The explanatory note to the accounting report of the open joint-stock company "Sibirtelecom" for 2002 (стр. 1 )

The explanatory note to the accounting report of the open joint-stock company "Sibirtelecom" for 2002

1.Organisation and Field of Activity.......................................................................................................................... 3

1.1.Description of Company................................................................................................................................................. 3

1.2. Information about significant events................................................................................................................. 5

1.3. Information about the registrator and the auditor................................................................................. 5

1.4. Information about the management..................................................................................................................... 6

2.The general principles of the accounting policy in 2002..................................................................... 7

2.1.The nominal assets............................................................................................................................................................. 7

2.2.The fixed assets.................................................................................................................................................................... 8

2.3. Stores........................................................................................................................................................................................ 8

2.4.The procedure of revaluing assets and liabilities in a foreign currency................................... 8

2.5.The procedure of creating reserves.................................................................................................................... 8

2.6.The procedure of accounting received credits........................................................................................... 9

2.7.The deferred expenses.................................................................................................................................................... 9

2.8.The procedure of accounting profits................................................................................................................. 9

2.9.The procedure of accounting expenses............................................................................................................. 9

2.10.The procedure of accounting state aid............................................................................................................ 9

2.12.The expenses on pensions.......................................................................................................................................... 10

2.13.The profit for one share........................................................................................................................................... 10

2.14.The reorganization of the company (the integration of some companies).............................. 10

2.15.The main alterations of the accounting policy in 2002 as compared to 2001.......................... 11

3.The alteration of the entrance statement of balance on January 1, 2001......................... 12

4.Analysis and assessment of the structure of the balance.............................................................. 16

4.1.Liquidity and financial resources........................................................................................................................ 16

5. The flow of profits in 2002............................................................................................................................................ 17

6.The comparison of figures of the accounting report.......................................................................... 22

7. The explanations about important articles of the balance sheet....................................... 23

7.1 The fixed assets................................................................................................................................................................. 23

7.2. Unfinished building....................................................................................................................................................... 26

7.3.Financial investments................................................................................................................................................... 27

7.4. Shares and shares of authorized capitals..................................................................................................... 28

7.5.The stores.............................................................................................................................................................................. 35

7.6.The debts to the company............................................................................................................................................ 37

7.7.Other debtors..................................................................................................................................................................... 37

7.8.Capitals and reserves.................................................................................................................................................... 38

7.8.1.The authorized capital.................................................................................................................................................... 38

7.8.2. Owned shares................................................................................................................................................................... 39

7.8.3. Distribution of profits..................................................................................................................................................... 39

7.8.4.The reserved fund............................................................................................................................................................. 40

7.8.5.Intrests................................................................................................................................................................................ 40

7.9.Credits and loans............................................................................................................................................................. 41

7.10.Debts of the company.................................................................................................................................................. 48

7.10.1. Debts of the company connected with taxes............................................................................................................ 48

7.10.2.The structure of debts of the company....................................................................................................................... 48

MENTS TO PROFITS AND LOSSES REPORT........................................................................................................... 49

8.1 Profits on regular types of activities............................................................................................................... 49

8.2 Expenditures on regular types of activities................................................................................................. 49

8.3 Operational profits and expenditures.............................................................................................................. 50

8.4 Non-production profits and losses..................................................................................................................... 51

8.5 Income tax and other similar payments............................................................................................................. 52

8.6 Emergency incomes and payments........................................................................................................................ 53

Table 28........................................................................................................................................................................................ 53

9. PROFIT PER SINGLE SHARE................................................................................................................................................... 53

10. TERMINATION OF ACTIVITIES........................................................................................................................................... 54

11. AFFILIATED PERSONS............................................................................................................................................................ 54

13. NON-STATE PENSIONERS’ FUNDS...................................................................................................................................... 62

14. EVENTS THAT TOOK PLACE AFTER DECEMBER 31, 2001 (PBU 7/98)............................................................... 63

14.1 Changes to statute documents............................................................................................................................ 63

14.2 Decision on issuance of bonds.............................................................................................................................. 64

14.3 Purchase of 49% of shares of “Baikalwestcom” Ltd. And “Yenisseytelecom” Ltd............... 64

14.4 Striking agreements of financial rent (leasing)...................................................................................... 65

15. CONDTIONS OF ACTIVITIES (PBU 8/98)........................................................................................................................... 65

15.1 Licenses................................................................................................................................................................................ 65

15.2 Political situation......................................................................................................................................................... 65

15.3 Taxation................................................................................................................................................................................ 66

15.4 Existing and potential risks.................................................................................................................................... 66

15.5 Insurance............................................................................................................................................................................ 66

This explanatory note is the essential part of the annual accounting report of the open joint-stock company "Sibirtelecom" for 2002. It was prepared according to the legislation of the Russian Federation.

