ALFA

GR

OU

PA

nnual

Report

2003

ALFA

GR

OU

PA

nnual

Report

2003A

LFA

GROUP

Annual

Report

2003

ALFA

GROUP

Annual

Report

2003

ALFA GROUPAnnual Report2003

ALFA GROUPAnnual Report2003

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Statement by the Chairman of the Supervisory Board of Directors of Alfa Group

Supervisory Board of Directors

Alfa Group’s Corporate Centre

Alfa Group’s Investment Philosophy

Alfa Group Financial Highlights

Financial Review and Strategic Development of the Group

Alfa Group’s Principal Holdings

● Financial Services – Alfa Bank; AlfaStrakhovanie Insurance Group

● Oil & Gas Production – TNK-BP

● Commodities Trading – Alfa-Eco Group

● Retail Trade – Trade House Perekriostok

● Telecommunications – Alfa Telecom

(includes: Golden Telecom, Inc; VimpelCom; Kyivstar, MegaFon)

● Technology – Russian Technologies

Serving Our Communities

Contact Information

Consolidated Financial Statements and Report of the Auditors

5

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

■ 3RD ALL RUSSIAN COMPETITION “RUSSIANORGANIZATION WITH HIGH SOCIAL EFFICIENCY”OAO “Volga” (managed by Alfa-Eco): “Best Company in

Paper and Pulp Industry” (2002)

■ 3RD ANNUAL NATIONAL AWARD IN MEDIA-BUSINESS “MEDIA-MANAGER OF RUSSIA – 2003”Alexander Gafin, Director for Public Relations:

1st Place, “PR–Industry” (2003)

■ 10TH INTERNATIONAL EXHIBITION “PRODEXPO-2003”Trade House of P.A. Smirnov’s Descendants (managed by

Alfa-Eco): Gold Medal for Smirnov Vodka No. 21; Silver Medal

for Liqueur “Mozzevelovaya” and “Klyukvennaya”; Bronze

Medal for Liqueur “Limonnichek” and “Perzovaya”(2003)

■ ALL RUSSIAN COMPETITION “GOLDEN WEB-SITE”Golden Telecom: 1st Place, “Corporate Web-Site” (2002)

■ ASSOCIATION OF MANAGERS AND KOMMERSANT PUBLISHING HOUSE “Business Leaders in Russia” (No.6) Mikhail Fridman,

Chairman of the Supervisory Board of Directors of Alfa Group

- Inter-industrial Groups; (No.8) Peter Aven, President of Alfa

Bank - Financial Sector; (No.17) German Khan, Executive

Director of TNK-BP – Oil Sector (2003)

“200 Most Professional Financial Officers, Top 20” (No.3)

Josef Bakaleinik, Chief Financial Officer at TNK-BP; (No.8)

Teijo Panko, Chief Financial Officer at Alfa Bank (2003)

“200 Most Professional IT Directors, Top 20” (No.8) Andrey

Kuznetsov, Director of Information Technology at VimpelCom

(2003)

“200 Most Professional HR Directors, Top 20” (No.10) Marina

Malykhina, HR Director at Alfa Bank (2003)

“Industrial & Regional Leaders” (No.4) Alexander

Kosiyanenko, Chief Executive Officer at Perekriostok –

Trading Sector; (No.1) Peter Aven, President of Alfa Bank –

Financial Sector; (No.10) Rushan Khvesyuk, Chairman of the

Executive Board of Alfa Bank – Financial Sector (2003)

■ THE BANKER MAGAZINEAlfa Bank: “Bank of the Year – Russia” (2000); “1000 Best

Banks in the World” (2002)

■ BUSINESS WEEK MAGAZINEMikhail Fridman, Chairman of the Supervisory Board of

Directors of Alfa Group: “The Stars of Europe – 25

Leaders” (2003)

VimpelCom: 1st Place, “Best Telecommunication Company

in the World and Best IT Company in Russia” (2002)

■ CANNES LIONSAlfaStrakhovanie: 1st Place, “Best Creative Idea for a

Television Commercial” (2001)

■ CLUB OF CHIEF EDITORS OF REGIONAL NEWSPAPERSAlexander Gafin, Director for Public Relations: Medal “Fourth

Authority. For Contribution to the Press” (2003)

■ COMPANION MAGAZINEIgor Litovchenko, President of Kyivstar Company: “Best

Manager - Тelecommunications” (2003)

■ CREATIVE & CREATIVITY MAGAZINEAlfa Bank Express: 1st place, “Creative Company” (2003)

■ EFFIE AWARDS/BRAND OF THE YEARVimpelCom, BeeLine GSM: “Highly Technological Services”

(2000, 2002, 2003)

TNK: “TNK Petrol Stations” (2002)

Alfa Bank Express: “Banks” (2003)

Perekriostok: “Trading Chains and Centers” (2002, 2003)

■ EMERGING MARKETS INVESTOR MAGAZINEAlfa Bank: “Best Domestic Bank in Russia” (2001)

■ EMERGING MARKETS NEWSPAPERAlfa Bank: “Best Trade Finance Bank in Russia and the CIS”,

“Best Correspondent Bank in Russia and the CIS” (2004)

■ EUROMONEY MAGAZINE Alfa Bank: “Highly Recommended Bank – Russia” (2000),

Best Bank in Russia” (2002)

TNK-BP: “Best Borrower of the Year” (2003)

■ EUROMONEY’S CENTRAL EUROPEAN MAGAZINEAlfa Bank: “Best Bank in Russia” (1997, 1998, 1999, 2000,

2002)

■ EUROPEAN MARKET RESEARCH CENTRE(EMRC)Igor Litovchenko, President of Kyivstar: Award “For out-

standing marketing achievements of Kyivstar and for inno-

vative policy” (2003)

■ EXPERT MAGAZINE(Awards for Best Annual Reports)Alfa Group: “Internet Presentation” (2001 - Nominee; 2002

- Winner), “Richness of Information” (2002 - Nominee),

“Classic Genre” (2002 – Nominee), “Design and Printing”

(2003 - Winner)

Alfa Bank: “Classic Genre” (2000 - Winner), “Internet

Presentation” (2000 - Winner; 2002, 2003 - Nominee),

Richness of Information” (2000, 2001 - Winner;

2002, 2003 - Nominee), “Design and Printing”

(2001 - Nominee)

Alfa-Eco: “Design and Printing” (2002, 2003 - Nominee)

■ EXPERT MAGAZINEAlfa Bank: “Best Reputation Among Commercial Banks”

(2002, 2003)

■ FINANCIAL TIMES Mikhail Fridman, Chairman of the Supervisory Board of

Directors of Alfa Group: “Leaders of the New Europe” (2004)

■ FINANCIAL TIMES – ENERGYTNK: “World’s Best Oil and Gas Company” (2000)

■ FORTUNE MAGAZINEMikhail Fridman, Chairman of the Supervisory Board of

Directors of Alfa Group: “Most Powerful People in

Business - Europe’s Power 25” (2004)

■ GENEVA INSTITUTE OF BUSINESS AND MANAGEMENT ET ALOAO “Volga” (Managed by Alfa-Eco): “Gold Medal for

Irreproachable Business Reputation” (2002)

■ GLOBAL FINANCE MAGAZINEAlfa Bank: “Best Russian Domestic Bank” (1999, 2000,

2001, 2002, 2003)

Alfa Bank: “Best Russian Trade Finance Bank” (2001,

2002, 2003, 2004)

Alfa Bank: “Best M&A Advisor” (2003, 2004)

Alfa Bank: “Best Foreign Exchange Provider

in Russia” (2004)

Alfa Bank: “Best Retail Bank in Russia” (2004)

■ INSTITUTE OF CORPORATE GOVERNANCEVimpelCom: Highest Overall Corporate Governance Rating

for a Russian Company (2000, 2001, 2002)

■ INSTITUTE OF ECONOMIC STRATEGY ANDECONOMIC STRATEGY MAGAZINEMikhail Fridman, Chairman of the Supervisory Board of

Directors of Alfa Group: 1st Place, “Most Strategic

Managers” (2004)

Alfa Bank: 1st Place, “Leading Russian Companies” (2002)

AlfaStrakhovanie: 3rd Place, “Leading Russian Insurance

Companies” (2002)

Alfa Group Consortium: 1st Place, “100 Leading

Companies with the Highest Rating Status AAA and

Maximum Strategic Level 88.0” (2004)

■ INTERNATIONAL ASSOCIATION OF BUSINESS COMMUNICATIONSPerekriostok: 1st Place, “Golden Net – Foodstuffs”

(2002, 2003)

TNK: 1st Place, “Golden Net – Petrol Stations” (2002)

TNK-BP: 1st Place, “Golden Net – Petrol Stations” (2004)

■ INTERNATIONAL BEVERAGE INDUSTRYFORUMAlfa-Eco: Gold Medal for 1700 Cognac; Bronze Medals for

Smirnov Vodka and Armina 5 Star Brandy (2001)

■ INTERNATIONAL EXHIBITION (ECOPRODEXPO)Perekriostok: Grand Prix – “Supermarket of the 21st

Century” (2003)

■ INVEST-GAZETAKyivstar: “ Most Dynamic Ukrainian Company” (2003)

■ IR MAGAZINE AWARDSVimpelCom: “Best Corporate Governance Award”;

“Best Investment Community Meetings and Roadshows”;

“Grand Prix for Best Overall Investor Relations – Large

Cap” (2003)

■ JP MORGAN CHASE BANKAlfa Bank: “Best Bank in Terms of the Quality of US Dollar

Clearing” - Quality Recognition Award (2003)

■ KOMPANIYA MAGAZINETNK: “Best Fuel and Energy Company” (2000)

TNK-BP: “Deal of the Year” (2003)

VimpelCom: “Best Telecommunications Company” (2001)

Alex Knaster, CEO of Alfa Bank: “Best Manager – Finance

Sector” (2000)

■ MOSCOW INTERNATIONAL ADVERTISINGFESTIVALAlfa Bank: 1st Place, “TV-Advertising” (2002)

■ MOSCOW INTERNATIONAL CURRENCY ASSOCIATIONAlfa Bank: Best Currency Dealing – Russia (2002)

■ NATIONAL ASSOCIATION OF STOCK MARKETS PARTICIPANTS (NAUFOR) STOCK MARKET ELITE AWARDSAlfa Bank: “Best Credit Institution” (2001, 2002);

“Best Trading Institution” (2002); “Best Institution

in Bond Market” (2002)

■ NATIONAL TRADE ASSOCIATION Perekriostok: “Best Trading Chain” (2001); “Best Chain in

Central Region” (2002)

■ OIL & GAS INVESTOR MAGAZINETNK: “Prize for Great Achievements in Corporate

Governance” (2002)

■ OPERATIONAL RISK MAGAZINEAlfa Bank: Operational Risk Achievement Award for

“Operational Risk Framework at a Financial Institution in an

Emerging Market” (2004)

■ ORGANIZING COMMITTEE OF THE INTERNATIONAL FORUM “WORLD EXPERIENCEAND THE ECONOMY OF RUSSIA” Alexander Vinogradov, President and CEO of Golden

Telecom: Medal “Leader of the Russian Economy” (2003)

■ PROFIL MAGAZINEAlfaStrakhovanie: “Most Professional Advertiser -

Insurance” (2003)

■ ROSBUSINESSCONSULTING ET ALVimpelCom: “Best Service Company” (1999)

Perekriostok: National Award “Company of the Year -

Consumers’ Services for Population”, “For Corporate

Governance” (2003)

Lev Khasis, Chairman of the Board of Directors of

Perekriostok: National Award “Person of the Year -

Manager of Retail Business” (2002), “Person of the Year –

Entrepreneur” (2003)

■ RUSSIADEAL LEAGUEAlfa Bank: “Leading Financial Consultant of Investment

Banking Services on Russian Market” (2003)

■ RUSSIAN MOBILE MAGAZINEVimpelCom: “Best Cellular Operator. Choice of the Editors”

(2003)

■ STATE COMMISSION OF THE RUSSIAN FEDERATION FOR TELECOMMUNICATIONS AND INFORMATION TECHNOLOGIESAlexander Vinogradov, President and CEO of Golden

Telecom: Title “Master of Communications” (2003)

■ ST. PETERSBURG FAIR OF WINE & VODKATrade House of P.A. Smirnov’s Descendants (managed by

Alfa-Eco): Gold Medal for Smirnov Vodka No.21, Liqueur

“Sukharnichek” and “Brusnichnaya”

Alfa-Eco: Gold Medal for Gyumri Cognac; Grand Gold

Medal for Cognac “1700 years of Christianity in Armenia”

(2002)

■ UNION OF ENTREPRENEURSAlexander Fain, General Director of Alfa-Eco Group:

“Best Entrepreneur of the Decade – Trading Activities” (2001)

■ WEBSITE OUTLOOK.RUPerekriostok: 1st place, “Outlook Advertising”

(May, June 2004)

7

marked the fifth straight year of expansion in the Russianeconomy with GDP growing on average by more than 5.8%per annum from beginning of 1999 through end of 2003 –the world’s second fastest rate after China’s 7.6%. Not

surprisingly, 2003 also marked the fifth straight year the RTS Indexoutperformed the MSCI Global Emerging Market Index.

Although the Russian economy benefitedgreatly from a uniformly robust commodityprice backdrop (i.e. not only high oil and gasprices, but rising precious and industrialmetals prices), economic expansion in 2003was increasingly driven by domestic invest-ment demand, growth in real wages and per-sonal consumption. Also noteworthy wasthe fact that Russia’s growth was not limit-ed to only the oil and gas sector, but it wasspread rather evenly across almost all sec-tors of the economy. During 2003 and into2004, we continued to capitalise onfavourable macro-economic conditions.

Thanks to oil-inspired earnings, and therealization of profit on part of our Russianand Ukrainian oil and gas assets via mergerwith BP plc’s Russian oil and gas interests,the year 2003 marked our most profitableyear ever in our 15-year history – we earnednet profits of US $1.99 billion. 2003 also marked the Group’s fifthconsecutive year of strong profitability, with cumulative net profits ofUS $5.10 billion for the five-year period ended in 2003. At 31December 2003, Group shareholders’ equity reached US $4.65 billion– its highest-ever level. Alfa Group Consortium ended the year 2003stronger and with an unprecedented financial flexibility – a cash posi-

tion of US $1.46 billion - which will allow us to aggressively pursueinteresting investment opportunities in Russia and the CIS as well as inother emerging markets.

2003 and 2004 also saw the further strengthening and diversificationof our Group through continued investment into our existing busi-

nesses including wireless telecommunicationsand food retail.

