The explanatory note to the accounting report of the open joint-stock company "Sibirtelecom" for 2002 (стр. 13 )

OJSC “Share-Holding Company for Development of Telephone Communication “Mobiltelecom”

Location: 7 Suhe-Batora Street, Ulan Ude

Postal address: 7 Suhe-Batora Street, Ulan Ude

Share of the eminent in the statute capital of this entity: 25.99%

Share of this entity in the statute capital of the eminent: none

Basis: agreement on association with OJSC “Electrosvyaz” of Republic of Buryatiya of 21.12.01

Private Security Enterprise “Ecrantelecom” Ltd.

Location: 13 Pirogova Street, Tomsk

Postal address: 13 Pirogova Street, Tomsk

Share of the eminent in the statute capital of this entity: 82.50%

Share of this entity in the statute capital of the eminent: none

Basis: agreement on association with OJSC “Tomsktelecom” of 21.12.01

“Yenisseytelecom” Ltd.

Location: 102 Prospect Mira, Krasnoyarsk

Postal address: Building 3, 4B Aerovokzalnaya Street, Krasnoyarsk

Share of the eminent in the statute capital of this entity: 51%

Share of this entity in the statute capital of the eminent: none

Basis: agreement on association with OJSC “Electrosvyaz” of the Krasnoyarsk Krai of 21.12.01

“Baikalwestcom” Ltd.

Location: 68 2nd Zheleznodorozhnaya Street, Irkutsk

Postal address: 68 2nd Zheleznodorozhnaya Street, Irkutsk

Share of the eminent in the statute capital of this entity: 51%

Share of this entity in the statute capital of the eminent: none

Basis: agreement on association with OJSC “Electrosvyaz” of the Irkutsk Region of 21.12.01

“Cellular Phone of Kuzbass GSM” Ltd.

Location: 61 Sovetsky Prospect, Kemerovo

Postal address: 61 Sovetsky Prospect, Kemerov.

Share of the eminent in the statute capital of this entity: 100%

Share of this entity in the statute capital of the eminent: none

Basis: agreement on association with OJSC “Electrosvyaz” of the Kemerovo Region of 21.12.01

Scientific-Production Company “Svyazintex” Ltd.

Location: 36 Gagarina Street, Omsk

Postal address: 85/1n Tchelyuskintzev Street, Omsk

Share of the eminent in the statute capital of this entity: 49%

Share of this entity in the statute capital of the eminent: none

Basis: agreement on association with OJSC “Electrosvyaz” of the Omsk Region of 21.12.01

“Omsk Cellular Communications” Ltd.

Location: 13 Kemerovskaya Street, Omsk

Postal address: 13 Tarskaya Street, Omsk

Share of the eminent in the statute capital of this entity: 29%

Share of this entity in the statute capital of the eminent: none

Basis: agreement on association with OJSC “Electrosvyaz” of the Omsk Region of 21.12.01

“ChitaNET” Ltd.

Location: 22 Tchaikovskogo Street, Chita

Postal address: 22 Tchaikovskogo Street, Chita

Share of the eminent in the statute capital of this entity: 31%

Share of this entity in the statute capital of the eminent: none

Basis: agreement on association with OJSC “Electrosvyaz” of the Chita Region of 21.12.01

“Yellow Pages – Tomsktelecom” Ltd.

Location: 32 Kuleva Street, Tomsk

Postal address: Building 16, 9 Makrushina Street, Tomsk

Share of the eminent in the statute capital of this entity: 33.30%

Share of this entity in the statute capital of the eminent: none

Basis: agreement on association with OJSC “Tomsktelecom” of 21.12.01

“ATS - 32” Ltd.

Location: 94 Mira Street, Irkutsk

Postal address: 94 Mira Street, Irkutsk

Share of the eminent in the statute capital of this entity: 40.40%

Share of this entity in the statute capital of the eminent: none

Basis: agreement on association with OJSC “Electrosvyaz” of the Irkutsk Region of 21.12.01

“ATS – 41” Ltd.

Location: 27 Mira Street, Bratsk, Irkutsk Region

Postal address: 27 Mira Street, Bratsk, Irkutsk Region

Share of the eminent in the statute capital of this entity: 49%

Share of this entity in the statute capital of the eminent: none

Basis: agreement on association with OJSC “Electrosvyaz” of the Irkutsk Region of 21.12.01

OJSC “Irkutsk Computation Chamber”

Location: 8 per. Bogdanova, Irkutsk

Postal address: 8 per. Bogdanova, Irkutsk

Share of the eminent in the statute capital of this entity: 34%

Share of this entity in the statute capital of the eminent: none

Basis: agreement on association with OJSC “Electrosvyaz” of the Irkutsk Region of 21.12.01

“Gorno-Altaisk Cellular Communication” Ltd.

