<PAGE>

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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K

<Table>
<C>          <S>
    [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934



             FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001




    [ ]      TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15(d)
             OF THE SECURITY EXCHANGE ACT OF 1934
</Table>

                        COMMISSION FILE NUMBER: 0-27423

                              GOLDEN TELECOM, INC.
             (Exact name of registrant as specified in its charter)

<Table>
<S>                                            <C>
                   DELAWARE                                      51-0391303
           (State of incorporation)                (I.R.S. Employer Identification Nos.)
</Table>

                REPRESENTATION OFFICE GOLDEN TELESERVICES, INC.
                               12 TRUBNAYA ULITSA
                             MOSCOW, RUSSIA 103045
                    (Address of principal executive offices)

                              (011-7-501) 797-9300
                        (Registrant's telephone number)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

<Table>
<Caption>
         TITLE OF EACH CLASS OF STOCK               NAME OF EXCHANGE ON WHICH REGISTERED
         ----------------------------               ------------------------------------
<S>                                            <C>
   Common Stock, par value $0.01 per share                 Nasdaq National Market
</Table>

     Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) have been subject to such
filing requirements for the past 90 days.  Yes [X]     No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained in this Form 10-K, and will not be
contained, to the best of the registrants' knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.  [ ]

     The aggregate market value of the voting stock of Golden Telecom, Inc. held
by non-affiliates on March 7, 2002 was approximately $172,883,688. On March 7,
2002, there were outstanding approximately 22,562,370 shares of Common Stock of
Golden Telecom, Inc.

<Table>
<Caption>
           ITEM OF FORM 10-K                           DOCUMENTS INCORPORATED BY REFERENCE
           -----------------                           -----------------------------------
<C>                                     <S>
         Part III, Items 10-13          Portions of the Registrant's proxy statement for the 2002 annual
                                        meeting of shareholders to be held in May 2002.
         Part IV, Items 14(c)           Exhibits.
</Table>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                              GOLDEN TELECOM, INC.

                                   FORM 10-K
                          YEAR ENDED DECEMBER 31, 2001

                               TABLE OF CONTENTS

<Table>
<Caption>
                                                                        PAGE
                                                                        ----
<S>       <C>                                                           <C>
                                   PART I
Item 1.   Business....................................................    2
Item 2.   Properties..................................................   46
Item 3.   Legal Proceedings...........................................   46
Item 4.   Submission of Matters to a Vote of Security Holders.........   47

                                  PART II
Item 5.   Market for the Company's Common Equity and Related
          Stockholder Matters.........................................   47
Item 6.   Selected Financial Data.....................................   48
Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...................................   50
Item 8.   Consolidated Financial Statements and Supplementary
          Information for the Company.................................   72
Item 9.   Changes In and Disagreements with Accountants on Accounting
          and Financial Disclosure....................................  119

                                  PART III
Item 10.  Directors and Executive Officers of the Company.............  119
Item 11.  Executive Compensation......................................  119
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management..................................................  119
Item 13.  Certain Relationships and Related Transactions..............  119

                                  PART IV
Item 14.  Exhibits, Financial Statement Schedules and Reports on
          Form 8-K....................................................  119
Signatures......................................................... 122-123
</Table>

                                        1
<PAGE>

                                     PART I

ITEM 1.  BUSINESS

INTRODUCTION

     We are a leading facilities-based provider of integrated telecommunications
and Internet services to businesses and other high-usage customers and
telecommunications operators in Moscow, Kiev, St. Petersburg, Nizhny Novgorod
and other major population centers throughout Russia and other countries of the
Commonwealth of Independent States. We organize our operations into the four
service groups below:

     - Competitive Local Exchange Carrier ("CLEC") Services.  Using our local
       access overlay networks in Moscow, Kiev, St. Petersburg and Nizhny
       Novgorod, we provide a range of services including local exchange and
       access services, international and domestic long distance services, data
       communications, Internet access and the design of corporate networks;

     - Data and Internet Services.  Using our fiber optic and satellite-based
       networks, including 140 combined points of presence in Russia, Ukraine
       and other countries of the Commonwealth of Independent States, we provide
       data and Internet services including: (a) Business to Business services,
       such as data communications, dedicated Internet access, web design, web
       hosting, co-location and data-warehousing: and (b) Business to Consumer
       services, such as dial-up Internet access and web content offered through
       a family of Internet portals;

     - Long Distance Services.  Using our fiber optic and satellite-based
       network, we provide long distance voice services in Russia; and

     - Mobile Services.  Using our mobile networks in Kiev and Odessa, Ukraine,
       we provide mobile services with value-added features, such as voicemail,
       roaming and messaging services on a subscription and prepaid basis.

BUSINESS SECTION OVERVIEW

     The following sections within the Business section describe our business
strategy, our current position in the markets in which we operate, our corporate
history and development, our customer base, and a detailed review of our service
groups by operating division. Additionally, we describe our licenses and our
network facilities. Finally, we provide a summary of the principal environments
in which we operate; the telecommunications markets, the political and economic
environments, and the legal, tax and regulatory regimes in Russia and Ukraine.

BUSINESS STRATEGY

     Our objective is to be the leading independent voice, data and Internet
services company in Russia and the Commonwealth of Independent States. To
achieve this objective, we intend to:

     - Pursue Consolidation Opportunities

       We intend to pursue consolidation opportunities through acquisitions that
       will allow us to improve and expand our service offerings and maintain
       operational control. We will target complementary opportunities that will
       enable us to achieve synergies and economies of scale.

     - Increase Market Share by Offering Bundled Data and Voice Services Over an
       Integrated Network

       Corporate customers increasingly demand integrated telecommunications
       solutions from one-stop providers that are able to deliver a full service
       offering in the geographical areas in which these corporate customers
       operate. As a result, we plan to continue to develop and combine our
       businesses to create a unified service platform for local access, local
       exchange, domestic and international long distance, data, Internet access
       and turn-key solution services.

                                        2
<PAGE>

     - Extend Our Leading Position in High Growth Data and Internet Markets

       We plan to build on our position as a leading provider of data
       communication services in Russia and other countries of the Commonwealth
       of Independent States by increasing the number of network access points
       in our network to facilitate the growing demand for data communications.
       In addition, we plan to expand our Business to Business and Business to
       Consumer services through dedicated and dial-up Internet access and
       connectivity, co-location and web hosting, web design, web content,
       Internet portal development and other Internet service offerings through
       our direct marketing efforts.

     - Reduce Operating Costs and Satisfy Capacity Needs through Network
       Planning and Optimization

       Our network strategy includes building and owning our local exchange and
       customer access networks. We have entered into long term leases for
       long-distance and international fiber optic cable systems to provide our
       regional and global connectivity, supplementing these channels with
       leased land-based channels with satellite circuits for redundancy and
       remote connectivity. We intend to incrementally expand the fiber optic
       capacity along our heavy traffic and high cost routes to reduce our unit
       transmission costs and ensure sufficient capacity to meet the growing
       demand for Internet and data services.