In the latter half of 2003 we acquired a 25.1%stake in MegaFon, the third-largest wirelesstelecoms service company in Russia for US$295 million. We also funded the final trancheof our investment in VimpelCom of US $58.5million which is being used for the continuedexpansion of VimpelCom’s Russian regionalcellular network. Also, Golden Telecom itselfduring 2003 and 2004 made a number of pru-dent strategic regional acquisitions aimed atbuilding economies of scale and market share.At the end of 2003 our investment in telecomassets was valued in excess of US $2 billion,making us one of the largest private investorsin the telecom sector in Russia and CIS.

Also significantly, in early 2004, we consolidatedall of our telecom assets (VimpelCom, GoldenTelecom, Kyivstar and MegaFon), which were

previously held in different parts of our Group, under a newly establishedholding company - Alfa Telecom which will be used as the Group’s exclu-sive vehicle for making investment into telecom assets. We plan toaggressively develop and strengthen our telecom business through fur-ther acquisitions in Russia, the CIS and other developing markets and byimproving the liquidity of existing telecom assets.

Statement by the Chairman of the Supervisory Board of Directors of Alfa Group

2003

8

In early 2003, we funded the last US $10 million of our US $30 millioncapital injection into Trade House Perekriostok, our supermarketchain. During 2003 and 2004 Perekriostok continued to rapidlyexpand into a number of promising Russian regions. This expansionwas achieved organically, through the opening of new Perekriostokshops, as well as through the acquisition of 70.1% of SPAR MiddleVolga which owns seven supermarkets in Nizhniy Novgorod and thesurrounding region.

2003 was also a decisive year for our Group in terms of co-operatingwith foreign investors. The most noteworthy of this co-operation wasthe merger of TNK and our other oil assets (which we jointly ownedwith Access-Renova) with BP’s Russian oil assets under a single hold-ing company – TNK-BP, forming Russia’s third largest (by productionand reserves) oil company. Under the terms of the deal, TNK-BP isowned 50% by BP, 25% by Alfa Group and 25% by Access-Renova.This deal is the largest single foreign direct investment in Russian his-tory. In addition, together with our minority shareholder, we solda 7.7% stake (new shares) in Perekriostok to Templeton StrategicEmerging Markets Fund LDC.

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

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

the Russian economy over the next several years. We are also increas-ingly interested in prudent investment into existing and potentially newlines of business in attractive emerging markets outside of Russia,where we have not historically focused our investment activities.

On behalf of the Supervisory Board of Directors, I wish to expressappreciation to all of our clients and partners for their business andfor their unwavering trust and support over the years. I would alsolike to thank our management and our employees for their remarkablecontributions during the year – contributions that have been key tosustained growth and profitability of the Group.

Mikhail Fridman

8 October 2004

9

Mr. Kuzmichov isresponsible for thestrategic co-ordina-

tion and development of commoditytrading activities within the Alfa Groupthrough the Group’s trading arm —Alfa-Eco. Mr. Kuzmichov is also servesas Chairman of the Board of Directorsof Russian Technologies and is a mem-ber of the Board of Directors of AlfaFinance Holdings SA. Mr. Kuzmichov isa graduate of the Moscow Institute ofSteel and Alloys. Не was born in Kirov,Russia in 1962.

Mr. Khan is theExecutive Directorand a member of the

Management Board of TNK-BP Mana-gement. Mr. Khan is also a member ofthe Board of Directors of Slavneft andAlfa Finance Holdings SA. From 1992to 1998, he held various managerialposts in Alfa Group. From 1995 to 1998he held the post of Director of thedepartment of commodity trading atAlfa-Eco. Mr. Khan is a graduate of theMoscow Institute of Steel and Alloys.He was born in Kiev, Ukraine in 1961.

Alexei KUZMICHOVChairman of the Board of Directors of Alfa-Eco Group

German KHANExecutive Director of TNK-BP

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

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

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

Mr. Fridman is a prin-cipal founder of AlfaGroup Consortium.

He graduated from the MoscowInstitute of Steel and Alloys. Two yearslater together with other investors, hefounded Alfa-Eco, a trading companyon which he built Alfa GroupConsortium. Mr. Fridman also serves asChairman of the Board of TNK-BP andis a member of the Board of Directors ofVimpelCom. Mr. Fridman was born inLvov, Ukraine in 1964.

Mikhail FRIDMANChairman of theSupervisory Board ofAlfa Group Consortium

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Mr. Kosiyanenko isthe founder of TradeHouse Perekriostok

and serves as Chief Executive Officer.He is responsible for the overall strate-gy and development of the Company.Prior to establishing Perekriostok, Mr.Kosiyanenko served as Chairman of theBoard of Directors of the commercialbank Moskva-Centre. Mr. Kosiyanenkograduated from the Moscow Institute ofSteel and Alloys. He was born inVolgograd, Russia in 1964.

Mr. Robinson isresponsible for coordi-nating financial control

and reporting of all Alfa Group companiesand for corporate governance for theGroup as a whole and control over theultimate holding company of the Group.Mr. Robinson is a British qualifiedChartered Accountant and a member ofthe Institute of Chartered Accountants inEngland and Wales. He graduated fromthe Accounting Faculty of Norwich CityInstitute in the UK. Prior to joining AlfaGroup, Mr. Robinson was a senior man-ager in the audit and business advisorygroup at PricewaterhouseCoopers. Hewas born in Corringham, England in 1967.

Nigel ROBINSONDirector of CorporateDevelopment, Financeand Control – Alfa Group

Alexander KOSIYANENKOChief ExecutiveOfficer of TradeHouse Perekriostok

Since October 2003,Mr. Savin serves asCEO of Alfa-Eco

Group where he is responsible for overallstrategic business development. From1992 to 2001, Mr. Savin worked at Bain &Company in Moscow, Boston andLondon. From September 2001 Mr.Savin worked as a Director in the invest-ment banking department of Renais-sance Capital. He is also a former mem-ber of the Board of Directors Mosenergoand Kuzbassenergo. Mr. Savin is a grad-uate of Moscow State University andreceived his MBA at Harvard BusinessSchool in 1996. Mr. Savin was born inMoscow, Russia in 1969.

AlexanderSAVINChief Executive Officer

of Alfa-Eco Group

Mr. Reznikovich isresponsible for mana-gement-audit as well

as the application and control over fulfill-ment of strategic recommendations forall companies in the Group. Mr.Reznikovich graduated from theMoscow State University, EconomicsFaculty and received his MBA from bothGeorgetown University (USA) andINSEAD (France) in 1993. From 1993 to2000 Mr. Reznikovich worked inMcKinsey & Co. In 2000 he and his part-ners established a new company, EMAX,which develops Internet centers inRussia. He was born in Moscow, Russiain 1968.

Alexei REZNIKOVICHDirector of GroupPortfolio Managementand Control – Alfa Group

Mr. Aven is responsi-ble for the Bank’soverall strategy and

for relations with business and govern-ment leaders. Prior to joining the Bank,Mr. Aven was Minister of ForeignEconomic Relations for the RussianFederation (1991-1992). He alsoworked at the International Institute forApplied Systems Analysis in Austria.Currently, he is Chairman of the Boardof Directors of Golden Telecom andCo-Chairman of the Board of Directorsof STS Media. He holds a PhD inEconometrics from Moscow StateUniversity. Mr. Aven was born inMoscow, Russia in 1955.

Peter AVENPresident of Alfa Bank

Mr. Fain is the authorof more than 70 scien-tific articles, manuals,

books, monographs, and patents. Mr.Fain graduated from the MoscowInstitute of Chemical Engineering withhonours. He also holds the title ofactive member of International Aca-demy of Sustainable Development andholds a candidate’s degree and is aprofessor in the field of applied mathe-matics. Mr. Fain was included in Profilemagazine’s annual list of the 50 mostinfluential businessmen in Russia. Hewas born in Moscow, Russia in 1936.

Alexander FAINGeneral Director of Alfa-Eco Group

As the principalfounder and GeneralDirector of Russian

Technologies, Mr. Gamzin is responsiblefor its overall strategy and development.Prior to forming Russian Technologies,Mr. Gamzin served as Chairman of theBoard of Directors of Intec Group, asugar and grain business which in 2001merged with Alfa Group’s sugar businessto create United Food Company. UFCwas sold to a Russian strategic investor atthe end of 2002. Mr. Gamzin graduatedfrom Moscow Commercial Institute,Foodstuff Commodity Research andSales Faculty in 1989. Mr. Gamzin wasborn in Krasnodar, Russia in 1964.

Mikhail GAMZINGeneral Director ofRussian Technologies

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Financial Control and Audit

Includes the development of a Group-wideaccounting and reporting policy; Review ofquarterly company IFRS accounts;Preparation of Group consolidated IFRSaccounts; Coordination of the externalaudit; Attracting strong personnel for keyfinance and accounting positions; Creationof and oversight over Internal AuditDepartments in our companies; Groupcompliance role (SEC).

Includes working to increase effectiveness ofthe Boards of Directors, including the recruit-ment of independent directors and establish-ing fully functioning Board committees (e.g.Audit, Strategy, and RemunerationCommittees); updating and enforcement ofthe Group corporate statute which governsdecision-making in the Group; Improvingtransparency of the Group through theGroup’s website and publication of the Groupannual report.

Corporate Governance

Responsibilities include the developmentand implementation of Group-wide stan-dards for evaluating and approving invest-ment decisions; Issuance of policy manualsto our companies regulating the approach,methodology and format to investment deci-sion-making; Enforcement of investmentdecision-making regulations; Monitoring andcontrol over individual investment projects;Organization of the work of our companies’Investment Committees including assistancein preparing major investment decisionstaken by the Investment Committees andBoards of our companies.

Investment Planning

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

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

ALFA GROUP’S CORPORATE CENTRE

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

12

ALFA GROUP’S CORPORATE CENTRE

Responsibilities extend to development ofan efficient and transparent Group-wideownership structure; Developing formal,transparent decision-making procedures;Efficient structuring of transactions andrestructurings; Representation of share-holders’ interests in respect of variousmatters.

Legal and Shareholder Matters

Responsibilities include developing andimplementing Group-wide standards andrecommendations to facilitate meaningfuland timely strategic planning in our compa-nies; Critical analysis of strategic plans(pre-implementation), operating plans andbudgets through direct work with our com-panies and active work on the Board andBoard committees of our companies;Continual monitoring of strategy implemen-tation; Support to our companies in devel-opment and implementation of an effectivesystem of key performance indicators(KPIs) and assistance in developing KPI-based compensation strategies.

Strategic Planning

Includes assessment and support in devel-oping sustainable IT strategies in our com-panies; Critical review of IT budgeting andkey IT projects in our companies; Organisa-tion of the work of Alfa Group’s IT ExpertCouncil (comprising our companies CIOs)transferring best practices and sharingexpert knowledge.

IT Development

Includes the provision of assistance to ourcompanies in hiring key management,finance and other senior personnel;Conducting organizational audits of ourcompanies; Establishing appropriatesystems of motivation and compensation.

Organizational Structureand Human Resources

Includes significant involvement in facili-tating Group acquisitions and divestituresas well as Group restructurings and otherad-hoc projects.

Special Projects

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

ALFA GROUP’S INVESTMENT PHILOSOPHYALFA GROUP’S INVESTMENT PHILOSOPHY

We typically make investments on the basis that we will have either majority or joint control,through share ownership, board representation, or both. Non-controlled investments aregenerally not attractive to us because the lack of control makes it difficult to guide thedevelopment of these companies and maximise shareholder value. Joint control is accep-table in cases where the joint venture partner is reliable and brings experience or skills thatcomplement our own, or shares funding obligations and risks, which due to their size ornature, we wish to share.

Much of our past success has been the result of our intimateknowledge and understanding of emerging markets, in particular,the Russian and CIS markets. We believe there are still substantialopportunities in the world’s emerging markets and that we are wellplaced to take full advantage of them.

15

We are interested ininvestments overwhich we can exercisecontrol.

WE RELY ON OUR INVESTMENT PHILOSOPHY TO GENERATE SUPERIOR RETURNS FOR OUR SHAREHOLDERSOVER THE LONG TERM, TO PROMOTE SOUND CORPORATE GOVERNANCE AND BUSINESS PRACTICIES, ANDTO BENEFIT OUR PARTNERS, COUNTERPARTIES, EMPLOYEES, THE RUSSIAN CONSUMER AND SOCIETY ATLARGE. WE CONTINUE TO BELIEVE THAT MUCH OF OUR FUTURE SUCCESS WILL BE ROOTED FIRMLY IN THISINVESTMENT PHILOSOPHY.

We believe the mostattractive opportunitiesare in world emergingmarkets.

We are opportunistic investors.

We require those in which we invest to be one of the top three in their business fieldor with a clear potential to become one of the top three within a reasonable period.Where we see that our investments are not meeting this criterion, we take activemeasures to divest and free up our financial and management resources for moreeffective investments.

First and foremost we are investors, not business managers — we leavethe day-to-day management and operating decisions of our companiesto professional, competent management with industry experience. Ourcompanies are independent entities and are given fairly wide latitude toconduct their affairs. However, we actively advise and take decisions onimportant strategic matters that have an impact on the shareholdervalue of our companies. We also continually evaluate management andmeasure the financial performance of our investments.

16

The lack of liquidity of emerging market assets makes any exit strategy tenuous. In Russia and the CIS in particular, the lack of liquidity is pervasive, which places itoutside our direct control. We use this time to develop our assets and guide ourcompanies to close the value gap. While we do not particularly welcome theinflexibility of being wed to an investment for the longer term, we lower our risks byseeking undervalued investments that provide ample down side protection and, asfar as possible, interim cash flows.

The need to attract foreign investment is becoming increasingly critical. Foreign investorsprovide not only capital investment, but also the expertise, credibility and advancementof reputation which is needed to successfully develop and realize the full value of ourinvestments. We are fully aware that the failure to attract longer-term foreign investmentwill result in under-developed assets and missed business opportunities. Also, withregard to exit strategy, sale to foreign investors provide us with a logical and attractivemeans of exiting our investments.

We view co-operation withforeign investors and theattraction of foreign capitalas important to the develop-ment of our companies.

We do not considerourselves experts inmanaging and operatingthe companies that we own.

We typically take a longer-term view, in order torealise the full potential ofour investments.

We are guided by thephilosophy of investing inonly those companies thatare leaders in theirrespective fields of business.