1.Organisation and Field of Activity

1.1.Description of Company

The open joint-stock company "Sibirtelecom", as referred to Company below, was registered by Novosibirsk Registration Chamber on May 30, 1994. The registration number is ГР 1161. Identifying Number of Tax Payer is . The company was registered at 53, M. Gorkiy St., Novosibirsk City, Russia, 630099.

According to the federal law "State Registration of Companies", issued on July 23, 2002, the company, which has been registered before July 1, 2002 was included in the general Russian registry of organizations (GRRO).

The main state registration number is

The main kinds of activity of the company according to the given licenses are as follows:

local telephone communication, long-distance telephone communication, telegraphy and data transmission including Internet leasing of telecommunication and transmission channels, program translation through wired-radio network, radiotelephone communication, cellular radiotelephone communication, moving radio communication (the type "Altay"), services of radial and zonal network (trunking), services of intelligent network, on-air broadcasting and cablecasting, broadcasting of sound programs, television programs and additional information, organization of protecting data, which are a state secret, a secret of communication or another one secured by the law, renovation of networks and communication facilities after accidents and damages, priority rendering of communication services and communication facilities for the purpose of defense, government, public safety and law, communication services in emergencies, preparing networks according to the established order in emergencies, preparing design estimates for buildings and technological communicational constructions, commission business, wholesale and retail trade, trading, purchasing and creating material and technical basis for this purpose (for example, setting up shops), estate business and deals with vehicles and other property, building, design and survey work, fishing and cattle breeding, selling, servicing and repairing cash registers, repairing electrical appliances, transport services, foreign activities connected with organizing electron and electric coupling, carrying out research and development work, developing and embedding software, program-technical systems, work stations, databases, expert systems and intelligence system, commission business, consulting, marketing services and dealing services, researching and advertising services, foreign activities including export-import transactions, creating joint ventures with foreign companies, firms, organizations and people, innovations and leasing, training and retraining staff, raising the level of staff's skills, transaction with securities, automatisation of work processes, embedding, testing and setting new equipment, communication equipment, computer aids, measurement instrumentation, remote control equipment and others that help to increase effectiveness of work and quality of service, researching the market of communication services, providing necessary amount and quality of communication services and advertising communication services, setting up and developing farms, electricity and heat production, transmission of electrical energy and heat, electrical energy and heat distribution, communal-general services, social and cultural services, organizing the educational process primary schools and kindergartens, housing and communal services and hotel services.

1.2. Information about significant events

The main significant event for the company is the reorganization within the bounds of the open joint-stock company "Sviazinvest". As a result of this reorganization the regional operators of the electrical communication were united into interregional companies.

The decision about the reorganization of the open joint-stock company "Electrosviaz" was taken at the special stockholders meeting on December 21, 2001 (Order No 2). The following companies were joined the open joint-stock company "Electrosviaz" situated in Novosibirsk Region:

the open joint-stock company "Electrosviaz", Altay Republic,

the open joint-stock company "Electrosviaz", Republic of Buriatiya,

the open joint-stock company "Electrical Communication of Hukasiya Republic",

the open joint-stock company "Electrosviaz", Krasnoyarsk Territory,

the open joint-stock company "Electrosviaz", Irkutsk Region,

the open joint-stock company "Electrosviaz", Kemerovo Region,

the open joint-stock company "Electrical Communication", Omsk Region,

the open joint-stock company "Electrosviaz", Chita Region,

the open joint-stock company "Altay Telephone and Telegraph Company",

the open joint-stock company "Tomsktelecom".

The open joint-stock company "Electrosviaz" situated in Novosibirsk Region was renamed. The new name is the open joint-stock company "Sibirtelecom" (Sibirtelecom, OJSC). The alteration of the charter was registered by Novosibirsk City Registration Chamber on December 26, 2001.

It was recorded in the general Russian registry of organizations because the following companies were opened down and joined the open joint-stock company "Sibirtelecom":

"Electrosviaz" situated in Novosibirsk Region:

the open joint-stock company "Electrosviaz", Altay Republic,

the open joint-stock company "Electrosviaz", Republic of Buriatiya,

the open joint-stock company "Electrical Communication of Hukasiya Republic",

the open joint-stock company "Electrosviaz", Krasnoyarsk Territory,

the open joint-stock company "Electrosviaz", Irkutsk Region,

the open joint-stock company "Electrosviaz", Kemerovo Region,

the open joint-stock company "Electrical Communication", Omsk Region,

the open joint-stock company "Electrosviaz", Chita Region,

the open joint-stock company "Altay Telephone and Telegraph Company",

the open joint-stock company "Tomsktelecom".