Location: 51/1 Choros-Gurkina Street, Gorno-Altaisk

Postal address: 51/1 Choros-Gurkina Street, Gorno-Altaisk

Share of the eminent in the statute capital of this entity: 30%

Share of this entity in the statute capital of the eminent: none

Basis: agreement on association with OJSC “Electrosvyaz” of Republic of Gorno-Altaisk of 21.12.01

B-1) Organizations where the eminent has lateral control (i. e. belonging to the same group of entities as the Society)

“Sayantelecom” Ltd.

Location: 45 Sovetskaya Street, Abakan, Republic of Khakassiya

Postal address: 45 Sovetskaya Street, Abakan, Republic of Khakassiya

Share of “Yenisseytelecom” Ltd. in the statute capital of this entity: 65%

Share of this entity in the statute capital of the eminent: none

Basis: agreement on association with OJSC “Electrosvyaz” of the Krasnoyarsk Krai of 21.12.01

12. State Assistance

During the year of 2002 the Society has been granted the following finances within the framework of state assistance:

Table 30

Name of state assistance	Sum, *****bles
1	2
Financing of capital expenditures related to purchase, construction or acquisition of main assets, other means	334
Financing of running expenditures	75,102
Budget loans
Other types of state assistance
TOTAL	75,436

13. NON-STATE PENSIONERS’ FUNDS

In 2002 the Society has reached an agreement with the non-state pensioners’ fund “Telecom-Soyuz.” According to this agreement, the Society is obliged to pay fixed sums in the amount of 11,000 thousand rubles in the year 2002 and 13,200 thousand rubles in the year 2003 (without associated companies.)

Total sums of payments into non-state pension insurance, as paid out by the Society in the years 2002 and 2001 amount to 79,696 thousand rubles (accounting for associated companies.) In the year 2003 payments are fixed in the amount of 94,469 thousand rubles. Data on corresponding agreements are provided below:

Table 31

Regional affiliate	Non-state pensioners’ fund, agreement, validity period	Payments (*****bles)
		2001	2002	2003
“Altaitelecom”	“Telecom-Soyuz” #27/1 of 31.05.2001, fm 3rd quarter of 2001 till 2nd quarter of 2006	2,800	5,760	8,640
“Electrosvyaz”, Republic of Buryatia	“Telecom-Soyuz” #89/2 & 89p/02 of 31.01.2002 till 01.01.2007		5,280	5,280
“Gorno-Altaitelecom”
“Electrosvyaz” of the Irkutsk Region	“Telecom-Soyuz” #80/1 of 18.12.2001, fm 01.01.2002 till 31.12.06	70	9,630	13,920
“Electrosvyaz” of the Kemerovo Region	“Telecom-Soyuz”, fm 09.10.01, no terminal date	3,300	13,200	13,200
“Electrosvyaz” of the Krasnoyarsk Krai	“Telecom-Soyuz”, fm 01.01.01, no terminal date	1,000	4,000	12,000
“Electrosvyaz” of the Omsk Region	“Telecom-Soyuz”, #78/1, fm 06.11.2001, no terminal date		8,300	8,950
“Tomsktelecom”	“Telecom-Soyuz”, fm 1st quarter of 2002 till 4th quarter of 2007		15,256	15,259
“Electrosvyaz” of the Republic of Khakassiya	“Telecom-Soyuz”, #106/2 of 26.06.2002 till 2007		100	1,240
“Chitatelecom”	“Telecom-Soyuz”, # 94/02 & #94p/02 of 18.03.2002, for 5 years			2,780
“Electrosvyaz” of the Novosibirsk Region	“Telecom-Soyuz”, #96/02 of 21.03.2002, fm 2nd quarter of 2002 till 2nd quarter of 2007		11,000	13,200
TOTAL:		7,170	72,526	94,469

14. EVENTS THAT TOOK PLACE AFTER DECEMBER 31, 2001 (PBU 7/98)

In accordance of Decree of the Ministry of Finances of RF of 25.11.1998 #56н “On approval of system for book accounting “Events after Reporting Date” (PBU 7/98)” below follows data on events that took place after reporting date:

14.1 Changes to statute documents

Based on the decision of the Board of Directors of Sibirtelecom OJSC. Of April 26, 2002, Protocol #15, and in accordance with resolution of the FCCB of Russia of December 27, 2002, #1856/б, the statute capital of the Society has been increased to 2,387,973 thousand rubles. Registration of the changes to the Statutes has been completed on February 10, 2003. Nevertheless, changes to the statutes capital has been considered a significant event, which confirmed the conditions under which the company performed its activities as of December 31, 2002, and which have been included into the present book accounting report in accordance with the requirements of PBU 7/98 “Events After the Reporting Date.)