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

ALFA GROUP FINANCIAL HIGHLIGHTSALFA GROUP FINANCIAL HIGHLIGHTS

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

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

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

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

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

Gain from Disposal of Interest in Joint Ventures,

Associated Companies and Subsidiaries 2,091,972 32,767 – – –

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

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

19

('000 USD)

By all measures, 2003 was an outstanding year for the Alfa GroupConsortium. We ended the year larger, stronger and with a cash posi-tion that permits us to be even more opportunistic in pursuing attrac-tive investment prospects. Net profit more than tripled from US $626million in 2002 to US $1.99 billion in 2003. At 31 December 2003,shareholders’ equity stood at US $4.65 billion, its highest-ever level.Return on shareholders’ equity for 2003 was 56% while return onassets was 21%.

We continued to strengthen our balance sheet with a year-on-yearreduction in relative debt levels. The ratio of long-term debt to share-holders’ equity fell to 0.05 at the end of 2003 from 0.14 at the end of2002, and the ratio of long-term debt to assets fell to 0.02 at the end of2003 from 0.05 at the end of 2002. The Group also improved its liquid-ity position, mainly as a result of closing our deal with BP during late2003. The Group’s cash position increased from US $406 million at theend of 2002 to US $1.46 billion at the end of 2003.

In 2003, the Group operated across five different business segments –Financial Services, Oil & Gas, Commodities Trading in Russia, CIS and

Southeast Asia, Retail Trade and Telecoms. All segments contributedpositively to the Group’s net profit of US $1.99 billion in 2003 (seetable on page 21).

By far and away, oil and gas assets comprised the largest part of theGroup’s net profit – US $1.89 billion, or 94.6%. Approximately 61%of this net contribution was realized as a gain from merging our oiland gas interests in Russia and Ukraine with BP’s oil and gasinterests in Russia while the remaining 39% was from theproportional share of net profits in our investment in TNK-BP. In

realizing part of our investment via this merger, we reduced our overallexposure to oil and gas assets, however, we still carry a relatively large

exposure. As we have stated many times before in these pages, this isan exposure which we continue to feel comfortable with because of our

perception of the continued favourable risk-to-reward ratio of Russian oil andgas assets, in particular since we have partnered with BP, and because of the

growing strategic importance of other business segments of the Group.

After the oil and gas segment, our telecommunications segment (comprising VimpelCom, Golden Telecom, Kyivstarand MegaFon) contributed the next largest amount to Group net profit. All of the companies that we invest into inthis segment are achieving increasingly strong financial results as they begin to realize economies of scale fromseveral years of heavy investment and from recent acquisitions on the markets in which they operate. In absoluteterms, the telecoms segment contributed nearly three times more net profit in 2003 than in 2002. Financial services(comprising both Alfa Bank Group and AlfaStrakhovanie Insurance Group) contributed the next largest amount toGroup net profit. Retail Trade (Trade House Perekriostok) contributed a relatively modest amount to Group net profitin 2003 as it continued to fulfil its ambitious expansion plans into Russia’s regions. Commodities Trading in Russia,CIS and Southeast Asia (Alfa-Eco Group) posted a small net profit in 2003 after posting a previous year loss. In early2004, Alfa-Eco significantly restructured its business to focus exclusively on the kind of proprietary and for-clientspecial-situation investment projects which it has been successfully involved for the past several years. As part ofthis restructuring Alfa-Eco ceased its trading business as it has been either loss-making or only marginally profitablefor the past few years.

Russian Technologies, discussed later, did not impact on net profit of the Group as it was established during 2003and made its first investment in 2004.

Financial Review and Strategic Development of the GroupFinancial Review and Strategic Development of the Group

Analysis of theGroup’s Financial

Results for 2003 byIndustry Segment

Overall Analysis of the Group’sFinancial Results for 2003

20

* As measured by change in Group shareholders’ equity (based on historic USD as at31 December 1999). Note that there were no capital contributions into the Group duringthis 4-year period.

Growth of US $1 Invested into RTS Index versus Alfa Group(1 January 2000 – 31 December 2003)

Alf

a G

roup

RT

S

0 500%

(224%)

(3743%)

1000% 1500%

$3.24

$38.43*

2000% 2500% 3000% 3500% 4000%

21

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

2003 2002

Oil & Gas Production 94.6% 91.1%Telecommunications 3.3% 3.7%Financial Services 1.8% 12.2%Retail Trade 0.2% 1.0%Commodities Trading in Russia,

CIS and Southeast Asia 0.1% (4.7)%Food Processing n/a 5.6%International Commodities Trading n/a (8.9)%

Total 100.0% 100.0%

Source: Derived from the annual audited IFRS financial statements

Since realizing part of our investment after merging our oil assetswith BP’s Russian oil assets, we have reduced our exposure to oiland gas assets in absolute terms. Looking beyond 2003, the oiland gas segment will also probably contribute less to Group netprofits in relative terms as the scale of our investment into otherbusiness segments - especially telecoms and food retail -continues to grow. Furthermore, we expect that a larger proportionof our earnings in the years to come will derive from outside ofRussia as we are now seeing some interesting investmentpossibilities in other promising emerging markets.

For the past several years, as investors we have taken the view that substantial re-investment of the Group’snet profits, both into our existing businesses and investment into new businesses is the highest and best useof our capital. In the five-year period ended 31 December 2003 we re-invested US $4.98 billion of our US$5.10 billion in net profits – a 97.6% re-investment rate. During the same period only US $121.1 million(2.4%) of the Group’s net profits were paid as dividends.

To arrive at our investment decisions, we make use of investment appraisal procedures which have beenstandardised across the Group’s major companies and that utilise modern financial modelling and riskanalysis techniques, which help to identify sources of value creation. In 2003 and 2004 we continued tomake strategic investment into telecommunications and retail sectors, as well as new investment into thetechnology sector.

In August 2003, we funded three months early, thefinal tranche of our investment in NYSE-listedVimpelCom of US $58.5 million which is beingused for the continued expansion of VimpelCom’sRussian regional cellular network. Also, in August2003, we acquired a 25.1% stake in MegaFon, thethird-largest wireless telecoms service company inRussia for US $295 million. Golden Telecom itselfduring 2003 and into 2004 made a number ofstrategic regional acquisitions aimed at buildingeconomies of scale including a 100% stake inSibchellenge (Krasnoyarsk), an effective 50%+1stake in Samara-Telecom, and an effective 100%stake in Comincon-Combellga.

Telecommunications

Continued Development of Newand Existing Businesses

0

20

40

60

80

100

VimpelCom Golden Telecom

Dec 312001

Dec 312002

Dec 312003

Aug 312004

GROWTH IN SHARE PRICE OF VIMPELCOM AND GOLDEN TELECOM

SINCE ALFA GROUP INVESTED IN MID-2001

VIP = 554%GLDN = 162%

In January 2003, we funded the last US $10 million of our US $30 mil-lion capital injection into Trade House Perekriostok for the purpose

of funding continued rapid expansion. During 2003, Perekriostokexpanded into a number of promising Russian regional areasincluding Nizhniy Novgorod, Samara, Volgograd, and Togliattiand also increased its presence in St. Petersburg. This expan-sion was achieved organically, through the opening of newPerekriostok shops, as well as through the acquisition of70.1% of SPAR Middle Volga which owns seven supermarkets

in Nizhniy Novgorod and the surrounding region. We alsoretain an option through the beginning of 2008 to acquire the

remaining stake from management. Looking forward, we are cer-tain that acquisitions will play a key role in expanding Perekriostok’s

presence in Russia and the CIS.

Technology

Retail trade

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

As we havestated manytimes in thesepages, we viewthe attractionof foreign capi-tal and foreign

expertise as essential to the development ofour businesses – co-operation with foreigninvestors forms a very important part of ourstrategy as a sale to foreign investors pro-vides us with an attractive and logical meansof exiting or partially exiting our investments.

In August 2003, we expanded our relation-ship with BP by merging virtually all of ourRussian and Ukrainian oil and gas assetswith almost all of BP’s Russian oil interestsinto TNK-BP, a newly formed holding com-pany. Under the terms of the deal, TNK-BPis owned 50% by BP, 25% by Alfa Groupand 25% by Access-Renova. Additionally,BP paid total cash of US $2.6 billion at theclose of the deal to Alfa Group and Access-Renova and is committed to paying threesubsequent annual tranches of equivalentUS $1.25 billion each in BP shares from

2004 to 2006. In July 2004, together withAccess-Renova, we sold our entire interestin the three BP tranches to a third-partybank for US $3.58 billion. Also, in January2004, BP paid an additional US $1.4 billionto Alfa Group and Access-Renova for thecontribution by Alfa Group / Access-Renovaof our 50% Slavneft stake into TNK-BP. Ourdeal with BP is, by far, the single largest for-eign direct investment in Russian history.The purchase price of the deal at the timeimplied financial valuation multiples whichwere in line with or at a premium to otherRussian oil majors.

In April 2003, together with our minorityinvestor, we concluded the sale of a 7.7%stake (new shares) in Perekriostok to portfolioinvestor, Templeton Strategic EmergingMarkets Fund LDC. At the time, the impliedpost-money equity valuation for Perekriostokwas more than 3 times the amount of ouraggregate historical investment.

In addition to the equity markets, our com-panies were also successful in tapping theinternational debt markets in 2003 and into

2004, despite tougher credit conditions.After successful capital raising on theEurobond markets by VimpelCom, Alfa Bankand TNK in 2002, our companies continuedto attract longer, cheaper and more stablefinancing. In early 2004 Trade HousePerekriostok closed a 2-year syndicatedborrowing with international private banksfor US $75 million – the first ever all-privateinternational syndication for a Russian retailcompany. In March 2003, Kyivstar launchedUS $60 million in 3-year loan notes, follow-ing their November 2002 offering whichraised US $100 million. This was the firstever Ukrainian corporate bond issue andfirst ever 144A offering from Ukraine. AlfaBank also, at the end of 2003, launched aUS $200 million Euro commercial paper pro-gramme with maturities of up to one year –the first out of Russia since the 1998 debtcrisis. In addition to being obtained onfavourable financing terms, the programdiversifies the Bank’s funding base and pro-vides very good flexibility to fund the Bank’sclients. In mid-2004, VimpelCom raised US$450 million on the Eurobond markets in5-year notes.

Co-operation with ForeignInvestors

Our investments into Russian fixed-line and Internet provider Golden Telecom, and cellularcommunications service companies VimpelCom, MegaFon and Kyivstar make us one of thelargest private investors into the Russian/CIS telecommunications markets. Since having madeour first investments into the telecoms sector in mid-2001 through purchase of significant stakesin US NASDAQ-listed Golden Telecom and US NYSE-listed VimpelCom, their share prices haverisen 162% and 554% respectively through 31 August 2004.

Also noteworthy was the restructuring of our telecom assets in early 2004 – a restructuringwhich consolidated all of the Group’s telecom assets (VimpelCom, Golden Telecom, Kyivstarand MegaFon), which were previously held in different parts of the Group, under a newlyestablished holding company - Alfa Telecom. Through this reorganization, we realized definiteorganizational and governance efficiencies and an improved overall flexibility allowing us tobetter pursue telecom opportunities both in Russia and the CIS as well as other emergingmarkets. Alfa Telecom will be used as the Group’s exclusive vehicle for making futureinvestment into telecom assets.

22

From time to time, we take the decision to exit certain of our investments. We typically takethe decision to divest as it allows us to re-deploy capital to more interesting opportunities,focus management attention on investments which have strategic priority, and to realizereturns by exiting or partially exiting investments which we consider to be fully-valued.

Aside from our merger transaction with BP which, in-effect was a partial exit from our oil andgas investments, we had two other notable exits during 2003. In late 2002, together withminority investors, we purchased approximately 20% of GDR-listed GUM, the largestdepartment store chain in Russia, for US $31.2 million on our belief that it was appreciablyundervalued. In early 2004, together with minority investors, we opportunistically sold our stakein GUM, for net proceeds of US $78 million to a Russian strategic investor. Also in late 2003,Alfa-Eco Group sold its approximately effective 46.5% stake in Volga, the largest manufacturerof newsprint in Russia, for US $56.2 million, to our joint venture partner, realising US $5.9million profit over the carrying value of our investment.

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

Despite the periodic instability exhibited by the Russian economy during 2004, all indica-tions suggest that 2004 promises to be another strong year for the Group. As experiencedinvestors, we remain confident in our abilities to manage the risks and navigate the changeswhich are now taking place in Russia and to capitalize on both investment and exit oppor-tunities. In the years to come, our companies will be well placed to benefit not only from thegrowing participation of foreign investors, but also from the continuing long-term domestictrends of rising consumption, increasingly-wide availability of credit, and continuing eco-nomic reform. We are increasingly interested in prudent expansion of existing businessesand new investment outside of Russia, especially in the area of telecommunications. AsRussia continues its inevitable integration into the world economy and as we begin to lookto new markets to invest, as always, we will remain steadfastly committed to our investmentphilosophy, a philosophy which has served us well for more than 15 years (see pages 15–16).

23

Outlook

Divestiture of Group Assets

Leading facilities-based provider of integratedtelecommunications and Internet services in majorpopulation centres in Russia and CIS.

Golden Telecom, Inc.

Leading wireless telecommunications service companyin Russia.

VimpelCom

Leading wireless telecommunications service companyin Ukraine.

Kyivstar

3rd largest wireless telecommunications servicecompany in Russia.

MegaFon

24

Largest private bank in Russia. Wide range of financialservices, including commercial and investment banking,trade finance, and asset management.

Alfa Bank Group

Leading issuer of non-obligatory insurance in Russia.

AlfaStrakhovanieInsurance Group

3rd largest (by production and reserves) verticallyintegrated oil company in Russia.

TNK-BP

Commodities trading and distribution in Russia, CISand Southeast Asia. Strategic investment into telecom-munications. Proprietary and for-client investment inRussia, the CIS and other developing markets.

Alfa-Eco Group*

Leading chain of supermarkets and hypermarkets inMoscow and other population centres in Russia.

Trade House Perekriostok

Investment in and development of promising Russiancommercial and consumer technologies.

Russian Technologies

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

Principal HoldingsAlfa Group’sPrincipal HoldingsAlfa Group’s

Alfa TelecomOne of the largest private investors into wireless andfixed-line telecommunications companies inRussia/CIS and other promising emerging markets.

ALFATELECOM

ALFA BANKALFA BANK

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

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

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

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

Currently, Alfa Bank’s long-term ratings are Fitch (B+, with stable outlook), Moody’s (Ba2, with stable outlook) and Standard & Poor’s(B, with stable outlook).