     - Focus Operating Activities and Capital Investments in Major Metropolitan
       Areas

       We plan to deploy our capital investments primarily in Moscow, Kiev, St.
       Petersburg, Nizhny Novgorod and other major population centers in the
       countries of the CIS, where demand for our services is most heavily
       concentrated. We also intend to consider opportunities to expand our
       operations in regional cities with sufficiently strong local economies
       and where we believe potential exists to grow businesses which complement
       our current operations.

OUR POSITION IN THE RUSSIAN AND UKRAINIAN MARKETS

     We believe that we are well positioned to maintain and consolidate our
strong presence in the business segment of the Russian and Ukrainian
telecommunications markets for the following reasons:

     - our early market entry and local market experience;

     - our focus on service, quality and reliability;

     - our strong infrastructure position in Moscow, Kiev, St. Petersburg and
       Nizhny Novgorod;

     - our extensive customer base;

     - our extensive range of international, domestic and data
       telecommunications services;

     - our influential shareholder base; and

     - our strong balance sheet position.

CORPORATE HISTORY AND DEVELOPMENT

     Golden Telecom, Inc.  Golden Telecom, Inc., initially a majority owned
subsidiary of Global TeleSystems, Inc. ("GTS"), was incorporated in Delaware in
June 1999 in preparation for our Initial Public Offering ("IPO") which took
place in September 1999. GTS was founded in 1983 as a not-for-profit company
under the name San Francisco/Moscow Teleport, Inc. and was among the first
foreign telecommunications operators in the former Soviet Union, where it began
offering data links to the United States in 1986, international long distance
services in 1992, local access to its networks in 1994 and cellular services in
1995. In most cases, GTS's businesses in Russia and other countries of the
Commonwealth of Independent States were developed through the establishment of
joint ventures with local and foreign partners, with GTS progressively
increasing its ownership. At the time of our IPO, GTS contributed substantially
all of the assets that constituted Golden Telecom, Inc. and retained an
ownership interest of approximately 67%, or 15.1 million shares of our common
stock.

     In May 2001 GTS completed the sale of approximately 12.2 million shares of
our common stock to a group of investors led by Alfa Group, a leading
Russia-based financial and industrial concern ("Alfa"), and

                                        3
<PAGE>

two of our then current shareholders, Capital International Global Emerging
Markets Private Equity Fund L.P. ("Capital") and investment funds managed by
Baring Vostok Capital Partners ("Baring Vostok").

     In July 2001, we completed the buy-back of $25.0 million of our common
stock from GTS. In November 2001, GTS sold its remaining ownership in our common
stock to Baring Vostok in a private placement transaction. Currently, Alfa and
its controlled affiliates own approximately 48% of our common stock, EBRD owns
approximately 13% of our common stock, Capital owns approximately 10% and Baring
Vostok owns approximately 11% of our common stock.

     TeleRoss.  TeleRoss was established in 1994 as a provider of domestic long
distance services and has developed into our primary consolidated operating
company in Russia, offering CLEC, Long Distance, and Data and Internet Services.
To facilitate this full service offering, effective November 1, 1999, we
completed the legal merger of our wholly owned CLEC Services business in Moscow,
TCM, and our wholly owned Data and Internet Services business, Sovam Teleport,
into TeleRoss. This merger allowed to us to achieve operational and financial
synergies, particularly with regard to taxation. Prior to their merger into
TeleRoss on November 1, 1999, TCM and Sovam Teleport were distinct legal
entities.

     The ownership and operational history of the individual divisions of
TeleRoss, and Golden Telecom Ukraine, and Sovintel, a significant
non-consolidated subsidiary, are as follows:

          CLEC Services division of TeleRoss (formerly TCM).  TCM was
     established in 1994 and prior to its merger into TeleRoss, constituted our
     CLEC Services division in Moscow. Prior to July 1998, we owned 52.64% of
     the holding company, GTS-Vox, that controlled 95% of TCM. In July 1998, we
     acquired the remaining outstanding interests in GTS-Vox and as a result
     owned 95% of TCM. We acquired the remaining 5% of TCM on August 16, 1999.
     TCM was dissolved upon its merger into TeleRoss in November 1999. In June
     2001, we acquired 100% of infrastructure company First Telecommunications
     Company ("PTK") as part of a larger acquisition. PTK has established
     interconnect in the Moscow network to provide numbering capacity and access
     lines. The numbering capacity and access lines are expected to be placed
     into service early in the second quarter of 2002 and we will allocate all
     of the numbering capacity and part of the access lines to our CLEC Services
     division. In September 2001, we acquired 51% of Agentstvo Delovoi Svyazi
     ("ADS"), which owns network infrastructure in Russia's third largest city,
     Nizhny Novgorod. ADS is now included as part of our CLEC Services division.

          Data and Internet Services division of TeleRoss (formerly
     Sovam).  Sovam Teleport was the subsidiary through which we conducted our
     Data and Internet activities in Russia and other Commonwealth of
     Independent States countries, except Ukraine. In February 1998, we acquired
     the ownership interest of our former partner, thereby making Sovam Teleport
     a wholly owned subsidiary. Sovam Teleport was dissolved upon its merger
     into TeleRoss in November 1999. The Data and Internet Services division of
     TeleRoss has absorbed our acquisitions of Internet Service Providers in
     Moscow and St. Petersburg, Glasnet and Nevalink, respectively, the web
     design firm, Fintek, and two vertical Internet portals, Referat.ru and
     Absolute Games. In April 2000, we acquired 51% of Commercial Information
     Systems ("KIS"), an ISP in Nizhny Novgorod, which is part of our Data and
     Internet Services division.

          In October 2000, we completed the acquisition of the InfoArt Internet
     portal. In December 2000, the acquisition of the Agama family of Internet
     portals was also completed. These assets, and other significant
     intellectual property rights, are segregated in a Cypriot holding company
     that protects, licenses and markets the Internet portals in the CIS and in
     other markets with significant concentrations of Russian-speaking
     population. The software and content development teams from Agama, InfoArt,
     Fintek, Referat.ru and Absolute Games were integrated into a group which
     operates as a software and content development facility for Golden Telecom,
     Inc. These information and content portals are used to enhance the services
     provided by our dial-up ISP brand, "ROL" (formerly Russia-On-Line).

          In June 2001, we completed the purchase of 100% of leading ISP, ZAO
     Cityline ("Cityline"), together with 51% of Ekaterinburg-based ISP, OOO
     Uralrelcom ("Uralrelcom"), and 100% of PTK. Cityline operates primarily in
     Moscow, but also operates in other major Russian cities, including St.

