our company (other than proxies to vote any shares of voting stock
beneficially owned by such shareholder and/or any of its affiliates or in
connection with a Tender Offer made by such shareholder or any of its
affiliates) with respect to any such non-election issue.

If the new standstill agreement becomes effective it shall remain in effect
until the earliest of:

(a) the date on which all of the parties agree in writing to the
termination of the agreement;

(b) the date eighteen months following the closing of the acquisition
of Comincom;

(c) the date on which any person owns, individually or collectively
with its affiliates, more than fifty percent of our company's issued and
outstanding shares of voting stock; and

(d) the voluntary or involuntary filing of a petition in bankruptcy by
or against our company, the occurrence of an event of insolvency affecting
our company, or the appointment of a receiver for our company;

provided that any shareholder who ceases to own at least three percent of
the shares of our voting stock shall cease to be a party to, or have any
rights or obligations under, the agreement, and no transfer or dilution or
termination shall be deemed to relieve any shareholder of any obligations
of such shareholder under the new standstill agreement accruing or
resulting from any breach by such shareholder prior to the date of such
transfer, dilution or termination.

REGISTRATION RIGHTS AGREEMENT

We have previously entered into registration rights agreements with Alfa,
Barings, Capital and Rostelecom. In connection with the transaction, the parties
have agreed to terminate the existing agreements and enter into one agreement
which will include Telenor as well. The terms of the new agreement are very
similar to the existing agreements.

Pursuant to the new registration rights agreement each of Alfa, Rostelecom
and Telenor will be entitled to request two demand registrations. Each of
Barings and Capital will be entitled to request one demand registration. Our
company shall not be obligated to register any securities pursuant to any demand
registration unless the demand is for at least 500,000 shares of common stock
(subject to adjustments).

The shareholders will have unlimited "piggyback rights" that allow them to
include their shares of common stock in other registration statements for common
stock that we may file, subject to a cutback if the inclusion of shareholder
shares would be harmful to the offering.

We will be responsible for most of the fees incurred in connection with any
registration under the agreement but we will not be responsible for the fees of
the shareholder's counsel or any selling commission or underwriter discounts.

The new agreement, as is the case in the old registration rights agreement,
provides for customary indemnification and contribution provisions.

GENERAL QUESTIONS

Q.: WHEN AND WHERE IS THE SPECIAL SHAREHOLDER MEETING?

A.: The special meeting of stockholders of our company will be held at the
offices of Chadbourne & Parke, Regis House, 45 King William Street, London
EC4R 9AN, United Kingdom on November 28, 2003 at 10 a.m. local time.

Q.: WHY AM I RECEIVING THIS PROXY STATEMENT AND PROXY CARD?

A.: You are receiving this proxy statement and proxy card from us because you
owned shares in our company on the record date. This proxy statement
describes issues on which we would like you, as a stockholder, to vote. It
also provides you information on these issues so that you can make an
informed decision. The proxy card is used for voting.

Q.: WHO CAN VOTE?

A.: Stockholders of record at close of business on October 22, 2003 are
entitled to vote at the special meeting. A list of the stockholders of
record entitled to vote at the special meeting will be available for
review by any stockholder, for any purpose relating to the meeting between
9:00 a.m. and 5:00 p.m. at our company's executive offices at the
Representative Offices of Golden TeleServices, Inc., 1 Kozhevnichesky
Proezd, 2nd Floor, Moscow, Russia 115114.

Q.: HOW MANY SHARES ARE ENTITLED TO VOTE?

A.: On October 22, 2003, the record date, our company had outstanding
approximately 28,790,972 shares of Common Stock, par value $0.01 per
share, with each share representing one vote.

Q.: WHAT IS QUORUM?

A.: In order to hold the meeting, there must be present in person or by proxy
card holders of a majority of voting power of the outstanding shares of
stock entitled to vote at the meeting, which is approximately 14,395,487
shares.

Q.: WHO PAYS THE COST OF SOLICITATION?

A.: Our company pays the cost of soliciting your proxy and reimburses
brokerage firms and others for forwarding this proxy statement and proxy
card to you. In addition, Mellon Investor Services has been retained by
our company to assist in soliciting proxies from brokerage firms, bank
nominees and other institutional holders to assure a timely vote by the
beneficial owners of stock held of record by such firms, banks and
institutions. This firm will receive a fee of approximately $6,500, plus
reasonable expenses, for its services. In addition to solicitation by
mail, proxies may be solicited in person, or by telephone, facsimile
transmission or other means of electronic communication, by directors,
officers and other employees of our company. If you plan to attend, please
advise our Corporate Secretary by e-mail at specialmeeting@gti.ru or by
written correspondence.

Q.: WHO CAN ATTEND THE SPECIAL MEETING?

A.: Only stockholders are invited to attend the meeting. To gain admittance to
the meeting, you must bring proof of your ownership. If you are a
stockholder of record and received this proxy statement and your proxy
card by mail, no admissions ticket is needed for you to attend the special
meeting. If a broker or other nominee holds your shares, and you plan to
attend the special meeting, you should bring a recent brokerage statement
showing your ownership of the shares. In all cases you must also bring a
form of personal identification.