14.2 Decision on issuance of bonds

On December 26, 2002 the Board of Directors of Sibirtelecom OJSC. (Protocol #16) approved the deal of taking a loan which would account for 25 to 50 per cent of the balance value of the assets of the Society, through issuing bonds of the Sibirtelecom OJSC., stipulating the interest of the bonds based on market value, but not more than 18% a year, on the following conditions:

Issue interest documentary bonds series 1.

Total value of bonds shall be 1,300,000,000 rubles.

Nominal value of a bond shall be 1,000 rubles.

Type of issuance of bonds – free subscription.

Date of issuance shall confirmed after state registration of issuance.

Issuance of bonds shall be started not earlier than 2 (two) weeks after disclosure of information on state registration of issuance of bonds in “Supplement to FCBP Herald”, newspapers “News Bulletin” and/or “Izvestiya (News)” and/or “Commersant (Entrepreneur)”, and availability to all potential buyers of information on such issuance of bonds.

Date of termination of issuance of bonds shall be stipulated as the earliest of the following dates:

a) 10th working date after start of issuance of bonds;

b) date of issuance of the last bond paper.

At that, date of termination of issuance shall not be later than twelve months after approval of decision of issuance of the bonds.

Price of the bonds shall be set at 100% of nominal value.

Interest rate on the first coupon shall be set based on the results of tender conducted on the first day of placing the bonds at the MMVB (Moscow Inter-bank Currency Stock Exchange.)

When selling the bonds, make it possible to pay in cash. No extended payment shall be allowed.

Issuance of bonds shall be conducted through MMVB Ltd. (Moscow Inter-bank Currency Stock Exchange.)

Centralized storage of the bonds shall be organized at the specialized depository “Non-commercial partnership “National Depository Centre.”

Date of start of cashing in the bonds shall be set on the 1092 (one thousand and ninety-second) day after the date of issuing the bonds.

Date of termination of cashing in the bonds shall coincide with the date of starting date of such cashing in.

The bonds shall be redeemed at nominal value on the date of the 1092 (one thousand and ninety-second) day after the date of issuing the bonds either independently or through a cashing agent.

Premature cashing in of the bonds shall be excluded, with the exception of cases stipulated by the legislation of the Russian Federation.

The bonds shall be issued without collaterals.

14.3 Purchase of 49% of shares of “Baikalwestcom” Ltd. And “Yenisseytelecom” Ltd.

On February 12, 2003 a premature general assembly of share-holders of Sibirtelecom OJSC took place, where the following decisions were made:

1. Approve the deal of purchase/sale of 237,797 (two hundred and thirty-seven thousand seven hundred and ninety-seven) ordinary shares of “Yenisseytelecom” Ltd, constituting 49% of the statutes capital of “Yenisseytelecom” Ltd, at the price of 12,500,000 (twelve million five hundred thousand) US dollars in rubles equivalent of the day of payment in accordance with the terms of purchase/sale agreement between Sibirtelecom OJSC and company “Russian Telecommunications Development Holding Corporation.”

2. 2. Approve the deal of purchase/sale of 490 (four hundred and ninety) ordinary shares of “Yenisseytelecom” Ltd, constituting 49% of the statutes capital of “Baikalwestcom” Ltd, at the price of 8,500,000 (eight million five hundred thousand) US dollars in rubles equivalent of the day of payment in accordance with the terms of purchase/sale agreement between Sibirtelecom OJSC and company “Russian Telecommunications Development Holding Corporation.”

In accordance with the Russian legislation, the deal of purchase/sale of 49% of shares of “Yenisseytelecom” Ltd and 49% of shares of “Baikalwestcom” Ltd between Sibirtelecom OJSC and company “Russian Telecommunications Development Holding Corporation” are considered to be the deals with interest (company RTDHC is a daughter company of “RTK-Leasing” Ltd, affiliated with “Svyazinvest” Ltd.