                                        4
<PAGE>

     Petersburg, Nizhny Novgorod, Tyumen and Kaliningrad. Together, it is
     expected, these acquisitions will allow us to increase our regional dial-up
     Internet presence and increase our access to dial-up capacity in Moscow, as
     well as providing numbering capacity and access lines for our CLEC Services
     division. We have commenced the integration of these acquisitions into our
     Data and Internet Services division, under the ROL brand.

          Long Distance Services division of TeleRoss (formerly TeleRoss
     operating company).  Our wholly owned TeleRoss operating company and our
     TeleRoss regional ventures historically constituted our Long Distances
     Services Division. Prior to January 1998 we held 50% ownership interests in
     fourteen regional joint ventures that offered domestic long distance
     services. The TeleRoss operating company holds the applicable operating
     licenses to offer pan-Russian domestic long distance services and thereby
     controls rates and tariffs, billing and collections for all regional
     ventures. Since January 1998 we have been acquiring our partners' ownership
     interests with the goal of transforming the joint ventures into branches of
     TeleRoss. At the end of 2001, TeleRoss was in the process of converting
     four of its regional ventures into branches and had added a branch in one
     new region. While we have significant influence within those that are 50:50
     joint ventures, decisions, including the decision to declare and pay
     dividends, are generally subject to our partners' approvals. TeleRoss also
     directly controls the activities related to remotely-located very small
     aperture terminal (VSAT) satellite customers.

     Golden Telecom (Ukraine).  We own 69% of Golden Telecom LLC, Ukraine
("Golden Telecom (Ukraine)"), which consists of two business units, Golden
Telecom BTS and Golden Telecom GSM. Prior to our IPO, we owned 75% of GTS
Ukrainian TeleSystems LLC which in turn owned 49% of Golden Telecom (Ukraine).
At that time we also owned an additional 20% interest in Golden Telecom
(Ukraine) through two wholly owned subsidiaries. As part of the IPO, an
affiliate of ING Barings contributed its 25% interest in GTS Ukrainian
TeleSystems LLC to a wholly owned subsidiary of Golden Telecom, Inc. and
received as partial consideration 420,000 newly issued shares of our common
stock. An additional 30,000 shares of our common stock were issued as final
settlement to the affiliate of ING Barings on March 1, 2000. In February 2000,
Golden Telecom Ukraine acquired 99% of Sovam Teleport Ukraine, which has been
integrated into the Data and Internet Services division within Golden Telecom
BTS. The remaining 1% of Sovam Teleport Ukraine is owned by SFMT-Rusnet, Inc., a
wholly owned subsidiary of Golden Telecom, Inc. Issues concerning the operations
of Golden Telecom (Ukraine) are discussed in Item 3 Legal Proceedings.

     Sovintel.  Sovintel was established in 1990 as a provider of international
voice services in Moscow. We own 50% of Sovintel, and Rostelecom, the national
long distance carrier, owns the remaining 50%. Sovintel's control structure
consists of the Meeting of Participants, the Board of Directors, the Executive
Committee of the Board of Directors and the Executive Directorate. Certain
business decisions, including the distribution of profits and losses, require
the approval of the Meeting of Participants. Sovintel's annual budget and
business plan are adopted by its Board of Directors. The Board of Directors
develops the annual budget and strategic business plans and recommends
acquisitions and other significant corporate actions. Certain functions of the
Board of Directors, including oversight of related party transactions are
delegated to the Executive Committee, comprised of one representative from each
partner. Under Sovintel's charter, each partner has the right to appoint three
of the six members of its Board of Directors.

     Rostelecom has the right to propose a candidate for the position of the
General Director, and we have the right to propose a candidate for the position
of the First Deputy General Director, who together constitute the Executive
Directorate. In addition, we have the right to propose a candidate for the
position of Finance Director. The Rostelecom appointee for General Director of
Sovintel, was also elected to the Golden Telecom, Inc. Board of Directors and
was appointed Chief Executive Officer of Golden Telecom, Inc. on November 6,
2001. Control of the Board of Directors at Sovintel is not affected by this
change.

     Major business decisions require joint approval of both members of the
Executive Directorate. The Executive Directorate oversees the daily operations
of the company and leads strategic planning initiatives to be presented to the
Sovintel Board of Directors. Neither we, nor Rostelecom, are obligated to fund
Sovintel's operations or capital expenditures. Losses (up to the amount of the
participants' respective charter capital

                                        5
<PAGE>

contributions or commitments) and profits of Sovintel are allocated to the
partners in accordance with their ownership percentages.

     In November 2001, we announced that we had signed a Memorandum of
Understanding with Rostelecom, to acquire Rostelecom's 50% holding in Sovintel.
On March 13, 2002 we executed a Sale and Purchase Agreement finalizing the terms
of the acquisition. The closure of the transaction is dependent upon the
performance or fulfillment of a number of conditions precedent, including the
receipt of necessary regulatory approvals from currency control and anti-trust
agencies in Russia and the United States of America. We expect the transaction
to close during the second quarter of 2002.

     MCT Corp.  In December of 2000 we contributed Vostok Mobile B.V., the
entity that holds our Russian mobile properties, to MCT in exchange for an
equity interest of approximately 24% in MCT. MCT has ownership interests in 24
mobile operations throughout Russia and in Uzbekistan and Tajikistan. Initially,
we acquired approximately 24% of the outstanding common stock of MCT, but we
expect to be diluted to not less than 18% as a result of equity offerings
planned by MCT. As part of the transaction, we also purchased for cash $9.0
million of MCT debt convertible into its equity securities. The debt component
of the transaction was repaid in full with interest by MCT in November 2001. We
treat our ownership interest in MCT as an investment and are not actively
involved in the day-to-day management of the operations of Vostok Mobile or MCT,
although we have one seat on the Board of Directors of MCT. At December 31, 2001
we owned approximately 23% of MCT.

     The following table summarizes the four service groups through which we
currently conduct our operations:

<Table>
<Caption>
SERVICE GROUPS                                              REGION OF OPERATIONS
--------------                                              --------------------
<S>                                                      <C>
CLEC SERVICES:
  CLEC Services division (formerly TCM) of TeleRoss
     (including ADS)...................................  Moscow and Nizhny Novgorod
  CLEC Services division of Golden Telecom BTS.........  Kiev and Odessa, Ukraine
  Sovintel.............................................  Moscow, St. Petersburg and
                                                         the North West region
DATA AND INTERNET SERVICES:
  Data and Internet Services division (formerly Sovam)
     of TeleRoss (including KIS, Cityline and
     Uralrelcom).......................................  Russia and the Commonwealth
                                                         of Independent States
  Data and Internet Services division (formerly Sovam
     Teleport Ukraine) of Golden Telecom BTS...........  Ukraine
LONG DISTANCE SERVICES:
  Long Distance Services division (formerly TeleRoss
     operating company) of TeleRoss....................  Russia
  TeleRoss ventures (branch, wholly-owned and joint
     ventures).........................................  15 cities in Russia
MOBILE SERVICES:
  Golden Telecom GSM...................................  Kiev and Odessa, Ukraine
</Table>

     As a result of our strategy to operationally merge our significant Russia
based consolidated entities, the formal merger of TCM and Sovam Teleport into
TeleRoss operating company was completed on November 1, 1999.