The open joint-stock company "Sibirtelecom" is the assignee of these companies according to the contract of adhesion.

1.3. Information about the registered and the auditor

Information about the registered:

Name: The open joint-stock company "Registrator-sviaz"

Address: 15A, Kalanchevskaya St., Moscow, Russian Federation

Post Address: post office box No 45, 15A, Kalanchevskaya St., Moscow, Russian Federation, 107078

Telephone: +7(0

Fax: +7(0

E-mail: *****@***ru

License:

License No 258

Date of Issue: October 1st, 2002

Term of Validity: without time-limit

Department having given this license: Federation committee of securities

The registrator had denoted the date when the registry of the issuer's registered securities came into force (January 9th, 1998).

Information about the auditor

Name: The open joint-stock company "Ernst and Yang Vneshaudit"

Address: 20/12, Podsosenskiy Lane, Moscow, Russia

Identifying Number of Tax Payer:

Post Address: 20/12, Podsosenskiy Lane, Moscow, Russia, 103062

Telephone: +292

Fax: +293

E-mail: *****@***

Data about the auditor's license

License No Е

Date of Issue: 17.01.2003

Term of Validity: 5 years

Department having given this license: Ministry of Finance in Russian Federation

1.4. Information about the management

The committee of directors of the open joint-stock company "Sibirtelecom"

1.Georgiy Alekseevich Romskiy is the deputy general director of the open joint-stock company "Sibirtelecom" and the chairman of board of directors.

2.Anatoliy Ivanovich Nikulin is the general director of the open joint-stock company "Sibirtelecom" and the vice-chairman of board of directors.

3.Vadim Yurievich Baldenko is the deputy director of the department of corporative financing direct investment in the open joint-stock company "Sibirtelecom".

4.Valeriy Panteleevich Bakalov is the rector of Siberian State University of Telecommunication and Informatics.

5.Yuriy Vladimirovich Bovkuv is the general director of the closed joint-stock company "Inversiya".

6.Aleksey Arkadievich Ermolich is the deputy chief of the department the representatives from the department of the corporative management in the open joint-stock company "Sibirtelecom".

7.Aleksandr Vladimirovich Lopatin is the deputy general director of the open joint-stock company "Sviazinvest".

8.Vasiliy Ferdorovich Pashkovskiy is the first deputy general director of the open joint-stock company "Sibirtelecom".

9.Aleksandr Andreevich Sheifer is the financial director and the chief accountant of the open joint-stock company "Sibirtelecom".

The executive committee of the open joint-stock company "Sibirtelecom"

1.Anatoliy Ivanovich Nikulin is the general director of the open joint-stock company "Sibirtelecom" and the chairman of the executive committee.

2.Genadiy Nikitich Baev is the director of the structural department "Novosibirsk telephone and telegraphy centre".

3.Valeriy Konstantinivich Bashkov is the director of managing the property of the open joint-stock company "Sibirtelecom".

4.Vitaliy Sergeevich Verbitskiy is the director of the structural department "Novosibirsk city telephone network".

5.Boris Veniaminovich Veserlyh is the director of building and investing in the open joint-stock company "Sibirtelecom".

6.Ivan Vatalievich Dadykin is the director of the payments and after-sales service and the director of the payments and after-sales service center in the open joint-stock company "Sibirtelecom".

7.Nina Ivanovna Kirichek is the personnel director of the open joint-stock company "Sibirtelecom".

8.Vladimir Victorovich Nozdrin is the technical director of the open joint-stock company "Sibirtelecom".

9.Vasiliy Ferdorovich Pashkovskiy is the first deputy general director of the open joint-stock company "Sibirtelecom".

10.Victor Vasilievich Stoliarov is the director of marketing and developing in the open joint-stock company "Sibirtelecom".

11.Yuriy Dmitrievich Tiutnev is the director of the structural department "Tatarsk Communications Center".

12.Elena Alekseevna Troian

The information about the operations performed by the affiliated people in 2002 is in Article 11. It is called "Affiliated people".

The auditing committee of the open joint-stock company "Sibirtelecom"

1.Irina Victorovna Prokofieva is the chief of the internal audition and economic analysis department of the open joint-stock company "Sviazinvest" and the chairman of the auditing committee.