Alfa Bank Today27

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

www.alfabank.com

During 2003, the Bank not only maintained its positionas a leader of the Russian financial market, rankingamong the top three companies in nearly everysegment of the market, but also significantlystrengthened its leadership. Alfa Bank today is not onlythe largest private bank in Russia, but also the

technological leader, offering the most comprehensive range of products. It is specifically this embodimentof the Bank’s strategy, directed at expanding the products we offer, diversifying business, and improvingstability and effectiveness, that has made the Bank the most attractive and reliable partner for our clients andcounter-parties. During 2003, the number of corporate accounts grew from 49,000 to 61,000.

In the area of corporate banking, Alfa Bank is third only to Sberbank and Vneshtorgbank by size ofoperations and range of services, with 5% of the market for lending and fourth by deposits, with 4% of themarket. Over the year, the Bank’s corporate deposit base rose some 75%. As a result of the rapid growth inAlfa Bank’s liabilities, our market share in corporate deposits grew by 0.5% during 2003. Alfa Bank servesone-third of Russia’s large and mid-sized companies, and acts as creditor to a quarter of these companies.

Financial Highlights

As-at 31 December 2003, assets of Alfa Bankgrew to US $5.9 billion, shareholder equity wasUS $547 million, and the loan portfolio grew toUS $3.6 billion. Net profit for the year 2003 wasUS $106 million.

In 2003, growth in Alfa Bank’s capital matchedthe rapid rate of growth of our business. As-atthe end of 2003, our capital adequacy ratio was10.29%. Maintaining a capitalization thatmatches our cautious approach to running abusiness in Russia is part of Alfa Bank’s strategyfor protecting the interests of our clients.

Effective use of resources is a key factor in AlfaBank’s reliability. At the end of 2003 commer-cial credit remained the largest part of our earn-ings-generating assets.

CO

MM

ER

CIA

L B

AN

KIN

G Corporate Banking

Development of our retail banking business is becoming anincreasing strategic priority as products focusing on the newRussian middle class are in huge demand.

The Bank established a cutting-edge retail network, which enteredthe Moscow market in 2003 under the brand name of Alfa Bank

Express. Alfa Bank Express was founded as an innovative banking service format targeted to the massmarket. Alfa Bank Express was the first service on the Russian market to offer not only separate products, buta full spectrum of banking services from traditional deposit and credit card services, to full access to creditresources (particularly in the area of consumer lending) and long-distance banking services. Initial results areof strong client interest in the services of this network, which offers ‘twenty-four-seven’ banking service.Clients may use any one of the Bank’s branch offices, regardless of where the account was opened. By theend of 2003, we had opened 20 such branches in Moscow. All ‘old-format’ branches will be converted intoAlfa Bank Express branches by 2005.

Retail Banking

The past year was notable for our continuing targeted expansion,aimed at deepening our presence in priority regions. We opened asubsidiary bank in Kazan, and began work in eight new structuraldivisions in other regions. We now boast over 120 branches, and theshare of regional branches of the Bank is also growing continuously.0

20

40

60

80

100

120

1999 2000 2001 2002 2003

49,9

76

77,2

35

85,4

17

104,5

90

105,6

19

Net Profit ('000 USD)

Source: Annual audited IFRS standalone financial statements 28

Regional Network

Alfa Bank has the largest loan portfolio of any of Russia’sprivate commercial banks. As-at the end of 2003,the Bank’s corporate loan portfolio was $3.6 billion, upapproximately 40% year-on-year. We have also continuedto diversify our client base. The share of loans held by ourten largest borrowers fell to 39% (compares with a Russian

banking sector average of 48%). The share of loans to affiliated companies has alsofallen (from 18% as at year-end 2002 to 3% in January 2004). Also, the share of loans to medium-sized creditors is continually rising.

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

International Network

During 2003, the Bank was able tosignificantly strengthen its positionas one of the highest-class Russianborrowers on the internationalfinancial markets.

Over the year, Alfa Bank arranged two one-year syndicated loans worth US $50 million and US $82million with option to extend. Moreover, the number and geographical reach of participating bankshas grown significantly. JP MorganChase took part in its first-ever syndicated loan in Russia in atransaction with Alfa Bank worth US $82 million.

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

Lending International Borrowing

Alfa Bank’s Presence in Russia and Other CountriesAlfa Bank’s Presence in Russia and Other Countries

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

Internet brokerage Alfa-Direct has achieved impressive results.Alfa-Direct’s MICEX trading volumes exceeded US $4.7 billion in2003, while RTS volumes reached US $690 million. The past twoyears saw stable growth in private investment. In 2003, Alfa-Direct’sInternet customer base grew 70%, to several thousand accountsby the year-end 2003 and project that Alfa-Direct’s customer basewill grow by more than 2,000 new clients in 2004. Currently,Alfa-Direct completes over 4,000 trades daily.

Alfa Bank’s research department plays an important role in helpingmaintain our clients’ loyalty. Our 19 research analysts, who coverboth equity and fixed-income, command great authority on theRussian securities markets. The annual Institutional Investor clientpoll once again chose Alfa Bank as one of the leading analyticalteams in Russia.

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

INVE

ST

ME

NT

BA

NK

ING Equities and

Brokerage

30

In 2003, Alfa Bank’s total volume oftrading in foreign currency deno-minated fixed income securities rose40%, to US $10 billion. Client tradesalso continued to grow as apercentage of the Bank’s total tradingvolume, to US $7 billion, twice ashigh as in 2002, while the share ofclient profit in overall profits of theDebt Capital Markets Division grewto 30% from 20% a year ago.

In 2003, the Bank expanded itspresence and trade volumes on theRussian Rouble debt market. Ourtotal annual turnover in Rouble-deno-minated debt instruments was someUS $400 million — nearly twice as in2002. Our returns are continuouslyrising both from proprietary tradingand from customer business.

In 2003, Alfa Bank helped to place 10bond issues for clients worth morethan RUR 13.4 billion. Despite adeterioration in the debt marketenvironment in the second half of theyear, Alfa Bank strengthened itsposition, rising from sixth to thirdplace in debt issuance (according tothe information agency Cbonds).

In 2003, our clients not only investedtheir own assets directly, but alsobought securities on margin, as wellas using spread strategies such ashedging the purchase of certainsecurities through the sale of others.

The Bank became a leader in financedand margin trading on the debtmarkets. The largest volumes offinanced trades were in foreign currencydebt, with volumes up 50% in 2003.The market for margin trading withRouble-denominated corporate debtalso grew.

In 2003, Alfa Bank’s domestic currencymarket turnover rose 150% year-on-year. The main share of transactionswas currency exchange for banks andcompanies from the CIS and WesternEurope. By the end of 2003, Alfa Bankbecame the largest Russian marketmaker, with 35% of the market andaverage daily turnover of some US $800million to US $1.2 billion.

Our Alfa FOREX Internet brokeragesystem came on-line this year. Thesystem uses cutting-edge technologyto assist in FX trades for counterpartiesand our own branches.

Alfa Bank’s activity on the market forhard currency transactions leads in allsectors of the market, and is highlyprofitable. In 2004, the authoritativejournal Global Finance, for the first time,named Alfa Bank as the Best ForeignExchange Bank in Russia.

Capital Markets Corporate Finance

According to an independent study conducted by RussiaDeal at the end of 2003, AlfaBank was acknowledged as a leading financial consultant among both internationaland Russian investment banks operating in the Russian market. Total 2003 dealvolumes in which the Bank acted as financial consultant reached nearly US $9 billion.

The Corporate Finance Division’s main focus was to provide Russian and foreignclients with financial consulting on M&A deals.

One of the Bank’s main achievements was to act as a financial consultant to theRussian shareholders of Tyumen Oil Company (TNK) at the start of its flagshipstrategic alliance with BP in Russia and Ukraine. The invaluable experience wegained during the course of the deal has taken us to the number one position in themarket for energy sector consulting.

The Bank continues to act as a strategic consultant to UES, one of Russia’s largestnatural monopolies, during the course of its restructuring.

Alfa Bank: Selected Corporate Finance Transactions in 2003

Client Brief Description Approximate Transaction Volume

TNK Alliance of TNK and BP Russian and Ukrainian assets US $7.6 billion

ICN Pharmaceuticals Sale of Russian assets US $55 million

Tomsk Cellular Communications Sale of a 100% stake to Mobile TeleSystems US $47 million

SibirTelecom Sale of 30% of the shares of Sibirsky Cellular Systems 900 US $29 million

Amtel Holding Private placement of 3.8% of shares to Templeton Strategic Emerging Markets Fund US $10 million

Perekriostok Private placement of 7.7% of shares to Templeton Strategic Emerging Markets Fund US $15 million

Alfa Bank is optimistic about its future.

Alfa Bank continues to realize its strategy of developing amodern, universal bank, represented among all principalsegments of the financial and banking market, includingretail business, corporate commercial and investmentbusinesses while maintaining its dynamic growth.

In the area of retail operations,the Bank aims to continue build-ing a retail network of the newtype we first introduced last yearunder the brand name Alfa BankExpress. In 2004, the main goalsof our retail banking business areto ensure aggressive growth,beating the market, optimizingthe technology we have intro-duced, and to make servicingour clients as quick and comfort-able as possible. We plan tofocus our attention on the devel-opment of credit products for theretail sector, including consumerlending. The Bank sees great potential in this opportuni-ty, considering the huge lack of credit products availablein Russia.

In the area of commercial banking and services for cor-porate clients, we intend to become a more attractivesource of loans to mid-sized companies, while continuingsupport of our large corporate clientele. The Bank hassteadily diversified both its business and credit portfolioin 2003 and we hope to continue this trend. The Bankalso plans to redouble its efforts in the sphere of com-mercial banking, especially in the services that have notyet been developed sufficiently in Russia, such as leasingand project finance.

In the area of investment banking and fund management,the Bank plans to develop new products, such as themutual funds we began offering last year, as well as secu-rities market brokerage services for our clients.

Introducing new technologies will remain a focus for us,creating a base for the Bank’s continuing development.The Bank will focus in particular on developing cutting-

edge service channels. We intend tostrengthen our leadership in developingelectronic banking and brokerageoperations. While 80% of sales will stillbe conducted through our banking per-sonnel, we intend for 80% of servicesprovided to clients to be replacedthrough distance technologies, includ-ing on-line and telephone banking.

Management will also focus on increas-ing the Bank’s efficiency, optimizingstructure and staffing to meet the grow-ing competition, including from foreignbanks. In connection with this, we havedecided on an organizational restruc-

turing within the Bank intended to group managementaround our core businesses. We believe this should leadto a clearer management structure, better cooperationbetween the Bank’s divisions, and to better products andservices for our clients.

Asset Management

Alfa Capital Management Company, a whol-ly-owned subsidiary of Alfa Bank, is rapidlybecoming one of the leading Russian fundmanagement companies for both private andcorporate clients in Russia and abroad.Founded in the early days of Russian marketliberalization, Alfa Capital received new impe-tus in 2003, becoming a diversified businesscombining both portfolio investment in debtsecurities and shares. As such, a new groupwas created which is dedicated to directinvestment - Alfa Capital Partners (ACP).

Alfa Capital has also been selected by thegovernment to manage individual pensionsavings.

Strategy

32

AlfaStrakhovanie Insurance GroupAlfaStrakhovanie Insurance Group

AlfaStrakhovanie Insurance Group is one of Russia’s largest insurers and is consistentlyranked amongst the leading insurance companies on the market. The Group offers a diversifiedportfolio of services including comprehensive business insurance programs and an extensiveproduct range for individuals. AlfaStrakhovanie actively operates across the whole of Russia.

www.alfastrah.ru

IN 2003, THE GROUP

ENJOYED

COOPERATION WITH

A NUMBER OF MAJOR

CLIENTS INCLUDING:

● IBS Group Holding Ltd.● IBM● Golden Telecom● SIDANCO● Emergency Ministry of the

Russian Federation● Culture State TV and Radio

Channel ● VimpelCom● ICN● Transnefteproduct● Udmurtneft● Pulkovo-2 Airport● Volga Motor Works● Petrovskiy Passage● Alfa-Eco Group● Kommersant Publishers● Volgotanker● Danone

● Wild Orchid● TsENKI● NTV+● DON-Stroy● MIAN● Partiya● Tekhnosila● Bayersdorf (representative

office)● Samsung Electronics Co. Ltd.

(representative office)● Daimler Chrysler AG

(representative office)● Wimm-Bill-Dann● SUN Interbrew● Udarnitsa Confectionery

Factory● Pepsi Co.

AlfaStrakhovaniein 2003

AlfaStrakhovanie’s reputation is based on thestrict performance of its obligations to its clients.Undertaking large risks requires a high capital-ization - AlfaStrakhovanie’s aggregate sharecapital at the end of 2003 reached RUR 1.90 bil-lion (US $64.6 million). Re-distribution of a por-tion of obligations which are undertaken amongother reliable insurance and re-insurance com-panies is a pillar that underpins the stability ofinsurance businesses worldwide. A reliable port-folio hedging re-insurance program enablesAlfaStrakhovanie to insure large financial risks ofits clients. Risks are re-insured with top leadingglobal companies, such as Munich Re, SwissRe, SCOR, Hannover Re, and Lloyd’s of Londonas well as blue-chip Russian companies.

Based on the Company’s financial standing,Expert RA rating agency awarded AlfaStrakho-vanie the rating of A++ (high reliability with pos-itive outlook) in 2003.

More Reliability

35

The Group’s key priorities for the next year include the continued roll-out of comprehensive risk management programs for industrial enterprises (so-called UmbrellaCoverage programs) and development of customised plans for insuring clients’ businesses.

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

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

In 2003, AlfaStrakhovanie’s topmanagement adjusted and theBoard of Directors approvedchanges to the existing strate-gic investment program cover-

ing the period through 2006. The business development strategy combines furtherdevelopment of products and distribution channels, active expansion into regions,strengthening of the sales organization, and further cooperation with Alfa Bank.

Double-digit growth of the Russian insurance market provides ever-increasing challenges to people involved in this business. After hiring anumber of top professionals from leading insurance companies, banksand FMCG companies in 2002, there were no major reshuffles in key staffduring 2003.

One of the cornerstones of AlfaStrakhovanie’s well-balanced HR policy is the sustained development of existing personnel. Tothis end, in 2003, the Corporate University of AlfaStrakhovanie was founded. Notably, a program of uniform corporate trainingstandards for employees and agents was developed.