CUSTOMER BASE

     We compete primarily for high-volume business customers and carriers who
require access to highly reliable and advanced telecommunications facilities to
operate their business. Together, our top five customers accounted for
approximately 28% of our consolidated revenues for year ended December 31, 2001.
Our largest customer, Vimpelcom, together with its affiliate KB Impulse,
accounted for approximately 14% of our

                                        6
<PAGE>

consolidated revenues for the year ended December 31, 2001. No other customer,
except for Sovintel, which accounted for approximately 6% of our consolidated
revenues, accounted for over 5% of our consolidated revenues for the year ended
December 31, 2001. We provide services to our largest customers, including
Vimpelcom and Sovintel, pursuant to agreements which specify the service levels
we should maintain for these customers and the tariffs that we charge for these
services.

     Our principal customer segments are:

     Corporate Network Customers.  Corporate network customers are typically
large multinational or Russian and Ukrainian companies which require the full
range of voice and data services in several cities across Russia, Ukraine and
other countries of the Commonwealth of Independent States. While pricing is
always a factor, this segment places more value on network coverage, reliability
as defined by service level agreements, and the ability to design, install and
maintain local area and wide area networks. These customers are willing to make
longer-term commitments to integrated one-stop providers in exchange for
increased levels of service.

     Corporate End-Users.  Corporate end-users are foreign and Russian
enterprises with centralized operations, either in Moscow, Kiev or in the
regions. These corporate end-users also require a full range of voice and data
services, but are more likely to purchase distinct services from separate
suppliers based on price. We attempt to acquire business from corporate
customers by providing superior technology and service levels at competitive
pricing.

     Small and Medium Enterprises ("SME").  We define small and medium
enterprises as those customers that require only one or two numbers and
generally have monthly billings of less than $2,000.

     Fixed-Line Operators.  Fixed-line operators are other telecommunications
providers, including other Moscow overlay operators, alternative regional
fixed-line operators and the local operators, which we refer to as the local
telcos. Price is the primary factor in their purchase decision, and although
long-term contracts are rare, traffic volumes are large. Voice telephony is a
commodity for the customers in this segment.

     Cellular Operators.  Cellular operators are heavy consumers of our local
exchange capacity in Moscow because each cellular customer requires a unique
telephone number (or "port"), which has made cellular operators important
contributors to our revenue. In contrast, for our corporate and SME customers,
one port can serve multiple end-users. Price and availability are the primary
factors in their purchase decision.

     Mass Market.  We define the mass market as those customers who utilize
calling cards or dial-up Internet access. This market segment is increasingly
price-sensitive, but quality of service is also important, particularly in the
Internet access business. In Kiev and Odessa, Ukraine, we also offer mobile
services to the mass market, targeting individuals with above average disposable
income, where price and quality are also primary decision factors.

PRICING

     Generally, our customers make payments to us in the local currency, as
appropriate, however the majority of our tariffs are denominated in US dollars
and are indexed to the US dollar for settlement purposes. Also, the majority of
our operating costs are denominated in US dollars, but settled in local
currency, as appropriate.

OUR SERVICE GROUPS

     This section provides a detailed review of our business on a service group
basis and by operating division. We provide additional information on the
services and customers, marketing and pricing, and competition within each
division.

                                        7
<PAGE>

  CLEC SERVICES

  CLEC Services Division of TeleRoss

     The CLEC Services division of TeleRoss operates an integral part of our
competitive local exchange carrier services in Moscow. Its infrastructure is
integrated into the Moscow city incumbent telephone network at 78 transit and
local exchanges allowing it to deliver traffic within the local public network.
Our network also interconnects directly with other fixed-line and cellular
operators in Moscow and with Rostelecom. We have constructed the infrastructure
necessary to support 150,000 ports, each corresponding to a unique telephone
number. We recently completed the acquisition of PTK which has a contract to
provide us with a further 9,999 Moscow numbers and 1,800 access lines for a
period of ten years, which we expect to be fully operational early in the second
quarter of 2002. We intend to allocate the numbering capacity and 800 access
lines to our CLEC Services division. The balance of the access lines will be
allocated to dial-up Internet.

     In September 2001, we acquired 51% of ADS, which leases network
infrastructure to support 15,000 city telephone numbers registered to ADS in
Nizhny Novgorod, Russia's third largest city.

     SERVICES AND CUSTOMERS

     Local Access Services.  This division of TeleRoss provides carriers with
telephone numbers, ports and interconnectivity to the Moscow city telephone
network through our local gateway. Access to the Moscow city telephone network
through our network provides customers with a high-quality network that supports
a broad range of offerings. CLEC services are complemented by additional value
added services such as conference call facilities, unified messaging and call
forwarding.

     The division's customers primarily consist of cellular operators, including
Vimpelcom, and fixed-line operators, including Sovintel.

     MARKETING AND PRICING

     For each port, customers generally have paid a one-time port fee, a flat
monthly fee and per minute charges based on usage. However, recent pricing
trends are reflected in an increased emphasis on per minute charges based on
usage, rather than on port fees. These usage charges are collected by individual
carriers and a portion of the charges are paid to TeleRoss in accordance with
settlement agreements.

     COMPETITION

     The division's main competitor is MTU-Inform, a Moscow City Telephone
Network affiliate that, until August 16, 1999, had been a 5% shareholder in TCM.

  CLEC Services Division of Golden Telecom BTS

     The CLEC Services division of Golden Telecom BTS, our largely Kiev-based
competitive local exchange carrier, has constructed and owns a 177 kilometer
fiber optic network that is interconnected to the local public telephone network
in Kiev and to our international gateway. Since the opening of our mobile
service operation in Odessa, we have expanded our CLEC service offerings into
Odessa, targeting business clients. As of December 31, 2001, Golden Telecom BTS
serviced over 7,800 telephone lines for business customers.

     SERVICES AND CUSTOMERS

     Local Access Services.  Local access services are provided to business
customers through the connection of the customers' premises to Golden Telecom
BTS's fiber network, which interconnects to the local public telephone network
in Kiev.