2.Sergey Imanovich Alehin is the deputy chief of the internal audition and economic analysis department of the open joint-stock company "Sviazinvest".

3.Larisa Mihailovna Medvedeva is the chief of the economic policy and controlling service.

4.Sergey Vladimirovich Podosinov is the leading expert of the internal audition and economic analysis department of the open joint-stock company "Sviazinvest".

5.Kiril Victorovich Frolov is the leading expert of the internal audition and economic analysis department of the open joint-stock company "Sviazinvest".

2.The general principles of the accounting policy in 2002

2.1.The nominal assets

The regulations of Dispositions of Accounting 14/2000 must be used to account the nominal assets (Order No 91 was issued by Ministry of Finance on October 16, 2000).

The nominal assets must be accounted at their original cost.

The depreciation of the nominal assets is accounted from their original cost and the term of their use every month. The linear method must be applied to account the sum of the depreciation. The term of the use of the nominal assets is set according to the following points:

Patent or voucher terms and other terms of using intellectual property according to the legislation of Russian Federation should be considered. Expecting terms of using the nominal assets should be considered (the company must get a profit out of the nominal assets during these terms.). The expecting terms of using the nominal assets are set by the commission created for this purpose according the methodological instructions about accounting the nominal assets. The members of the commission are approved by the general director of the company. If it is not possible to define expecting terms of using the nominal assets, the depreciation will be accounted for 20 years according to the set regulations.

2.2.The fixed assets

The fixed assets are assets with the term of their use over 12 months. The regulations must be used to account the fixed assets (Order No 26 was issued by Ministry of Finance on March 30, 2001).

The fixed assets must be accounted at their original cost. The fixed assets weren't revalued in 2002.

The fixed assets are shown at their original cost (replacement cost) minus the sum of the depreciation. The linear method must be applied to account the sum of the depreciation. The depreciation is accounted from their original cost or their current (replacement) cost if the revalue has been carried out, from a kind of the fixed assets and depreciation rates set on the basis of a term of using a fixed asset.

If a fixed asset costs less than 10000 rubles, the depreciation is 100% and written in expenses required for exploitation and manufacture.

If the fixed assets are received according to a leasing contract, the rate of the accelerated depreciation must be used. The rate of the accelerated depreciation is conditioned in the contract. The rate was 3 in 2002.

The expenses on repair are included in the cost value of a reporting period. The reserves for the future expenses on repair of the fixed assets are not created.

2.3. Stores

Stores (raw material, goods) are accounted from actual expenses that are spent to buy or manufacture them.

The cost of the stores that go out of the company is defined according to their average cost value except of precious metals.

2.4.The procedure of revaluing assets and liabilities in a foreign currency

Money in a foreign currency (cash in a cash register of the company, money on accounts in lending agencies, monetary and payment documents, short-term securities, money on accounts including borrowed funds, the rest of money invested from the state budget or foreign funds (investments given to Russian Federation according to certain programs)) is conversed into rubles on the date of financial transaction and the reporting date of drawing up of accounts.

2.5.The procedure of creating reserves

The company created the following reserves in 2002:

The reserves for bad debts

The sum of each reserve is separately defined for each debt on the basis of inventory taking. The sum of the reserve depends on creditworthiness of a debtor. The creation of such reserves is envisaged in the accounting and tax legislation and the issued on 1st January (25 Chapter of the revenue code). An outstanding debt lasting less than 90 days is not reserved, and an outstanding debt lasting more than 90 days is reserved in the full sum for the accounting report.

A reserve for a bad debt is created according to the tax legislation.

Debts of buyers and customers are shown in the accounting report minus reserves for bad debts. A part of debts owed to the company is ones of state organizations and organizations depending on regional or state budgets. Different circumstances including political and economic ones influence the possibility of receiving these debts back. The company takes into account these circumstances while creating reserves for bad debts.

2.6.The procedure of accounting received credits

The company transfers its long-term debts into short-term ones when a credit has to be paid in 365 days according to terms of a contract.

Extra expenses on receiving credits are accounted when they were paid, that is, during the reporting period.

2.7.The deferred expenses

Expenses that are paid during the reporting period but cannot be included in the cost value of services, products and others are called the deferred expenses. The deferred expenses have to be gradually deducted from certain reserves during the period, which they are referred to.

2.8.The procedure of accounting profits

The profits of the company are divided into profits from standard kinds of activities and other profits (transaction profits and extraordinary ones).

The profits are accounted according to the accrual method, that is, when services are provided. The profits do not include Value Added Tax and Selling Tax.