In 2003, AlfaStrakhovanie continued its geographical expansion intoRussia’s regions opening 5 affiliates and 59 branches in Ioshkar Ola,Kemerovo, Krasnoyarsk, Lipetsk, and Arkhangelsk. In aggregate,AlfaStrakhovanie is comprised of over 150 regional branches (excludingMoscow) in Russia.

Compulsory third party auto insurance has rapidly developed in the regions. According to the Russian Insurance Association,AlfaStrakhovanie ranks among the top ten insurers based on the results of operations for the last six months of 2003.

AlfaStrakhovanie has begun large-scale IT infrastructure upgrades in a number of key regional branches, which will ensure ahigh standard of service delivery to customers throughout Russia.

More Quality

To maintain high quality service while intensivelyexpanding the business has become one ofAlfaStrakhovanie’s top priorities. Significant fundshave been invested in the automation of businessprocesses, upgrading the IT infrastructure, building

a comprehensive and unified information system and providing for information security.

AlfaStrakhovanie is successfully proceeding with implementation of SalesLogix, a customer relations man-agement system, and with the development of specialized data processing systems for voluntary healthinsurance (AVIS) and life insurance (LifeOffice). Also, in 2003, a unified information system was created for

core insurance products, making it possible to greatly enhance the efficiency of business processes relatedto insurance contract management.

Similar technological improvements are being implemented on the corporate side, with the continued imple-mentation of an integrated insurance and accounting system, including the automation of the budgetingand management reporting processes.

Round-the-clock support delivered by our corporate call centres is an absolute prerequisite for customersatisfaction. This service is now available to all the clients insured under voluntary health and auto insur-ance programmes.

New products which the Group offered to its individual clients in 2003,were in most cases uncomplicated policies which could be issued in afew minutes by choosing a required set of services and price levels.

AlfaTravel product was specially timed to the holiday season for tra-vellers and includes five price levels depending on the scope of services and a policy for persons travelling abroad with theirown car. A broader coverage was also offered to customers – the policy is now valid not only abroad but also in Russia if acustomer is at least 90 km away from his or her permanent residence.

AlfaMed, a new convenient product for corporate customers, was developed based on the personal physician service at MedASclinic to meet demand by medium and large enterprises for reliable and quality medical coverage for their employees. AlfaMed is athree-tiered product which divides an enterprise’s personnel into top managers, line managers, and non-management employees,each tier containing a set of standard insurance services which can be supplemented at the customer’s request.

More Simplicity

More Focus on Clients

More Professionalism

More Technology

More Confidence

1998 1999 20012000 2002 20030

25

50

75

100

125

150

66

45

28

101 1

50

21

0

100 000

200 000

300 000

400 000

500 000

43,455

1999 2000 2001 2002 2003

77,935101,815

172,358

441,826

67%

73%27% 69%

31%

22%

78%

40%60%

33%Number of contracts concluded

by affiliated companies of AlfaStrakhovanie

Contracts with individuals

Contracts with legal entities

NUMBER OF CONTRACTS AND MIX OF

INSURANCE POLICES WRITTEN BY

ALFASTRAKHOVANIE AT YEAR – END

REGIONAL NETWORK GROWTH –

NUMBER OF BRANCH OFFICES AT

YEAR – END

Source: Company data

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

www.tnk-bp.com

TNK-BP commenced operations on 1 September 2003 after BP and Alfa Group, jointly with

Access/Renova Holding, (together AAR), merged their oil and gas assets in Russia and Ukraine.

BP and AAR each own a 50% stake in TNK-BP. TNK-BP has the exclusive rights to implement

all AAR and BP oil and gas projects in Russia and Ukraine.

In agreement with the terms of the merger, ААR contributed its

shareholdings in TNK-International, ONACO, SIDANCO and

Slavneft, stakes in Rusia Petroleum (holder of licenses for the

Kovykta gas and condensate field and Verkhnechonskoye oil and

gas field development), in the Rospan gas-production company

(which is developing the New Urengoy and East Urengoy gas

fields) while BP contributed its ownership in SIDANCO, its stake

in Rusia Petroleum as well as its Moscow retail network. As a sup-

plement to the assets it transferred, BP also paid cash to AAR and

agreed to issue BP treasury shares to AAR.

As of 31 December 2003, TNK-BP’s proved oil reserves stood at 9.0 billion barrels (based on

the criteria stipulated by the Society of Petroleum Engineers), according to an audit by

the independent international firm DeGolyer and McNaughton. Annual crude output in 2003

was approximately 64 million tonnes. TNK-BP holds five refineries with total refining capacity

of approximately 50 million tonnes of oil per year and markets products through a retail net-

work counting over 2,200 sites in Russia and Ukraine.

The combination of AAR’s and BP’s oil and gas interests forms the

basis for TNK-BP becoming one of the largest and the most profi-

table oil and gas companies in Russia and Ukraine. When the inte-

gration is complete, TNK-BP will have evolved into a company with

a single organisational structure, having uniform operating proces-

ses and systems. TNK-BP’s team was formed from TNK, SIDANCO

and BP representatives, enabling it to consolidate the advantages

of Russian and international management best practice.

TNK-BP’s short-term plans include further development of its

Russian and Ukrainian assets, boosting oil and gas output through the use of new technolo-

gies, expansion in Eastern Siberia, further growth in its reserves portfolio and implementation

of a series of new strategic projects.

History

39

TNK-BP operates in virtually all oil and gas provinces in the RussianFederation. The Company’s portfolio largely consists of fields that havebeen developed over a number of years; however, they also have goodmedium- and long-term growth potential. A key element for realisationof this potential is achieving maximum investment efficiency.

In the short-term, theCompany will focus onthe most efficientdevelopment of exist-ing reserves, the bulkof which lie in WesternSiberia. It is planned toboost output, to in-crease reserves reco-very and to ensure the

commercially effective development of probable reserves through thetargeted application of new technologies. Rehabilitation of idle wells,new reservoir stimulation techniques, waterflood system reconfigura-tion – all this has proved its efficiency many times in the global oil indus-try and has a significant potential for Russia as well. For instance, atSamotlor, TNK-BP’s largest oil field, the application of recovery me-thods used by BP at Prudhoe Bay, Alaska, should enable the Companyto add approximately 1 billion barrels of new reserves for each two per-cent increase in the recovery factor.

TNK-BP’s proved reserves are estimated at 9.0 billion barrels as of 31December 2003. This figure may potentially increase approximatelythree-fold as new technologies and enhanced development plans aredeveloped and implemented. Strong output growth will be balanced byrobust reserves replacement. In the medium and long-term, output willbe enhanced by further growth in the producing fields and by thedevelopment of new oil and gas fields. Efficiency of capital investmentwill be achieved by combining modern drilling and completion tech-niques as well as enhanced secondary recovery methods. In the longerterm, development of such new projects as the Rospan Development,Kovykta (East Siberia) and Uvat (south of the Tyumen Region) will pro-vide the basis for further growth.

TNK-BP exploration and production strategy envisages applyingadvanced technology in order to turn the Company’s enormousresources into proven reserves and to produce them in the most effi-cient and profitable way.

Upstream

TNK-BP’s downstream objective is to ensureefficient processing and sales of extractedcrude oil and gas. Ensuring access to the bestmarkets is key to profitability. In practice, thismeans maximising export sales of crude oil andpetroleum prod-ucts, while ensur-ing the highestprofitability of sa-les in domesticmarkets. TheCompany’s crudeoil output and itscapacities forprocessing/salesof petroleum pro-ducts are wellbalanced. Yet, as upstream production growsat a rate exceeding Russia’s average, there willbe a need to gain expanded market access.

The Company will boost production of highvalue-added petroleum products, which will besold through retail stations working under TNKand BP brands in selected markets.

A large-scale upgrade and modernisation pro-gramme, which is being implemented at theRyazan Refinery, is an example of the work beingdone to increase the yield of high value-addedproducts. Special attention is being paid to high

v a l u e - a d d e dproducts that areexperiencing ahigher rate ofdemand growththan the basicrefined products(e.g. A-95 gaso-line). Successfulcompletion of theprogramme willincrease light

product yield and make it possible for the refin-ery to meet the growing demand for light andenvironmentally friendly petroleum products inthe Moscow area and potentially in newEuropean markets.

Downstream

TechnologiesTechnology plays a key role, not only in exploration andproduction, but also contributes to the improved efficien-cy across the Company’s asset base. Investments intechnology will not only ensure further production growth,but also enhance capital efficiency throughout TNK-BP.Expert technical working groups have been formed andwill focus on key areas where technology can make themost impact on the upstream and other businesses ofthe Company.

Special attention is being paid to introducing technologyto the oil field services in order to enhance upstreamcapital productivity gains. This will enable TNK-BP toimprove the quality of oil field services, while reducingcosts and the time of service delivery. The Company’sgoal in this area is to achieve the best level of servicesprovided in Russia in all core lines of technical support,including drilling, infrastructure repairs, well workovers,hydraulic fracturing, and so on, to comply with interna-tional standards.

Technologies

40

1,27

6

759

2001

TNK Sidanco

2002 20030

200

400

600

800

1000

1200

1400

701

357

314

1,1

16

1,2

76

1,0

15

+10% +14%

TNK-BP

TNK-BP Annual Production (excluding Slavneft)('000 barrels per day)

Source: Company data

Where We Operate: UpstreamWhere We Operate: Upstream

Where We Operate: Refining and MarketingWhere We Operate: Refining and Marketing

MOSCOW

UKRAINE

RUSSIA

Udmurt Oil Company

Rospan

TNK-Nyagan

Samatlorneftegaz

Udmurtneft

Orenburgneft

Orenburggeologya

Saratovneftegaz

Yugraneft

TNK-Sakhalin

NovosibirskneftegazTyumenneftegaz

TNK-Uvat

TNK-Nizhnevartovsk

NNP

Varieganneftegaz

Verkhnechonskneftegaz

RUSIA Petroleum (Kovykta Project)

Vanyoganneft JV

Upstream CompaniesNew Projects

MOSCOW

Ryazan

Karelia

Kaluga

Kiev

Rostov

Lisichansk

Saratov

Tula

Kursk

RefineryMarketing <25%

25%-50%

>50%

Retail market share

Yekaterinburg (Uralskaya NK)

Nizhnevartovsk

(NNPO)

Orenburg

Orsk

UKRAINERUSSIA

Note: Excluding Slavneft

Notes: 1. TNK-Stolitsa and TNK-Megapolic are not indicated on the map2. Excluding Slavneft

Source: Company data

TNK-BP: Long-Term PlanningThe principal goal in TNK-BP’s five-year strategy is to increase the long-term value of the Company. Though the Company has developed an aggressiveshort-term growth plan, it also intends to implement large-scale investments in long-term growth. The purpose of these investments is to create pre-requisite conditions for sustainable growth and profitability in the period going far beyond the five-year plan.

TNK-BP: Long-Term Planning

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

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

Investment in technology to enhance efficiency in all business segments.

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

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

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

42

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

The Group has unmatched experience in the field of investment projects,having implemented a number of well-publicised investment and manage-ment programs with considerably positive results. In the past severalyears, Alfa-Eco has successfully com-pleted projects at such leading Russianenterprises as the Achinsk AluminaPlant, the West Siberian MetallurgicalComplex, Taganrog Metallurgical Plant,Balakhna Pulp and Paper Mill “Volga”, the Korshunovsky Ore Mining andEnrichment Plant and others. Over the years, many projects have beenlater spun-off as separate business units, including within the structure ofAlfa Group Consortium, including Tyumen Oil Company, the Perekriostoksupermarket chain, United Food Company and some others. The mostrecent example is Alfa-Eco’s transfer of its telecommunications assetsVimpelCom and MegaFon, which are among the top 3 leading mobileoperators in Russia, to Alfa Telecom.

Alfa-Eco’s success is rooted in a clear competitive advantage. The Grouphas created a team of highly professional investment managers, who arecapable of efficiently running enterprises in various industries, have in-

depth knowledge of the specifics ofRussia’s regional markets and the ability toreact quickly and appropriately to changesin these markets, and are able to buildmutually beneficial relationships with

clients. This combination of qualities makes it possible to precisely revealthe most promising projects and carry out transactions of a highly com-plex nature.

Over the past three years, investments in completed transactionsamounted to over US $460 million, while their average annual internalrate of return was around 332%.

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

www.alfaeco.ru

ALFA-ECO GROUP ALFA-ECO GROUP

In early 2004, Alfa-Eco Group (“Alfa-Eco” orthe “Group”) announced its new strategy offocusing its business on making investmentson behalf of shareholders, proprietary and for-client investment in Russia and also the CISand other emerging markets. Alfa-Eco’sproject range includes all types of projects forlarge equity funds. This includes gearedacquisitions of significant shareholdings(LBO), providing capital for financing ofgrowth strategies, acquisition of under valuedassets, corporate restructuring and optimisa-tion of operational activity in portfolio compa-nies, alliances with strategic investors,acquisition of enterprises operating under dif-ficult financial conditions, anti-crisis manage-ment and solving conflict situations.

45

Alfa-Eco Group

Achinsk Alumina Refinery

Korshunovsky Ore Mining and Enrichment Plant

Volgograd Metallurgical Plant Krasniy Oktyabr

Taganrog Metallurgical Plant

Amurmetal Metallurgical Plant**

Volga (Balakhna Pulp and Paper Mill)**

Cosmos Hotel**

VimpelCom***

680%

161%

253%

84%

30%

31%

79%

129%

Average Annual Internal Rate of Return (IRR)* for Selected Exitsof Investment Projects of Alfa-Eco Group

Growth in VimpelCom Performanсe Indicators Since Alfa-Eco Group BeganInvesting in May 2001

*Calculation performed using a method developed by the European Venture Capital Association (EVCA)

and based on financial statements audited by PricewaterhouseCoopers (unless otherwise noted).

**Calculation based on unaudited data.

***Estimation based on quotation as at 31 March 2004.

May 2001 March 2004

Number of subscribers (mln) 1.11 13.21Market capitalization (USD mln) $806.8 $5,590Share price of Level 3 ADRon the New York Stock Exchange (USD) $15.00 $103.99

Investment ActivityInvestment Activity

Since 2001 the Group had ownedand managed a blocking votingstake in cellular communicationsprovider VimpelCom (brand name:

Bee Line GSM). In mid-2004 Alfa-Eco transferred its interest in VimpelCom to thenewly established company within Alfa Group Consortium, Alfa Telecom.