     International and Domestic Long Distance Services.  Golden Telecom BTS
terminates incoming traffic for foreign operators destined for its customers in
Kiev, Odessa, and most other major metropolitan areas in Ukraine, through its
gateway switch in Kiev. Incoming international traffic is also terminated into
other operator networks, with which settlement agreements have been made. These
other operators include national

                                        8
<PAGE>

cellular operator networks and networks belonging to Ukrtelecom, the state
monopoly operator. Traffic destined for other cities is routed either through
regional carriers or the national carrier. Outgoing international traffic is
routed to international operators using the least-cost routing. At the end of
the third quarter of 2001, we suspended certain services related to the
termination of incoming international traffic in some cities pending resolution
of regulatory issues.

     Golden Telecom BTS offers domestic long distance services throughout
Ukraine through interconnection with Utel. However, Golden Telecom BTS holds an
intercity operator's license allowing it to offer domestic long distance
services directly and is developing infrastructure in major Ukrainian
metropolitan areas to facilitate this offering. Domestic long distances services
from Kiev to other cities in Ukraine are currently provided through
infrastructure leased from the national long distance carrier, Ukrtelecom, and
the corresponding local telco.

     The customers for this division primarily consist of corporate network
customers, corporate end-users, fixed-line operators and cellular operators.

     MARKETING AND PRICING

     While emphasizing the quality and reliability of its services, Golden
Telecom BTS positions itself as a price competitive service provider to
businesses. Sales to our customers are made through a direct sales force, which
is shared with the Data and Internet Services division and consists of thirteen
account managers in Kiev. Additionally, we have one sales manager for carrier
services and one for international incoming traffic.

     We have recently adopted a more aggressive pricing policy for corporate end
users in order to stimulate higher revenue growth. As a carrier for other
telecommunications operators, Golden Telecom BTS also offers a more attractive
pricing structure than the incumbent operators in order to attract cellular and
smaller public switched telecommunications network (PSTN) operators.

     COMPETITION

     In Kiev, Golden Telecom BTS competes with Ukrtelecom, the incumbent
operator, and Utel, which handles mostly long distance and international
traffic. Golden Telecom BTS believes that because of its early market entry and
its ability to provide international, domestic and local access, it has a
leading position in the high-end segments of the corporate market.

     In Ukraine, the fixed-line operators market is dominated by Utel, although
Golden Telecom BTS is seeking to increase its share of this market, especially
by carrying international outgoing traffic from independent telecommunications
operators, including cellular companies, and by providing integrated voice and
data services.

  Sovintel

     Sovintel is a competitive local exchange carrier that owns and operates a
fully-digital overlay network in and around Moscow. Sovintel has a limited
network in St. Petersburg that is interconnected to Sovintel's Moscow network to
support new business customers and Sovintel's Moscow clients. Sovintel services
over 82,000 telephone numbers for business customers and cellular providers.

     SERVICES AND CUSTOMERS

     Local Access Services.  Local telephone services are provided through the
interconnection of Sovintel's fiber optic ring with the switches of the CLEC
Services division of TeleRoss, MTU-Inform and other competitive local exchange
carriers that operate in Moscow. These switches provide access to local
telephone services through interconnections with the local public telephone
network and with the principal Moscow cellular providers.

     International and Domestic Long Distance Services.  Sovintel provides
domestic long distance services primarily through Rostelecom's network and the
TeleRoss long distance network. Sovintel provides interna-

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<PAGE>

tional services primarily through its international gateway, which transmits
international traffic through dedicated channels leased from Rostelecom.

     When an international call is placed to one of Sovintel's customers which
has been assigned a number acquired from and serviced by the independent local
exchange providers, such as the CLEC Services division of TeleRoss or
MTU-Inform, the calling party has the option of dialing through either the
public city code (095) or Sovintel's exclusive city code (501). When a caller
chooses to dial through the 501 code, the call is connected directly to
Sovintel's dedicated network and can thereby avoid the frequently congested
public international and domestic long distance networks. Sovintel receives a
settlement from international carriers for calls routed through its 501 city
code. International outbound switched voice traffic is routed by destination
based on either anticipated return traffic from the foreign operator through
Sovintel's 501-code, or through least-cost routing. Sovintel attempts to direct
international traffic through particular foreign operators so as to balance
Sovintel's settlements paid to and received from foreign operators. Thereafter,
Sovintel directs all international outbound, switched voice traffic in excess of
that required to achieve the balance of the bilateral relationships to the
lowest cost route.

     Data Services.  Sovintel provides high-speed data services through an
interconnect agreement with the Data and Internet Services division of TeleRoss
and through its own Moscow city data network. These services include a private
line service, an integrated voice and data integrated services digital network
(ISDN) connection, Internet, frame relay and asynchronous transfer mode service.
Private line channels, which are provided over dedicated leased lines, are
principally used by customers with high-volume data traffic needs, including
financial institutions, large multinational companies and data service
providers.

     Equipment Sales.  As part of its integrated service offering, Sovintel
distributes equipment manufactured by Nortel Networks, Cisco Systems, Siemens,
Avaya and Ericsson. Sovintel installs and maintains Nortel Meridian One
products, Norstar key system, Mercator PBXs and the Magellan DPN and the
Passport lines of data equipment. Sovintel's technicians have been trained to
install, configure and maintain all the products that it sells to its customers.
These services enable Sovintel to maintain close customer contact, helping
Sovintel to market additional services and enhance customer retention.

     Sovintel's customers primarily consist of corporate network customers,
corporate end-users, fixed-line operators and cellular operators.

     MARKETING AND PRICING

     Sales to customers are made through a direct sales force consisting of 35
account managers in Moscow and St. Petersburg, supervised by an expatriate
commercial director. Each of these account managers targets specific customer
groups and industry segments, and is supported by specialists in technical sales
support, marketing, customer service and user training. Sovintel offers one of
the broadest ranges of products among independent providers, and releases new
products and enhancements to existing products in order to strengthen its market
position. In addition, Sovintel trains its employees to provide customer service
at a level which is comparable to that provided by Western telecommunications
companies. As a result, we believe Sovintel has earned a reputation for
providing high-quality telecommunications services through an experienced and
professional customer service staff.

     Sovintel prices its services at a premium to those offered by the national
monopoly operator and competitively with other alternative service providers
within the market. Sovintel offers volume discounts to its customers for
exceeding certain defined revenue thresholds. Although Sovintel publishes
standard tariffs, currently it does not require regulatory approval to change
its tariffs.

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<PAGE>

     COMPETITION

     Sovintel competes principally on the basis of price, network quality,
customer service and range of services offered. While Sovintel has a leading
position in the corporate market, it faces significant competition from other
service providers, including:

     - Comstar, a joint venture between Metromedia International Group, Inc. and
       Moscow City Telephone Network;

     - Combellga, a joint venture between Telenor and Comincom;

     - Global One, a subsidiary of the international venture Global One,
       currently merged with Equant;

     - Moscow City Telephone Network, the incumbent operator in Moscow;

     - MTU-Inform, an affiliate of Moscow City Telephone Network, both currently
       controlled by Sistema Telecom;

     - TelMos, a joint venture among Moscow City Telephone Network, Rostelecom
       and Sistema Telecom;

     - Petersburg Telephone Network, the incumbent local operator in St.
       Petersburg; and

     - Peterstar, an affiliate of PLD Telekom; PLD Telekom was acquired by the
       Metromedia International Group, Inc.