2.9.The procedure of accounting expenses

The expenses depending on their kinds are divided into expenses on standard kinds of activities, and transaction expenses and emergency expenses.

Accounted expenses on standard kinds of activities equal the real payment and payable bills.

2.10.The procedure of accounting state aid

The budgetary money and resources are accounted as soon as they are received

2.11.The inventory of property and liabilities must be carried out in the following way.

·  The inventory of the fixed assets cannot be carried out less than ounce two years (the deadline is 1st November of a reporting year).

·  The inventory of the nominal assets must be carried out ounce a year (the deadline is 1st December of a reporting year).

·  The inventory of uncompleted capital building and capital investments must be carried out ounce a year (the deadline is 1st November of a reporting year).

·  The inventory of raw materials, materials, equipment for mounting, semi finished goods, goods and finished commodities in warehouses must be carried out ounce a year (the deadline is 1st November of a reporting year).

·  The inventory of precious metals must be carried out twice a year.

·  The inventory of not finished manufacture must be carried out every quarter of the year (the deadline is the end of each quarter of the year).

·  The inventory of deferred expenses and revenues must be carried out ounce a year (the deadline is 31st December of a reporting year).

·  The inventory of cash assets on accounts in banks must be carried out ounce a year (the deadline is 31st December of a reporting year).

·  The inventory of cash in a cash register cannot be carried out less than ounce a quarter of the year.

·  The inventory of long-term investments must be carried out ounce a year (the deadline is 31st December of a reporting year).

·  The inventory of short-term investments and monetary documents must be carried out every quarter of the year (the deadline is the end of each quarter of the year).

·  The inventory of settlements with debtors and reserves for bad debts must be carried out every quarter of the year (the deadline is the end of each quarter of the year).

·  The inventory of settlements with creditors (communication operators) must be carried out every quarter of the year (the deadline is the end of each quarter of the year), and the inventory of settlements with other creditors must be carried out ounce a year (the deadline is 31st December of a reporting year).

·  The inventory of payments of taxes and obligatory assessments to regional or state budgets and off-budget funds must be carried out ounce a year.

·  The inventory of financing and funding the company must be carried out ounce a year (the deadline is 31st December of a reporting year).

·  The inventory of internal settlements cannot be carried out less than ounce a quarter of the year.

·  The inventory of settlements with the staff and accountable people must be carried out ounce a year (the deadline is 31st December of a reporting year).

2.12.The expenses on pensions

The company pays obligatory assessments to Pension Fund of Russian Federation, Fund of Social Insurance and Fund of Employment for its employees. The obligatory assessments of the company to Pension Fund are 28% of the salary fund for the employees. These obligatory assessments are accounted in the expenses as soon as they are charged.

The company also takes part in a pension program with the installment defined earlier. This pension program is a part of the scheme of non-governmental provision of pensions. The sum of the installments is defined every year and is accounted in the expenses as soon as it is charged. You can find further information in Article 14 of this explanatory note.

2.13.The profit for one share

The profit for one share is calculated by dividing the net profit for a reporting period by the average weighted numbers of equities having been turning for one year. This calculation is carried out according to Methodological recommendations about revealing the profit for one share. They were approved by Order No 29 of Ministry of Finance issued on March 21, 2000.

2.14.The reorganization of the company (the integration of some companies)

The accounting policies of the integrating companies had a lot of differences before the reorganization.

The depreciation of the fixed assets costing less than 10,000 rubles was not accounted. The cost of the fixed assets was included in the expenses as soon as they were manufactured or put into operation.

There were not other differences among the integrating companies because all the companies included in the group "Sviazinvest" created the accounting policies on the basis of the project of the uniform accounting policy.

The inventory of the assets and liabilities of the joining companies was carried out on the date of the reorganization. As a result of the inventory some assets that could not be given to the assignee (licenses, trade marks, letterheads) were included in the organization expenses.

2.15.The main alterations of the accounting policy in 2002 as compared to 2001

The following alterations were made in the accounting policies of the integrating companies in 2002 as compared to 2001.

1. The creation of the reserves for bad debts

An outstanding debt lasting less than 90 days is not reserved, and an outstanding debt lasting more than 90 days is reserved in the full sum for the accounting report in 2002. The sum of each reserve was separately defined for each debt on the basis of creditworthiness of a debtor in 2001.

2.The procedure of accounting takings from selling goods and services

The takings from selling goods and services were estimated in the following way in 2002.

The takings were estimated according to the income tax. While defining a tax basis takings from selling goods and services are accounted by using the accrual method.