Since making an initial investment in May 2001, Alfa-Eco has played an active rolein the management of VimpelCom. Thanks in no small part to the efforts of Alfa-Ecomanagers, VimpelCom has succeeded in considerably expanding its presence inRussia’s regions. At the end of 2003, the BeeLine network operated in 55 regionsof the Russian Federation (in 56 regions as of March 2004), and was intensivelyengaged in building new networks. Starting in 2003, the company began pene-trating two more Russian regions: the North-western and Urals Federal Districts.The priority strategic goal is to extend the network’s license zone to cover the entirecountry.

Since Alfa-Eco began participating in the management of VimpelCom, the BeeLinenetwork’s subscriber base has grown from 1.11 million in May 2001 to 11.44 mil-lion at the end of 2003 (in March 2004, the number of subscribers reached 13.21million). VimpelCom’s market capitalization increased from US $806.8 million inMay 2001 to US $3.95 billion at the end of 2003 (in March 2004, capitalization wasas high as US $5.59 billion).

When Alfa-Eco initially invested in the project, VimpelCom’s stock (level 3 ADR) wastrading on the New York Stock Exchange at US $15 per share, whereas by 31December 2003 the stock price had increased almost five-fold, reaching US $73.50(in March 2004, US $103.99).

In August 2003, the Group acquired a 25.1%interest in Russia’s third-largest cellulartelecommunications provider MegaFon.MegaFon and its subsidiaries’ licenses cover

the entire Russian Federation (145 million people). The company’s net income increased five-fold in 2003, reaching US $131 million, while its revenue was US $822 million, EBITDA was US$378 million, and the number of subscribers exceeded 6 million.

In mid-2004, Alfa-Eco’s stake in MegaFon was transferred to Alfa Telecom with which Alfa-Ecowill likely in the future implement joint projects in the telecommunications industry.

During 2003, Alfa-Eco continued to managethe Kamsk Pulp and Paper Mill (OAO TsBK“Kama”, Perm Region). The Kamsk Mill wasthe last non-privatised enterprise in this sec-

tor, faced with huge production and financial problems after losing its market share. After Alfa-Eco took ownership of the plant in 2002, it enjoyed a marked improvement in its performance.Kama has streamlined its management structure, and introduced a new concept of sales andemployee motivation. In 2003, labour productivity increased by 70% and the output of high-quality paper was increased and new products were launched. The company is now imple-menting a technical upgrade program for the plant.

46

Alfa-Eco’s Main Projects in 2003Alfa-Eco’s Main Projects in 2003

VimpelCom MegaFon

TsBK “Kama”

The Group gained management control ofBalakhna Pulp and Paper Mill (Volga) in 2001when the company was in technical defaulton its debt. A team of Alfa-Eco managers

optimized the mill’s condition and the plant has since enjoyed stable operations and is now anindustry leader. Volga manufactures over 30% of all newsprint in Russia. In 2003, it produced555,000 tonnes of goods. Around 63% of the plant’s paper is exported to 50 countries aroundthe world, with the bulk of exports going to the European Union. Leading publications in GreatBritain, France, Germany, Italy and other countries are printed on paper from Volga.

TsBK “Volga”

In 2003, Alfa-Eco continued its managementof Sakhalin-based Petrosakh, a vertically-integrated oil company (Alfa-Eco manages a97% equity stake in the company).Petrosakh delivers its output to Asia-Pacificcountries and also locally to satisfySakhalin’s needs. Petrosakh owns a licensefor the geological exploration of a large oil-and-gas field in the Sakhalin-6 coastal shelfzone (potential deposits are estimated at 1billion tonnes). A seismic survey has beencarried out and an international pool ofinvestors is being organised for its develop-ment. The potential size of the requiredinvestment is estimated at US $1.5 billion.

Petrosakh

In the reporting year, a grain holding companyAlfa-Eco Don was formed, which operates inthe spheres of grain processing, grain storageand transhipment possibilities via railroad andport. It has an export potential of approxi-mately 1 million tonnes of product per year.The company intends to expand its co-oper-ation with agricultural producers in theSouthern regions of Russia.

Alfa-Eco DonAlfa-Eco is the major shareholder of theTrading House for Reviving the Traditionsof P.A. Smirnov, Purveyors to the Court ofHis Imperial Highness, which holds therights to the internationally acclaimedSmirnov brand of vodka. In 2003, Smirnovwon a gold medal, two silver medals andtwo bronze medals at the 10th anniver-sary exhibition Prodexpo-2003.

Alfa-Eco is intensifying its program to pro-mote the Smirnov brand in order toincrease its sales volume, to expand theproduct family and to improve its quality.An improved composition of Smirnovvodka was developed and tested in co-operation with the best industry specialists.

Smirnov

47

In 2003 the Group acquired a blocking stakein the famous Cosmos Hotel in Moscow.Cosmos is a 3-star hotel with developedamenities, is favourably located and is a well-known brand. Experts in the hotel sectorgave Cosmos one of the best ratings for2003 among Moscow hotels in its class. Ithas an annual turnover of approximatelyUS $20 million.

Cosmos is an especially attractive invest-ment project due to the lack of 3-4-starhotels in Russia’s main cities. Over thereporting year Alfa-Eco, together with theother majority shareholder in Cosmos, theMoscow city government, participated in thestrategic and operational management ofCosmos.

Cosmos Hotel

The Securities Market

48

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

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

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

The Securities Market

In 2003, the oldest company of Russia’s municipal housing sector, Rosvodokanal, was acquiredby the Group. Rosvodokanal together with the Russian Congress of Municipal Formations coop-erate on implementing projects aimed at the creation of efficient market-oriented enterprises whichoperate public water supply systems. Rosvodokanal’s specialists have already begun operatingsuch systems in some regions of Russia.

Rosvodokanal

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

www.perekriostok.ru

With its origins in trading, Alfa Group was well posi-tioned to meet the growing demand for western-stylesupermarkets, as a new middle class emerged frompost-Soviet society, eager and able to buy high-quali-ty goods. In 1994, Alfa Group took a strategic deci-sion to establish Trade House Perekriostok(“Perekriostok”).

The first Perekriostok super-market opened its doors toconsumers in September1995. As early as 1996, theproject received support ofworldwide financial and creditinstitutions, including theEuropean Bank ofReconstruction and Develop-ment. In summer of 1998, theCompany launched its owndistribution centre providingsignificant and unprecedented cost and logisticaladvantages over its competitors. In April 2003, theCompany attracted its first outside investment - a7.7% stake in the Company was sold to internationalinvestment fund Templeton Strategic EmergingMarkets Fund LDC.

In 2003, the Company acquired from Delta CapitalManagement a controlling interest in one of the lead-ing retailers of the Nizhniy Novgorod region – SPAR

Middle Volga which owns and operates seven super-markets. This was the first deal on the Russian retailmarket where a strategic investor acquired sharesfrom a portfolio investor. This acquisition is synergis-tic and improves the position of Perekriostok on thenational retail trade market.

In January 2004, Perekriostokconcluded a 2-year syndicatedcredit for US $75 million whichwas organised by HSBC andRaiffeisenbank, which includedin the syndicate a number ofmajor western banks. This wasthe first ever all-private interna-tional syndication for a pureRussian corporate borrower.

● At the end of 2003 there were 66 modern super-markets operating under the Perekriostok brandname in Moscow, St. Petersburg, Samara,Togliatti, Volgograd and Nizhniy Novgorod.

● Perekriostok employs more than 9,000 persons. ● Perekriostok grew its revenues by 32% in 2003

with turnover reaching approximately US $450million (inclusive of taxes).

History

The principal objective of Perekriostok is to provide middle-income customers with a wide range of high-quality foodproducts at reasonable prices in a pleasant shopping environ-ment with efficient and high-quality service.

Each Perekriostok is a modern western-style store with manyresembling a kind of “shopping city”, where customers can pur-chase not only food products but also other goods ranging fromnewspapers and magazines to fresh flowers. Additionally, manystores have on-premises dry-cleaners, beauty salons, photostudios, ATM’s and mini-banking facilities. Each store utilisesscanner checkouts, saving time for customers.

From the very beginning, Perekriostok has pursued a strategy ofbuilding and leasing stores in densely populated suburban areasof Moscow. This is where the vast majority of Muscovites live, butthe infrastructure and amenities in the suburbs are typically muchless advanced than in downtown areas. Since Muscovites, likeany other large city dwellers, prefer to shop close to home,Perkeriostok caters to an enormous captive market.

Since late 2002 the Company has been rapidly expanding intothe middle-class population centres outside of Moscow andplans to aggressively expand further into Russia’s regions andthe CIS.

Concepts and StrategyConcepts and Strategy

51

Products Pricing

Perekriostok supermarkets offer a wide choice of food products and other goods (over15,000 SKUs in a typical supermarket and as many as 35,000 SKUs in the hypermarkets),with 75% accounting for food products) - both domestic and imported. In addition tostocking all the standard supermarket lines, Perekriostok stores offer approximately 360ready-to-cook or ready-to-eat items including fresh meat and fish. Additionally, many of thesupermarkets have an in-store mini-bakery which provides a selection of more than 80 orig-inal and traditional baked items. The Company also has its own private-label branded line ofhigh-quality goods. In March 2003, the Company launched a “Healthy Nutrition” programwhich it jointly developed with the Russian Academy of Medical Sciences, which is aimed atpromoting healthy eating habits among its customers.

A NUMBER OF PRIORITIESHAVE BEEN SET AND WILL BEFULFILLED IN 2004-2005.SOME OF THE MOREIMPORTANT PRIORITIESINCLUDE:

52

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

Launch of up to 40 stores in 2005 with tradearea of 45,000 m2;

Selected acquisitions of technologically-soundretail chains in Russia and CIS;

Obtaining credit ratings from international rating agencies in 2005;

Turnover in 2004 – more than US $750 million;in 2005 - more than US $1 billion.

Further Development forFurther Development for

2004-20052004-2005

1995 1996 19981997 1999 2000 2001 2002 20030

10

20

30

40

50

60

70

1 5 912

1928

3846

66

Моscow

Hypermarket

Supermarket

Small Format

Franchise Volgograd

N.Novgorod

Samara

Tolyatti

St.Petersburg

422

2

122

7

1

1

1

Perekriostok’s pricing policy is very straightforward – to provide customers with high-quali-ty goods at reasonable prices. This is possible through the forming of closer relations withdomestic suppliers and using advantages from having an in-house distribution centre.Direct deliveries and large-volume purchases considerably cut product costs, whichenables the chain to maintain competitive price levels in all of the Company’s supermarkets.Also, the Company offers a discount program and joint promotions with suppliers to attractnew customers and retain their loyalty.

Regular polls and loyalty cards programs enable the Company to understand customerneeds and preferences, and also help to determine pricing policies, assortment of goods,merchandising in the store, design of the store interior and assists in developing and intro-ducing up-to-date marketing programs and new services.

GROWTH IN NUMBER OF PEREKRIOSTOKSTORES AT YEAR END

Source: Company data

PEREKRIOSTOK STORE LOCATIONS AND NUMBER

OF STORES THROUGHOUT RUSSIA (June 2004)

ALFA TELECOMGOLDEN TELECOM, INC. IS A LEADING FACILITIES-BASED

PROVIDER OF INTEGRATED TELECOMMUNICATIONS AND

INTERNET SERVICES TO BUSINESSES AND OTHER HIGH-

USAGE CUSTOMERS AND TELECOMMUNICATIONS OPERA-

TORS IN MAJOR POPULATION CENTRES THROUGHOUT

RUSSIA AND OTHER COUNTRIES OF THE CIS.www.goldentelecom.ru

Golden Telecom’s customers includelarge, medium and small Russiancompanies, large transnational com-panies, business centres, hotels,fixed line, mobile and paging opera-tors, banks, financial institutions,residential clients, embassies andrepresentative offices of foreigncompanies. The Company makesuse of its own backbone fiber opticnetwork in Moscow, St. Petersburg,Nizhniy Novgorod, Krasnoyarsk,Samara, and Kiev which is accessedusing fiber optic, copper wire,microwave and fixed wireless lines.

Golden Telecom was incor-porated as a Delaware corpo-ration on 10 June 1999 and islisted on NASDAQ under thesymbol “GLDN”. Current share-holders of Golden Telecom rep-resent a balanced mixture ofstrategic and financial, as wellas Russian and internationalinvestors.

CustomersCustomers ShareholdersShareholdersShareholders of Golden Telecom

18%

Alfa Group

Telenor

Rostelecom

EBRD

30%

20%11%

8%

7%

6%

Baring Vostok

Capital International

Free Float

Source: Shareholders’ SEC filings, as of 31 December 2003

Golden Telecom consists of threemajor operating companies: Sovintel,Comincom, and Golden Telecom(Ukraine), and conducts its business inRussia and the CIS through a networkof affiliated or controlled structures.The most significant branches arethose in St. Petersburg, Arkhangelsk,Khabarovsk, Irkutsk and Ufa. The lead-ing regional joint ventures are situatedin Nizhniy Novgorod, Kaliningrad,Krasnoyarsk, Novosibirsk, Vladivostok,Ekaterinburg, Krasnodar, Volgogradand Samara. Through agents and dis-tributors, the Company also offersservice in Azerbaijan, Belarus, Georgia,and operates through subsidiaries inKazakhstan and Uzbekistan.

StructureStructure

55

ALFA TELECOM

GOLDEN TELECOM, INC.GOLDEN TELECOM, INC.

Comincom, together with its 100%-owned subsidiary,Combellga, provides telecommunications services, princi-pally to major hotels, business offices and mobile commu-nication companies through its telecommunications net-work in Russia, including Moscow, St. Petersburg,Voronezh, Samara and several other major population cen-tres. The acquisition of 100% of Comincom in December2003 further strengthens Golden Telecom’s position in thekey Moscow and St. Petersburg communications markets,and positions the Company to realize future operating andcost synergies.

Comincom

Sovintel

Golden Telecom (Ukraine) commenced service in 1997 asa competitive local exchange carrier in Kiev and as aprovider of mobile services. Today, Golden Telecom(Ukraine) is the leading provider to corporate customers inKiev and has a substantial presence in all major regionalcentres of Ukraine.