     In addition to CLEC services, all the companies listed above provide
Internet solutions, and some also offer limited data transmission. Of Sovintel's
competitors, MTU-Inform and Global One are market leaders in Moscow in the data
services market. Numerous small and medium-sized Internet service providers
compete for the corporate end-user market.

  DATA AND INTERNET SERVICES

  Data and Internet Services Division of TeleRoss

     The Data and Internet Services division of TeleRoss provides data
transmission services, dedicated and dial-up Internet access, news and
information services. We use leased capacity on land and satellite-based
networks to provide these data services in 140 points of presence to create wide
area networks. International connectivity outside the CIS is provided through
agreements with operators such as AT&T, Infonet, Ebone and Cable & Wireless.
Through reciprocal cooperation agreements with these other international
operators, the division provides end-to-end, international connectivity to its
Russia and Commonwealth of Independent States-based customers. This division
targets appropriate services to customers through Business Services initiatives
and Consumer Services initiatives, as follows:

     BUSINESS SERVICES AND CUSTOMERS

     Data Transmission Services.  The Data Services division of TeleRoss offers
traditional and high-speed data communications services, using X.25, frame relay
and asynchronous transfer mode technologies, to business customers who require
wide area networks to link computer networks in geographically dispersed
offices. Its major customers are large multinational corporations, financial
institutions and small and medium-sized Russian enterprises. These customers
require an integrated product offering, including network access and hardware
and software solutions featuring installation, configuration and maintenance.

     Private Line Services.  This division provides private line channels to
customers who require high-capacity and high-quality domestic and international
point-to-point connections. Private lines can be used for voice and data
applications.

     Information Services.  We offer a variety of information services
addressing the needs of professional markets. Today, these services address
primarily the banking and financial industries with products such as S.W.I.F.T.,
Reuters, Bloomberg and MICEX (Moscow Inter-bank Currency Exchange).

                                        11
<PAGE>

     Dedicated Internet Services.  We offer a dedicated Internet access service
through our access and backbone networks. We provide our business customers with
dedicated access to the global Internet.

     Value-Added Services.  We offer an increasing range of value-added services
such as web design, web hosting and Internet Protocol, or IP, based Virtual
Private Networks and we intend to increase our market position in these services
to other Internet related products and services.

     In conjunction with our goal of increasing our web design capabilities, we
reinforced our market leadership position in web hosting through the
construction of a Managed Data Center, which was completed in December 2000. We
enjoy strong sales synergies among our co-location, web hosting and other
Internet service offerings.

     Voice over Data Services.  The markets where we operate are experiencing a
continuing significant trend toward routing voice traffic over the Internet
using IP technology, known as "Voice over IP" or "VoIP". TeleRoss is a leading
provider of this service. In addition to using TeleRoss' data networking
services for typical Local Area Network to Local Area Network interconnections,
many customers will also route their voice traffic over TeleRoss' frame relay
data network in an effort to reduce overall telecommunications expenses. Voice
over frame relay involves "packetizing" voice calls using frame relay, a data
transmission protocol, and transporting the voice call over our data network to
be "de-packetized" at the terminating end. The call is finally terminated
through normal circuit switching. Packet switching offers greater cost
efficiencies over circuit switching, and offers this division an opportunity to
leverage its data network investment across a greater number of services and
geographic areas. This product offering complements TeleRoss' other value-added
data service offerings and allows us to further leverage our data network
infrastructure investment.

     Equipment Sales.  As part of our integrated service offering, we
distribute, install, configure and maintain the equipment and software necessary
to support the data requirements of our customers. We have distributor
agreements with Cisco, Motorola and Nortel.

     We are well positioned to offer other value-added Internet services by
targeting our existing large base of corporate networking clients and dedicated
Internet access customers. We also provide dial-up Internet access to corporate
end-users.

     Customers primarily consist of corporate network and corporate end-user
customers.

     CONSUMER SERVICES AND CUSTOMERS

     Dial-up Internet Services.  We offer dial-up Internet services through our
ROL (formerly Russia-On-Line) Internet service, which commenced Internet
services in 1995. At that time it was branded under the name Russia-On-Line, but
during the last year and as a result of the integration of acquired ISPs who
operated under different brand names, we have begun to use the brand ROL. ROL
was the first Russian-English language, online service for accessing the
Internet through either dedicated private lines or dial-up servers. In addition,
the company has added vertical Internet portals covering many topics, including
entertainment, education, computer-gaming and communications specifically for
the Russian mass-market.

     During 2000, we completed the integrations of Glasnet, a business acquired
June 30, 1999, that targeted mass-market consumers and Nevalink, a small service
provider in St. Petersburg, which we acquired on December 1, 1999. On June 1,
2001 we further strengthened our position in the dial-up access market when we
completed the purchase of 100% of leading ISP, Cityline, together with 51% of
Ekaterinburg-based ISP, Uralrelcom, and 100% of infrastructure company PTK,
which will allocate 1,000 access lines to Moscow dial-up Internet capacity.
Cityline operates primarily in Moscow, but also operates in other major Russian
cities, including St. Petersburg, Nizhny Novgorod, Tyumen and Kaliningrad. Since
acquisition we have commenced the integration of these companies into our
existing infrastructure and in turn lowered our operating costs by integrating
the support functions, where there are duplications.

     Our dial-up access services are delivered in the regions through our
domestic long distance infrastructure, which provides customers with access to
the Internet and an array of proprietary Russian language information services.
We have discontinued our support for an English language based portal as the
Russian language

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<PAGE>

based market has expanded. Also, our ongoing expansion into the regions of
Russia, has created further openings for Russian language based web services.
Our regional expansion continues to further establish ROL as the only nationwide
dial-up ISP in Russia.

     The consumer dial-up access market continued its dramatic growth during the
last year, not only in Moscow, but also in the regions of Russia. As of December
31, 2001, ROL, together with Cityline, Uralrelcom and KIS had a subscriber base
of over 150,000 active subscribers, with a total for Golden Telecom, Inc. of
over 185,000 active subscribers, including the subscribers of Golden Telecom
(Ukraine) and Sovintel. As of December 31, 2000, ROL, together with KIS had a
subscriber base of over 68,000 active subscribers, with a total for Golden
Telecom, Inc. of over 85,000 active subscribers, including Golden Telecom
(Ukraine) and Sovintel. In addition, ROL continued its expansion into the
regions of Russia and into the CIS countries, now covering 43 cities with its
dial-up access. ROL currently utilizes an STM-1 fiber optic connection to the
international world-wide-web and two one-gigabit ethernet fiber optic
connections to the Russian telecommunications network. These two one-gigabit
ethernet connections were the first to be added by an ISP to the Russian
Internet and were deployed to greatly improve the quality of services generally
available in the Russian market, through significant capacity and corresponding
redundancy. The consumer dial-up Internet access service has seen an increased
utilization rate over the last year as subscribers have increased the number of
hours spent online from approximately 27 hours to approximately 30 hours per
month. We expect this utilization rate to continue to increase over the coming
years as the quality of entertainment and information services improves.