VOTING PROCEDURES (FOR STOCKHOLDERS OF RECORD)

You are a stockholder of record if you have an account directly with our
transfer agent, Mellon Investor Services.

Q.: HOW DO I VOTE?

A.: You may vote by signing and mailing your proxy card. If you return your
signed proxy card to our company before the special meeting, our company
will vote your shares as you direct. You can specify whether you approve,
disapprove, or abstain from the proposal. The proposal will be presented
at the special meeting by our management.

Q.: WHAT DOES DISCRETIONARY AUTHORITY MEAN FOR STOCKHOLDERS OF RECORD?

A.: If you return your proxy card to our company, but do not specify on your
proxy card how you want to vote your shares, we will vote them "FOR" the
proposal on your proxy card.

Q.: HOW DO I CHANGE MY VOTE?

A.: Stockholders of record who execute proxies may revoke them at any time
before they are voted. Any proxy card may be revoked by the person giving
it any time before it is voted by delivering to our company's Corporate
Secretary at the Representative Offices of Golden TeleServices, Inc., 1
Kozhevnichesky Proezd, 2nd Floor, Moscow, Russia 115114 or Golden Telecom,
Inc., 4400 MacArthur Blvd., N.W., Suite 200, Washington, D.C., 20007 on or
before the business day prior to the special meeting or at the special
meeting itself, a subsequent written notice of revocation or a subsequent
proxy card relating to the same shares or by attending the meeting and
voting in person.

VOTING PROCEDURES (FOR BENEFICIAL STOCKHOLDERS)

You are a beneficial stockholder if a brokerage firm, bank, trustee or
other agent (the "nominee") holds your stock. This form of ownership is often
called ownership in "street name" since your name does not appear anywhere on
our records.

Q.: HOW DO I VOTE?

A.: You must vote in the manner described by the nominee in the materials
delivered by the nominee with this proxy statement. Detailed instructions
are also included in this proxy statement.

Q.: HOW DO I CHANGE MY VOTE?

A.: To change your vote, follow the nominee's instructions on revoking or
changing your proxy card.

GENERAL VOTING QUESTIONS

Q.: HOW MANY VOTES ARE NEEDED FOR THE PROPOSAL TO PASS?

A.: The vote of the holders of at least a majority of the shares of Common
Stock present in person or represented by proxy at the meeting and
entitled to vote is required to approve the proposal.

Q.: WHAT SHARES ARE REFLECTED ON MY PROXY CARD?

A.: The proxy card we delivered to you reflects all shares owned by you at the
close of business on the record day as a stockholder of record. If you
hold shares "in street name" you will receive a voting instruction card
from your nominee for those shares.

Q.: IF I PLAN TO ATTEND THE MEETING SHOULD I STILL VOTE BY PROXY CARD?

A.: Yes. Casting your vote in advance does not affect your right to attend the
meeting. Written ballots will be available at the special meeting for
stockholders of record. If you send in your proxy card and also attend the
meeting, you do not need to vote again at the meeting unless you want to
change your vote. Beneficial owners who wish to attend the meeting and
vote in person must request a proxy from the nominee and bring that proxy
to the meeting.

INCORPORATION OF INFORMATION BY REFERENCE

The following information contained in documents filed by Golden Telecom,
Inc. with the United States Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934 are hereby incorporated by reference in this
proxy statement:

(1) Item 7, Managements' Discussion and Analysis of Financial
Condition and Results of Operations and Item 8, Consolidated Financial
Statements and Supplementary Information for the Company from our Annual
Report on Form 10-K for the fiscal year ended December 31, 2002 (File No.
0-27423); and

(2) Item 1, Condensed Consolidated Financial Statements of Golden
Telecom, Inc. (unaudited) and Item 2, Management's Discussion and Analysis
of Financial Condition and Results of Operations from our Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2003 (File No.
0-27423).

PROXY

COMMON STOCK
GOLDEN TELECOM, INC.
Representative Offices of Golden TeleServices, Inc.
1 Kozhevnichesky Proezd, 2nd Floor, Moscow, 115114, Russia

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby nominates and appoints Jeff Riddell as proxy
with full power of substitution to him, and hereby authorizes him to represent
and to vote, as designated hereon, all shares of Common Stock of GOLDEN TELECOM,
INC. (the "Company") which the undersigned is entitled to vote on all matters
that come before the Special Meeting of Stockholders to be held on November 28,
2003, and any adjournments thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE APPROVAL TO ISSUE SHARES. IN CONNECTION WITH THE ACQUISITION OF
OAO COMINCOM.

The Board of directors recommends a vote for the following proposals:

For Against Abstain

Approve the issuance by Golden Telecom, Inc. of 20% or more [ ] [ ] [ ]
of its common stock in connection with the acquisition of OAO
Comincom, an open joint stock company existing under the laws
of the Russian Federation.

Signatures __________________ Signature if held jointly __________________ Dated: _______________, 2003

Note: Please sign above exactly as the shares are issued. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the President or other
authorized officer. If a partnership, please sign in partnership name by an
authorized person.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF SHARE
ISSUANCE IN CONNECTION WITH THE ACQUISITION OF OAO COMINCOM.