“Svyazinvest” Ltd, being the company interested in the deal, did not take part in the voting.

In accordance with credit agreement #16-03 “on provision of loan in Russian rubles”, on 19.03.2003 “Alphabank” Ltd provided to Sibirtelecom OJSC a loan for purchase of “Yenisseytelecom” Ltd and “Baikalwestcom” in the amount of rubles equivalent to 21,000,000 (twenty-one million) US dollars, based on the exchange rate of the Central Bank of the RF on the day of provision of the loan. Such rubles equivalent amounts to 659,561,700 (six hundred and nine million five hundred and sixty-one thousand seven hundred) rubles.

As a collateral to paying back the loan, shares of the purchased companies shall be handed over. Date of reimbursement of the loan shall be 13.09.2003. Reimbursement of the loan shall be executed in Russian rubles. The right of ownership for the shares has been confirmed by a note from depository of “North-Western Financial Company” Ltd of 13.01.2003.

14.4 Striking agreements of financial rent (leasing)

In 2002 the Society has reached 43 leasing agreements with “RTK-Leasing” Ltd. In accordance with the terms of reached agreements, the property shall be considered to be on the balance of the leaser since 2003. In 2003 there will arise obligations for the sum total of 1,087 thousand rubles.

15. CONDTIONS OF ACTIVITIES (PBU 8/98)

15.1 Licenses

Major part of profits of the Society has been obtained thanks to operations carried out in accordance with licenses for provision of services of electrical communications issued by the Ministry of the Russian Federation on Communications and Informatics. In April 2003, license #9851 (registration series A008964) – broadcasting of cable television programs on the territory of the Irkutsk Region – will terminate. The Governing Board thinks that there are no grounds that will hinder with extension, termination or annulment of such license.

15.2 Political situation

Changes in the political situation, legislation, tax and normative regulation affect activities and profitability of Sibirtelecom OJSC in Russia. The character and frequency of such changes and related risks, as a rule, are not covered by insurance, and are unforeseen, as well as their influence onto future activities and profitability of operations of the Society.

15.3 Taxation

Presently in Russia there are a number of taxes introduced on the federal and regional levels: transportation tax, sales tax, unified social tax, other taxes as well as social security and protection taxes.

Leadership of Sibirtelecom OJSC thinks that tax obligations have been fully disclosed in the attached balance report. But there remains the risk that tax bodies will occupy a completely different position on what concerns issues that can be interpreted in many ways, which can significantly affect financial situation of the Society.

15.4 Existing and potential risks

Sibirtelecom OJSC takes part in law suits that arose in the course of financial/production activities of the Society; total sum of the claims amounts to 136,222,653 rubles. This sum comprises:

- law cases with tax bodies, as of reporting date there appear to be discrepancies concerning payments to the budget and tax litigations for the sum total of 48,532,154 rubles;

- law suits where the Society performs as a plaintiff, for the sum total of 22,965,978 rubles;

- law suits where the Society performs as a defendant, for the sum total of 38,333,802 rubles.

15.5 Insurance

In 2002 the Society has insured significant, thought not the whole, part of main production means (non-movable assets, equipment, transportation means, production-dangerous sites.) In the course of arranging such agreements, the list of the above equipment was made up based on the criteria of “value” and degree of possibility of insurance cases.

In 2002 no insurance cases was left without consequent insurance reimbursement for all insured equipment. Unfortunately, due to poor development of insurance for losses due to termination of activities, such risk has not been insured.

15.6 Policy with respect to regional regulation

The tariff policy of the Society in the following year will be affected by a number of factors:

- in December 2002, completion of the process of re-organization of electric communication companies within the Siberian federal zone;

- possible changes to regional regulation.

Activities of the Society in 2003 with respect to tariffs will be aimed at conscientious analysis of existing prices at regional affiliates, constituting Sibirtelecom OJSC, development of unified structure and principles of pricing, development and introduction of a multi-stage optimization of tariffs for regulated services of local and long-distance telephone communications with confirmation by MAP of Russia. Work shall be continued on optimizing regulated communication services to become economically justifiable, with approval of changes in the methodology of calculations by respective authorities.

Such tariff policy shall contribute to fortification of the financial conditions of the Society.

General Director ____________________________ A. I. Nikulin

Chief Accountant ____________________________ G. I. Khvoschinskaya