     We acquired the Internet portals in 2000 to complement the dial-up access
service provided under the ROL brand for the consumer market and provide a basis
whereby the ROL brand was expected to generate revenues from the advertising and
e-commerce markets which are beginning to evolve in Russia. These acquisitions
were part of a content strategy, which the company initiated at the end of 1999.
In general, the company's strategy has been to utilize the portals to provide a
complete Internet service to its subscriber base, while generating incremental
advertising revenues by offering a fully functional informational/entertaining
content base which can be accessed at high speed through the ROL network. ROL
subscribers can access the content on the Russia-On-Line Internet portals
without experiencing delays related to the public telecommunications network in
Russia. The Internet portals are also available to other networks throughout the
world-wide-web. Some services are expected to become premium services for the
ROL subscribers only.

     The Aport search engine, acquired as part of the Agama acquisition, has
seen substantial growth in the number of users over the last year. With a new
interface and the inclusion of the search engine into the ROL base family, we
expect the search engine to continue to see growth and market share gains over
the next year. The Referat.ru and Absolute Games sites have been completely
integrated into the main ROL portal. The catalog sites from Agama @Rus, and the
stars.ru catalog from InfoArt have also been merged into the portal. In general,
we are continuing to realize the synergies between the content that has been
acquired and the new content specifically for the ROL subscriber base.
Additionally, ROL released the web site "World Around Us" (www.krugosvet.ru), a
Russian language encyclopedia, to which we acquired the rights in 2000, and we
have utilized this material to enhance our educational offerings. The ROL site,
together with its sub-sites, is currently the third most popular site in Russia.
The web site carries the same ROL brand as the dial-up service. Although some
advertising revenue is generated by the site, the expansion of advertising on
the Internet, in Russia, is still limited.

     Although significant revenues from Internet advertising have not yet
materialized in the Russian market, there has been substantial growth in
revenues in percentage terms during 2001. The lower than predicted expectations
for Internet advertising revenues both for Russia and other economies, has led
us to review our long term strategy for Internet based products and reevaluate
the economic value of our portal assets. This, in turn, has resulted in our
recording an impairment charge on these assets at the end of 2001. More detailed
information on this matter is included under "Management Discussion and
Analysis." We expect to see some growth in the Internet based advertising market
and will continue to develop our Internet portals and to offer our Internet
advertising service as one of our range of Internet services and be in a
position to capitalize on any upturn in demand.

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<PAGE>

     We will continue to strengthen our dial-up Internet access service in the
main metropolitan areas we serve and augment this with further expansion into
the Russian regions.

     MARKETING AND PRICING

     The Data and Internet Services division of TeleRoss and the Long Distance
Services division of TeleRoss, share a dedicated sales force in Moscow and St.
Petersburg, consisting of approximately 48 sales and account managers. In
addition to direct sales, our Internet access packages are distributed in Moscow
through large retailers. In the Russian regions, TeleRoss and its venture
partners market the Data and Internet Services division's data product portfolio
to help build cooperation with our local joint venture partners, who do not have
the capability to offer a comparable range of data services, and to increase the
customer base of both the Data and Internet Services and Long Distance Services
divisions of TeleRoss.

     We price data services on a two-tier structure with high-volume users
generally negotiating a monthly flat-rate fee and lower volume users paying a
volume-based fee. Dial-up and dedicated Internet access customers pay a fixed
monthly access charge plus an additional volume-based fee in an increasingly
competitive market.

     At the end of 1999 we introduced a series of prepaid cards, which entitle
the holder to utilize a certain amount of hours of dial-up Internet access. We
continue to distribute these cards nationwide in Russia through a two-tiered
distribution network of large distribution services and dealers. In some regions
of Russia a number of the larger distributors are TeleRoss regional ventures. In
addition, we maintain a partner network in regions where TeleRoss services are
not directly available or do not complement the local environment.

     COMPETITION

     Global One and Rostelecom are our primary competitors in the data services
market. MTU-Intel, a subsidiary of MTU-Inform, is the division's primary
competitor in the Internet service provider market in Moscow. In the local
Internet portal market Ros Business Consulting, Rambler and Yandex are our main
competitors.

  Data and Internet Services Division of Golden Telecom BTS

     In February 2000, Golden Telecom BTS acquired Sovam Ukraine and has since
integrated the network of Sovam Ukraine into the existing Golden Telecom BTS
network.

     SERVICES AND CUSTOMERS

     Corporate Data and Internet Services.  The Data and Internet Services
division of Golden Telecom BTS provides a private line service, an integrated
voice and data ISDN connection, frame relay, asynchronous transfer mode, X.25,
and dial-up and dedicated Internet services. Private line channels, which are
provided over dedicated leased lines, are principally used by customers with
high-volume data traffic needs. The services and customers of Sovam Ukraine have
been integrated into Golden Telecom BTS.

     Information Services.  We offer access to a variety of information services
addressing the needs of key professional markets. The Data and Internet Services
division of Golden Telecom BTS provides conduits to airline reservations
systems, as well as, financial and banking services (SWIFT) and news services
(Reuters) in Ukraine. A data center provides server co-location services for
news and financial service providers.

     Voice Over Data Services.  This division intends to be a leading provider
of voice over data services in Ukraine. A VoIP product introduced under the
brand "Allo!", was launched in Kiev and other major metropolitan centers, in
2001, to provide an alternative international calling solution for corporate and
mass

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<PAGE>

market customers. This service has proved to be popular in the Ukrainian market
and will continue to offer growth opportunities.

     Dial-up Internet Services.  This division offers dial-up Internet access to
customers under the "SvitOnline" brand. Currently the division has in excess of
16,000 active subscribers, which includes some corporate customers.

     Customers for this division primarily consist of corporate network
customers, corporate end-users, fixed-line operators and cellular operators.
Internet services under the SvitOnline brand are also provided as a mass
marketing offering with dial-up and pre-paid cards.

     MARKETING AND PRICING

     While emphasizing the quality and reliability of its services, this
division positions itself as a price competitive service provider to businesses.
Sales to our customers are made through a direct sales force. Additionally, we
have three account managers, who handle mass-market service offerings although
this segment will become less significant over time as the primary strategy is
towards the business customer.