Golden Telecom (Ukraine)

Services Golden Telecom provides a variety of services to its customers.Some of the services offered include:

To business customers:● Local numbers and lines, local, domestic long-distance and

international digital voice services;● Private lines; ● Dedicated Internet access; ● Design, installation and management of private data networks; ● Call centre services

To cellular operators:● Local numbers and connection lines to the Public Switched

Telecommunications Network (PSTN), local, domestic long-dis-tance and international traffic carrier services

To international carriers:● Voice traffic termination in Russia and the CIS; ● Capacity resale

To smaller fixed-line operators:● Local, domestic long-distance and international traffic carrier

services; ● Voice over Internet Protocol (VoIP) traffic termination; ● Broadband IP connectivity

To consumers:● Residential telephone service;● Dial-up Internet access; ● Pre-paid calling cards

56

Sovintel was established in 1990 as a competitive localexchange carrier in Moscow in the form of a 50/50 joint ven-ture between the former parent company of GoldenTelecom, Global TeleSystems, Inc. (GTS) and the MainCentre for Management of Long-Distance Communications ofUSSR (GTsUMS). GTsUMS subsequently became part ofRostelecom - the Russian national long distance carrier.From its early days, Sovintel was positioned as a superiorvoice service provider with a focus on the high-end of thecorporate market. Sovintel expanded quickly and estab-lished a strong blue-chip customer base and a stellar repu-tation for customer service. GTS’ holding in Sovintel wastransferred to Golden Telecom, Inc. as part of the GoldenTelecom IPO in 1999. In September 2002, Golden Telecombought the remaining 50% of Sovintel from Rostelecom.

Market Position

Golden Telecom demonstrated strong financial results in 2003. Consolidated revenue was US$360.5 million, an increase of 81% over 2002. Earnings before interest, tax, depreciation andamortization (EBITDA), an important indicator of the Company’s financial health, grew by 87%relative to 2002 and reached US $115.0 million in 2003.

2003 Financial Results

The Company’s objective is to be the leading inde-pendent voice, data and Internet servicesCompany in Russia and the CIS. To achieve thisobjective, Golden Telecom intends to:

Pursue Consolidation Opportunities.The Company intends to pursue consolidation opportunities throughselective acquisitions that will allow it to expand its geographical reach, addto its service offerings and improve market share while maintainingoperational control. Golden Telecom will target complementary opportunitiesthat will enable it to achieve synergies and economies of scale and seekregional opportunities in major cities where it does not have its own localnetwork infrastructure.

Increase Market Share by Offering Bundled Data and VoiceServices Over an Integrated Network.Corporate customers increasingly demand integrated telecommunicationssolutions from one-stop providers that are able to deliver a full serviceoffering in the geographical areas in which these corporate customersoperate. As a result, Golden Telecom plans to continue to develop andcombine its businesses to create a unified service platform for local access,local exchange, domestic and international long distance, data, Internetaccess and services via turn-key solutions.

Extend the Company’s Leading Position in High GrowthData and Internet Markets.Golden Telecom plans to build on its position as a leading provider of dataand Internet communication services in Russia and other countries of theCIS by increasing the number of network access points in its network tofacilitate the growing demand for data and Internet communications.

53%

34%

9%4%

Business andCorporate Services

ConsumerInternet Services

Carrier and MobileOperator Services

Mobile Services

Strategy

Golden Telecom occupies a leading position in Russian and CIS telecommunications. TheCompany is the largest alternative operator in Russia, with an aproximate 35% share of the cor-porate market. Moscow is the primary base of Golden Telecom’s operations with approximately75% of the Company’s revenues received in Moscow. Golden Telecom also occupies a leadingposition in the Dial-Up Internet Access consumer market, throughout Russia. No other alterna-tive service provider commands such a strong presence in all of these markets. Golden Telecomis the number two provider in the corporate market of St. Petersburg and number one amongalternative network providers in Nizhniy Novgorod. In Ukraine, Golden Telecom (Ukraine) is thelargest independent fixed-line operator and operates in all major Ukrainian cities.

SOURCES OF REVENUEYear Ended 31 December 2003

CONSOLIDATED REVENUE (in USD mln)FOR THE YEARS 1998-2003

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

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

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

58

2003 was another record year for VimpelCom. VimpelCom’s phenomenal subscriber growthwas accompanied by record operating revenue of approximately US $1.34 billion, a 73.8%increase from 2002. Operating income before depreciation and amortization (OIBDA) wasapproximately US $613.2 million, a 90.3% increase as compared to 2002. VimpelCom’sOIBDA margin reached 45.9%, compared to 41.9% reported for 2002. Net income reachedapproximately US $234.0 million, an 80.6% increase from 2002. In 2003, VimpelCom genera-ted approximately US $511.9 million in operating cash flows. VimpelCom’s balance sheetwas strong, with a debt-to-shareholders’ equity ratio at 0.6 as of 31 December 2003.

59VimpelComVimpelCom

VIMPELCOM IS A LEADING PROVIDER OF WIRELESS TELECOMMUNICATIONS SERVICES IN RUSSIA, OPERATING UNDER THE “BEE LINE GSM”BRAND, WHICH IS ONE OF THE MOST RECOGNIZED BRAND NAMES IN RUSSIA. VIMPELCOM’S LICENSE PORTFOLIO COVERS APPROXIMATELY94% OF RUSSIA’S POPULATION (136 MILLION PEOPLE), INCLUDING MOSCOW AND ST. PETERSBURG.

www.vimpelcom.com

VimpelCom has always been a pioneer inwireless telecommunications in Russia andthe Company continues to be a marketleader in product innovation. In 2003,VimpelCom became one of the first opera-tors in the world to introduce on-line prepaidroaming. The Company also introducedcommercial GPRS (General Packet RadioServices) and MMS (Multimedia Services)offerings across the country in 2003. For itstraveling customers and foreign visitors,VimpelCom maintains roaming agreementswith companies from 150 countries and sup-ports GPRS roaming in 50 countries.

At the end of 2003, VimpelCom’s total sub-scriber base was approximately 11.44 mil-lion, with approximately 5.66 million sub-scribers in the Moscow license area and 5.78million subscribers in the regions outsideMoscow.

VimpelCom was the first Russian companyto list its shares on the NYSE in November1996. VimpelCom’s ADSs are listed on theNYSE under the symbol “VIP”. Since itslisting on the NYSE, VimpelCom has been aleader in corporate governance and trans-parency in Russia, being recognized onnumerous occasions as the best in Russiancorporate governance by various indepen-dent institutions and organizations.

Company Profile 2003 Financial Highlights

VimpelCom’s objective is to becomeRussia’s leading telecommunicationscompany, providing mobile voice anddata services. As Russia is now thefastest growing cellular market in theworld, VimpelCom’s strategy aims atsecuring long-term profitable growth forthe Company with a dedicated focus onservice quality and product innovation.This strategy is based on two funda-mental elements: (i) building a unifiednetwork across Russia with the samebusiness processes and solutions fornetwork operation and control, IT, mar-keting, distribution, customer serviceand billing; and (ii) employing primarilyorganic “greenfield” growth augmentedby selective acquisitions. Moscow,which is the most lucrative market inRussia, is gradually approaching satura-tion. Penetration in Moscow has alreadypassed the 80% level. Although sub-scriber growth in Moscow will continuefor some time, VimpelCom is gettingready for a new phase of competitionwhere retention, subscriber loyalty, supe-rior quality and customer-friendly prod-ucts will play a decisive role.

The Strategy for 2004 and Beyond

2001

1 mln

2 mln

3 mln

4 mln

5 mln

6 mln

7 mln

8 mln

9 mln

10 mln

11 mln

12 mln

2002 2003

2,1

11,5

00

5,1

53,1

00

11,4

36,9

00

2001

100

200

300

400

500

600

700

800

900

1000

1100

1200

1300

1400

2002 2003427.9

779.6

1,3

35.5

MTS

VimpelCom MegaFon

8%

49%43%

SUBSCRIBER GROWTH IN RUSSIA MARKET SHARE IN RUSSIA AT YEAR-END 2003 TOTAL OPERATING REVENUES

(in USD mln)

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

MARKET SHARE IN MOSCOW AT YEAR-END 2003

31%

37%

MTS

VimpelCom MegaFon

Other

14%

18%

Source: Company data

During 2003, Kyivstar registered healthyand profitable growth. The Company’ssubscriber base increased by 63% tomore than 3 million subscribers while netrevenues grew to US $374 million for the12 months ended 31 December 2003 – a

50% increase over 2002. Also noteworthy was the fact that EBITDA margin grew from 58% in 2002to 60% in 2003, while net income grew to US $101 million in 2003.

Also in March 2003, Kyivstar launched US $60 million in 3-year loan notes, following a successfulUS $100 million issuance in November 2002. This Eurobond was the first ever Ukrainian corporatebond issue and first ever 144A offering outside of Ukraine. At the end of 2003, Standard and Poor’sraised the long-term rating to the B (stable) level.

KyivstarKyivstarKyivstar is one of the leading providers of wirelesstelecommunications services in Ukraine. The Company islicensed to operate mobile, city, long-distance and inter-national phone networks and in addition holds licenses tobuild and maintain its own fixed-line networks and toorganise data transmission networks. The Company’smobile communications network is deployed accordingto the GSM 900/1800 standards.

www.kyivstar.net

Ab

ou

t K

yivs

tar Kyivstar began operations as a mobile operator on 9 December

1997 when the first call was performed on its network. By the endof 1997, the Company had a total of 506 subscribers, which at thetime translated to a 4.2% market share. By November 2001, thenumber of subscribers reached 1 million. As of 1 July 2004, theCompany’s subscriber base exceeded 3.6 million, and estimatedmarket share was 43.5%. The network covers more than 980Ukrainian cities and towns including all regional centres, over13,000 villages and all the main highways of national and regionalimportance. The Company offers international roaming serviceswith the networks of 247 mobile operators from 120 countries on 5continents.

Kyivstar received ISO 9001:2000 certification in 2001. It was thefirst Ukrainian company operating on the telecommunications mar-ket to do so. Maintaining international standards ensures mutuallybeneficial development of relations with partners and enhancesthe development of all processes in the Company.

60

Kyivstar in 2003

140.1

0

50

100

150

200

250

300

350

400

249.2

40.5

143.6

374.0

2001 2002 2003

Net RevenueEBITDA

223.7

0

0.5 mln

1.0 mln

1.5 mln

2.0 mln

2.5 mln

3.0 mln

3.5 mln

1,0

95,2

00 1,8

55,9

00

3,0

36,6

00

2001 2002 2003

Source: Company dataSource: Annual audited US GAAP consolidated financial statements

EB

ITD

A M

arg

in =

28.

9%

EB

ITD

A M

arg

in =

57.

6%

EB

ITD

A M

arg

in =

59.

8%

GROWTH IN NET REVENUES AND EBITDA(in USD mln) FOR THE YEARS 2001-2003

GROWTH IN KYIVSTAR’S SUBSCRIBER BASEIN UKRAINE AT END OF YEARS 2001-2003

Ab

ou

t K

yivs

tar

Beyond 2003

Kyivstar is committed to strengthening its positions inthe mobile market of Ukraine and is committed toproviding affordable, flexible and high-quality mobileservices across a range of market segments to asmany customers as possible.

The foundation of Kyivstar’s marketing strategy liesin an accurate positioning of mobile communicationsservices for different subscriber categories, flexibletariff policies, and fair treatment of our customers.A harmonious combination of strategic foreignshareholder experience (Norwegian telecommunica-tions company Telenor) and effective use of marketingresearch results contribute to the marketing successof the Company and to general customer perceptionsof the Kyivstar brand as a reliable, open and friend-ly operator.

Kyivstar’s strategy is also based on the active develop-ment of a reliable technical network. Kyivstar willactively increase both capacity and quality of cover-age. The Company is also targeting an increase inthe number of roaming partners, extending co-oper-ation to even more countries in order to provide cus-tomers with more mobile services abroad.

MegaFonMegaFonMEGAFON IS THE THIRD-LARGEST PROVIDER OF WIRELESS TELECOM-MUNICATIONS SERVICES IN RUSSIA. MEGAFON’S LICENSE PORTFOLIOCOVERS 100% OF RUSSIA’S POPULATION (145 MILLION PEOPLE).

www.megafon.ru

About

MegaFon MegaFon is a federal GSM 900/1800 mobile operator in Russia which

ranks third after MTS and VimpelCom in terms of key performance indica-tors. The Company’s major shareholders, apart from Alfa Telecom whichowns an effective 25.1% equity stake in MegaFon, are Telecominvest, andSwedish-Finnish company TeliaSonera.

MegaFon’s mobile services licenses cover 100% of the Russian territorywith a population of 145 million and the licenses provide the Company witha strong advantage in the medium term.

MegaFon meets world technology and customer care standards. The largestMegaFon network operated in Moscow and Moscow region, for example,is built on the basis of the state-of-the-art GSM equipment which will notrequire upgrades in the foreseeable future and allows the Company to offerworld class services today.

61A

bout

MegaFon

During 2003, MegaFon managed to increase its subscriber base morethan two-fold (from 3.1 million subscribers to approximately 6.4 millionsubscribers) and to bring its share of the mobile services market to 18%.

In 2003, the Company’s net profit grew by almost four times to US$99 million, its revenue reached US $815 million and EBITDA was ahealthy US $326 million.

MegaFon in 2003

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

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

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

62

Future Plans

2000 2001 200320020

0.5 mln

1 mln

2 mln

3 mln

4 mln

5 mln

6 mln

7 mln

6,3

59,0

00

3,0

51,0

00

911,0

00

256,0

00

TOTAL NUMBER OF SUBSCRIBERS AT YEAR END

Source: Company data

Russian TechnologiesRussian TechnologiesTHE RUSSIAN TECHNOLOGIES VENTURE FUND WAS ESTABLISHED BY ALFA GROUP CONSORTIUMDURING 2003 IN ORDER TO EXPLOIT THE COMMERCIAL POTENTIAL OF PROMISING RUSSIAN TECH-NOLOGY PROJECTS IN DOMESTIC AND INTERNATIONAL MARKETS.

www.ru-tech.ru

The innovation potential of the Russian marketrepresents a unique opportunity to create andcommercialise new technological productswith considerable growth potential.

Russia has a strong scientific and technologicalbase, founded on the heritage of the formerSoviet Union which made signifi-cant investment into scientificresearch and development.Today, Russia is one of the lead-ers in the world (ranking fourthafter the US, China and Japan) interms of number of scientists(over one-half million) with thenumber of post-graduate futurescientists growing every year.Substantial scientific potential ofRussia and emerging scientific developmentscreate favourable conditions for development ofa venture capital industry in Russia.

Throughout the 1990’s, a number of Russianscientists immigrated to the United Statesbringing with them technologies developedduring the Soviet era. Companies such asGoogle, Parametric Technologies, and

Genesys were built on Russia-originated tech-nologies. Until recently this “immigrationmodel” was the only practical way for Russia-originated technologies to be exploited forcommercial applications in global markets aswestern private equity and venture capitalfunds have historically been reluctant to invest

in technology companies withsubstantial links to Russia.

Russia’s continuing economicdevelopment and political stabi-lization coupled with broade-ning access to local venture capi-tal provide the right environmentfor commercialising Russia-origi-nated technologies in global mar-kets. Russian Technologies is

positioned as a key player in building success-ful partnerships with local entrepreneursassisting them to achieve their goals to buildindustry leading companies.

Russian Technologies Fund Strategy

VentureBusiness in Russia:MarketOpportunity

Mission of the Fund. To develop the commercial potential of Russian technologies inworld markets and assist in introducing western high technologies in Russia.

Strategic Vision. To become the most successful management company amongsttechnology venture funds in Russia, as well as to act as a catalyst in the development ofRussia’s new economy.

Main Activity. To invest in companies with breakthrough technologies that will occupycompetitive positions in existing markets or newly established market segments.

Basic Values● Great technology will not make an impact without a strong management team, strategic

planning and investors’ focus.● While there will always be many investment proposals, the task of investors is to identify

the market opportunities within.

63

Philosophy of the Fund

The Fund makes equity investments in technology companies addressing largeexisting or expanding new markets. Russian Technologies targets companies withmanagement teams and specialists capable of demonstrating viable businessmodels and a solid vision for future business development.

The Fund is focused on early stage companies but will typically only invest whena company has a working prototype based on defendable intellectual property.

Each investment is approached as a partnership with the entrepreneur the basis ofwhich is the creation of long-term shareholder value.

The Fund is committed to providing financial, technical and operational assistancethroughout the life of a portfolio company to ensure high returns both for the Fund’sinvestors and shareholders.

Russian Technologies will often invest together with western co-investors. In suchcases, the Fund’s participation and particular value-add is mitigation of country-specific, political and technological risks.

The Fund operates as a financial investor and assumes it will be able to exit fromthe investment process within 3 to 4 years after having achieved a satisfactoryreturn on investment. The ability to project an exit opportunity is regarded as one ofthe major criteria in the investment project selection.

The majority of the funds investments are made into companies in which the Fundcan control the early stage project implementation and decision-making on criticalissues. The Fund actively participates in portfolio companies via the Board ofDirectors. Additionally, the Fund actively contributes to strategic planning, selectionof the key personnel and securing of financing for subsequent investment roundsusing a broad network of business partners, investors and consultants both insideRussia and on global markets.

A lack of working capital is often the main reason for a start up company going outof business. Therefore, we strongly adhere to the following principles in financingoperating expenses:

● Priority funding of the expenses that are critical to the company’s success;

● A corporate culture of financial discipline;

● Result-oriented motivation of managers and employees

The Russian Technologies Fund was formed during 2003. The main activities of theFund in 2003 were:

● Creation of deal pipeline;

● Team formation;

● Establishing relations with market participants

The Scientific Advisory Board (SAB), chaired by Professor A.P. Kuleshov, wasestablished within the framework of the Fund. The SAB deals with technologicalexpertise and evaluation of projects based on its wide connections within theRussian scientific community, including the Russian Academy of Science.Additionally, SAB helps the Fund to locate and select perspective Russian tech-nologies.

In April 2004, Russian Technologies executed its first investment, acquiring a 44%share of Ultra Motor Company, Ltd for US $1.1 million. Ultra Motor deals withcommercialisation of new fundamental technology and its promotion in the electrictransport market, which in 2003 was valued at US $16.2 billion. This technology isbased on the use of a new powerful electric motor for bicycles and other low powertransport vehicles. This technology has been developed in Russia over the past15 years.

Our investment will allow Ultra Motor to introduce its first commercial product to theIndian market, as well as to reinforce the team of managers and initiate develop-ment of new prototypes of electric vehicles. Mikhail Gamzin, Vladimir Bernsteinand Joe Bowman have joined the Ultra Motor Board of Directors.

The Fund is an active participant and sponsor of major events of the Russian tech-nology venture community. In 2003 Russian Technologies Fund was an active par-ticipant in events such as: The Fourth Russian Venture Fair and “Partnership forProsperity & Security” conference in Philadelphia, US. In January 2004 the Fundsponsored The Russian-American Technology Symposium (Stanford, USA) and inMarch 2004 participated in The Israeli TechTour. In September 2004 the Fund plansto be one of the main organizers of The Russian TechTour.

Company activity in 2003 and H1 2004

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Information Technologies

New materials

Laser technologies

Bio-technologies and life sciences

Nanotechnology

Energy

Sensors, security and detective systems

Unique engineering solutions

Russian Technologiesfocuses on investments inseveral primary technology

domains:

Serving Our CommunitiesServing Our Communities

lfa Group and its companies are known for their multi-year tradition of charitable activitiesand for the patronage of Russia’s historical, cultural and spiritual heritage. While we aim toachieve leadership in all the businesses we operate, we strive not to lose sight of the

importance of giving back to the society and communities in which we do business. Throughconstant efforts to create the conditions for a flourishing society, we are also laying the foundationsfor our own long-term success.

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

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

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● Alfa Bank donated considerable sums to help homeless children, victims ofterrorism, and others who suffered personal pain and loss in Moscow and theregions. ● In Orenburg, “TNK against Drugs” program, which included a media campaignincluding television broadcasts and printed materials, was launched.● AlfaStrakhovanie, as part of a joint charitable program with Alfa Bank, establishedinsurance compensation for the children of deceased crew members of Kursksubmarine to provide them with financial support for pursuing a higher education.● Alfa-Eco Group, Perekriostok, TNK-BP and VimpelCom financially supportmunicipal social security departments, nursing homes, orphanages, hospitals andclinics, veteran agencies, and military units in Moscow and other cities across Russia.● Perekriostok provides regular assistance with foodstuffs to invalids, large families,veterans, families with handicapped children and disadvantaged people, as well as to the “RETO Nadezhda” Centre of rehabilitation of drug addiction, and the Khimkihospital in Moscow region.● VimpelCom contributed financially to the construction of the Temple of HolyRussian Confessors, contributes to the United Way Moscow Fund, and provided freemobile phones service to invalids, veterans and disabled soldiers from the war in Chechnya.● Kyivstar provided free mobile service to first aid medical teams working with children in Kyiv, and sponsored a restoration of the intensive caredepartment of the Main Children’s Hospital of Ukraine.● Annually, TNK-BP prepares Christmas gifts and sponsors a New Year’s feast for children at schools and boarding schools in Nizhnevartovsk,Ryazan, Kursk, Moscow and operates three corporate charity foundations in the Republic of Udmurtia, the Saratov region, and the KhantyMansiysk Autonomous Area.

Humanitarian Activities

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● TNK-BP and Alfa Bank were co-sponsors of Paul McCartney’s historic concert on RedSquare in Moscow, a part of his European tour “Back in the World 2003”. The concert wasattended by over 35,000 persons, including President Vladimir Putin.● Alfa Bank is a trustee of the State Academic Bolshoi Theatre and one of the famous patronsof the fine and performing arts in Moscow and the regions. The Opera “La Traviata” by G. Verdii, anew project of Arturo Toscanini, was staged at the Bolshoi in 2003 under Alfa Bank’s sponsorship. ● In St. Petersburg Alfa Bank presented the exhibition “Joseph Brodsky: Urania. Leningrad-

Venice-New-York”. The Bank has set up a Joseph Brodsky Memorial Fund to erect a monument to a great Russian poet and Nobel Laureate and open amuseum in his honor.● Alfa Bank sponsored Robbie Williams’s concert in Moscow, and provided assistance to “Ballet Stars of St. Petersburg” program in Royal Albert Hall inLondon, Andrei Makarevich’s performances in the FarEast of Russia, Yury Bashmet’s and “Solisty Moskvy”concerts in Lipetsk. Alfa Bank was a sponsor of theunique exhibition “Kasimir Malevich: Suprematism” at theSolomon R. Guggenheim Museum in New York from Mayto September 2003, providing American audiencies with arare opportunity to view the work of this historic Russianartist. This exhibition was named a Best MonographicMuseum Show in the USA in 2002-2003 by US Art CriticsAssociation.● Alfa Bank’s regional branches sponsored the DmitryKhvorostovsky’s concert in Yekaterinburg, Oleg Tabakov’sMoscow Theatre-Studio performances in NizhniyNovgorod, the 7th International Jazz Festival “Eurasia -2003” in Orenburg and the theatre festival “KuzbassKovcheg” in Kemerovo.● Alfa-Eco Group finances cultural programs in NizhniyNovgorod region, sponsored the publication of booksabout the Marshall R. Y. Malinovsky Military Academy,and the Moscow State University trustees, and providedfunds to monasteries in Moscow region. ● Golden Telecom supported the exhibition “AtyrauTelecom 2003” and the international annual musicalcontest “Asia Dausy-2003” in Kazakhstan.● TNK-BP sponsored the “Musical Kremlin” InternationalFestival in Moscow, and holds the “Samotlor Nights”festival annually.

● Alfa Bank funds the Alfa Chance program that provides scholarships to talented high school graduates from Russian regions to study at prestigiousUniversities in Moscow and St.Petersburg.● Alfa-Eco Group sponsors musical schools in Tula region, educational organizations in Sakhalin region, and institutions providing employment assistance forteenagers.● TNK-BP supports a number of youth activities in Nizhnevartovsk including sports clubs and creative groups, mass cultural events, and the payment ofdedicated scholarships to talented students.● TNK-BP assigned funds for computerization of rural areas of the Republic of Udmurtia, the Saratov region, provided charitable aid to the Federation forInternet Education of Karelia and in Tyumen as well as to high schools in different cities. ● TNK-BP supports native population and minorities of the North and the Muslim community of Nizhnevartovsk.

EducationSupport andTalentDevelopment

Support of Culture andNational Heritage68

● Alfa Bank was a general sponsor of the 8th Annual President of Russia GolfCup and Junior Golf Development Program. Alfa Bank also financed InternationalNordic Holiday in Murmansk.● Alfa-Eco Group sponsored the international chess festival “Alfa-Eco VoronezhCup-2003” and finances support for young talented chess-players in Voronezhregion.● MegaFon organized and sponsored the Moscow Championship on AdidasStreetball Challenge as part of Moscow City Day celebrations.● TNK-BP organized and financed competitions and tournaments in varioussports in the Siberian regions.

Sporting Initiatives

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● Alfa-Eco Group provides financial assistanceto ecological organizations in Perm region andsponsors ecological programs in NizhniyNovgorod region.● As a member of World Wildlife Fund Alfa Bankregularly contributes to nature conservationinitiatives. ● TNK-BP’s business units in Nyagan, Udmurtia,and the Saratov region have been certified underISO for product quality, environment protectionand management system parameters. Also, aspart of TNK-BP’s “Clear Water” program, theCompany regularly purchases treatment units inextraction areas. ● TNK-BP continuously improves workingconditions for its employees by building newroads, new hostels on remote deposits and themeans of transportation for improved travel androtation of workers in the field.

Environment, Health and Safety

ALFA BANK GROUPChairman of the Board: Mikhail Fridman President: Peter Aven Address: 27 Kalanchevskaya Street, Moscow, 107078, Russia Tel.: +7 (095) 929-91-91, (095) 974-25-15 E-mail: mail@alfabank.ru

ALFASTRAKHOVANIEINSURANCE GROUPChief Executive Officer: Vladimir Skvortsov Address: 31B Shabolovka, Moscow, 115162, Russia Tel: +7 (095) 788-09-99 Fax: +7 (095) 785-08-88 E-mail: alfastrah@alfastrah.ru

TNK-BP CEO and President: Robert Dudley Address: 18 Schipok Street, Building 2, Moscow, 115093, Russia Tel.: +7 (095) 777-77-07 Fax: +7 (095) 777-77-07 E-mail: company@tnk-bp.ru

ALFA-ECO GROUPChief Executive Officer: Alexander Savin General Director: Alexander Fain Address: 12 Krasnopresnenskaya Naberezhnaya, Moscow, 123610, Russia Tel.: +7 (095) 967-00-00, (095) 967-00-66Fax: +7 (095) 967-00-76 E-mail: mail@alfaeco.ru

TRADE HOUSE PEREKRIOSTOK Chief Executive Officer: Alexander Kosiyanenko Address: 89 Dmitrovskoye Shosse, Moscow, 127486, Russia Tel.: +7 (095) 232-59-24 Fax: +7 (095) 956-35-25 E-mail: secretariat@perekriostok.ru

ALFA TELECOM*Managing Director: Pavel KulikovAddress: 21 Novy Arbat Street, Moscow, 119019, Russia Tel.: +7 (095) 981-44-47 Fax: +7 (095) 981-44-48 E-mail: lmi@alfaeco.ru

GOLDEN TELECOM, INC.President and CEO: Alexander Vinogradov Address: 1 Kozhevnichesky Proezd, Moscow, 115114, Russia Tel: +7 (095) 797-93-00 Fax: +7 (095) 797-93-32 E-mail: info@gldn.net

KYIVSTAR President: Igor Litovchenko Address: 51 Krasnozvezdniy Prospect, Kiev, 03110, UkraineTel: + 380 (44) 247-39-10Fax: + 380 (44) 245-72-08E-mail: info@kyivstar.net

RUSSIAN TECHNOLOGIESGeneral Director: Mikhail GamzinAddress: 23A Naberezhnaya Tarasa Shevchenko,Sector B, Floor 6, Moscow, 121151, RussiaTel.: +7 (095) 255-83-64Fax: +7 (095) 255-83-65E-mail: office@ru-tech.ru

CTF HOLDINGS LTD Director: Franz Wolf Head Office: 4 Irish Place, Suite 2, Gibraltar Tel.: (350) 41977 Fax: (350) 41988

MOSCOW CONTACT INFORMATION

Director of Corporate Development, Finance and Control: Nigel Robinson Deputy Director of Corporate Development, Finance andControl: David Gould Manager of Corporate Relations: Maria KlepilinaAddress: 6 Sechenovskiy Pereulok, Building 3, 3rd Floor,Moscow, 109034, Russia Tel.: +7 (095) 787-00-77 Fax: +7 (095) 201-36-00 E-mail: info@ctf.ru

ContactInformationContactInformation

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VIMPELCOM Chief Executive Officer: Alexander Izosimov Vice-President, International and Investor Relations:Valery Goldin Address: 10 8th Marta Street, Moscow, 127083, Russia Tel: +7 (095) 725-07-00 Fax: +7 (095) 721-00-17 E-mail: info@beeline.ru

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