     Golden Telecom BTS has adopted an aggressive pricing policy for corporate
end users in order to stimulate higher growth. Golden Telecom BTS is a fast
growing Internet service provider for businesses in Ukraine in terms of
incremental connections and market share. As a carrier for other Internet
service providers, Golden Telecom BTS also offers an attractive pricing
structure and expects further growth of its already significant market share,
especially in the regions of Ukraine. The increase in market share is expected
through the provision of international private line connections, international
frame relay connections and national corporate networks.

     COMPETITION

     In Kiev, this division competes with Infocom, a majority state-owned
operator, Lucky Net, IP Telecom and several smaller local Internet service
providers that currently do not have a clear marketing strategy or consistency
in the grade of service offered. We believe that because of our strong market
position and high quality services with professional customer-care, we have a
leading position in all segments of the corporate Internet market in Ukraine.

  LONG DISTANCE SERVICES

  Long Distance Services Division of TeleRoss

     The Long Distance Services division of TeleRoss operates a pan-Russian,
domestic long distance network and, in cooperation with fifteen regional joint
ventures and branches, is a provider of local access, international and domestic
long distance services in the cities where the joint ventures and branches are
located. The network is comprised of leased intercity fiber optic cable and
leased satellite capacity, regional earth stations and VSATs supporting our long
distance activities, with termination through our own last-mile networks. Joint
venture partners provide local access in the cities where regional joint
ventures operate.

     SERVICES AND CUSTOMERS

     Public Switched Voice Telephony Services.  The division provides switched
voice services to its customers through local city switches connected to its
earth stations and leased intercity fiber optic lines. When a customer in one of
the fifteen TeleRoss regions makes a domestic long distance or an international
call, it is typically transmitted first to our Moscow hub by fiber or satellite
transmission facilities. The call is then connected to the customer's
destination through a land-based line that TeleRoss operates, through the
Rostelecom network, or, for international calls, through our Sovintel
international gateway. Telecommunications operators also rely on TeleRoss
ventures to provide data and voice transmission.

     VSAT Satellite Services.  We offer VSAT satellite services to customers
located in remote areas that cannot be physically connected through land-based
cables to our regional long distance switches, as well as to

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<PAGE>

large infrastructure projects in need of sophisticated and reliable
communications systems. TeleRoss's satellite transmission facilities connect
these customers directly to TeleRoss's Moscow-based hub through a VSAT antenna
installed at the customer's location.

     The division's customers primarily consist of corporate network customers,
corporate end-users, fixed-line operators and cellular operators.

     MARKETING AND PRICING

     The Long Distance Services division of TeleRoss and its regional ventures
typically employ a direct sales force to market to corporate end-users. This
sales force is combined with the Data and Internet Services division and
consists of approximately 48 sales and account managers supervised by a
western-educated and trained commercial director. In addition, a team of three
regional sales managers are responsible for supporting the regional sales force
and maintaining relations with our regional partners. We have introduced sales
incentive plans to the regional joint ventures, but TeleRoss depends on these
ventures to implement these plans. In 2000 we began to offer a prepaid calling
card service "Glagol", which means "to talk" in old Russian. This service
promotes long distance calling services over our network in Russia.

     TeleRoss's regional ventures are increasingly driven by their corporate
network customers, who require uniform solutions for their wide area networks.
While pricing remains a factor, this customer segment places more value on
network coverage, reliability and ability to design, install and maintain local
area and wide area networks. These customers often require integrated solutions,
including data services to connect different offices. Local telcos often cannot
provide the required solutions, and we can adjust our prices to reflect the
integrated services that we provide.

     COMPETITION

     Rostelecom and Global One are the principal competitors to the Long
Distance Services division of TeleRoss. Rostelecom provides similar services in
all regions where we operate. Global One provides integrated voice and data
services in a limited number of regions. The local telcos are also competitors,
however they are not a strong competitor in the markets we target.

  MOBILE SERVICES

  Golden Telecom GSM

     Golden Telecom GSM operates a cellular network using GSM-1800 cellular
technology in Kiev and Odessa, where its network covers an area with a
population of approximately 3.9 million people. Golden Telecom GSM began
cellular operations with a license allowing it to offer services in Kiev and the
Kiev region. Golden Telecom GSM later obtained a national operating license and
commenced operations in Odessa in August 2000, however due to the overall
decline in our mobile revenues we are considering alternative strategies for the
future of the Odessa mobile operations.

     SERVICES AND CUSTOMERS

     Mobile Services.  Golden Telecom GSM provides two types of mobile services
to its clients: a basic service for clients who utilize prepaid calling cards
and an expanded service for subscription clients, including international access
and value-added services such as voicemail, call forwarding, and conferencing.
International roaming services with 84 operators in 49 countries are available
to customers who subscribe to the expanded service offering.

     Golden Telecom GSM's customers consist of a broad spectrum of private and
corporate users representing primarily the high-end mass market and business
customer segments.

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<PAGE>

     MARKETING AND PRICING

     Golden Telecom GSM's network has the widest frequency bandwidth allocated
of all cellular operators in Kiev, allowing it to deploy a high quality network
throughout the city and thus market itself as a quality service provider. Due to
the highly competitive nature of the cellular market in Kiev, Golden Telecom GSM
focuses on providing a flexible and competitive tariff structure. Golden Telecom
GSM targets two markets for its services. The subscription service is marketed
as a high-quality service to private and business users providing clients with
flexible tariff plans and a variety of value-added services. The prepaid package
is targeted at younger, entry-level users, offering them mobile services without
fixed contracts or monthly bills.

     COMPETITION

     The Ukrainian cellular market is highly competitive. Ukrainian Mobile
Communications (UMC) and Kyivstar GSM (Kyivstar) and Ukraine Radio Systems (URS)
operate GSM-900 networks in Kiev. UMC and Kyivstar offer nationwide coverage in
major cities within Ukraine and have recently begun deployment of GSM-1800
services after receiving licenses. UMC also operates a NMT-450 network
throughout Ukraine, although the subscriber base is declining. DCC operates an
AMPS-800 network in Kiev and other regions in Ukraine.

     The mobile communications market in Ukraine has developed rapidly during
2001, driven primarily by the two nationwide GSM operators, UMC and Kyivstar,
competing for market share. The stated objective of each was to achieve one
million subscribers by the end of 2001. Although both operators formally
announced success in achieving their objectives, the resulting impact on
subscriber profiles significantly altered the profit potential of the market.
Specifically, average revenue per user ("ARPU") declined rapidly during the year
as the operators offered aggressive incentives to their dealer networks to
attract the maximum amount of users, irrespective of recurring revenues.

     In 2001 Golden Telecom GSM experienced a 9% rise in active subscribers and
a 29% decline in ARPU. Due to the continued strong competitive pressure and the
limited coverage of our network in Ukraine, a decision was taken in 2001 to
freeze further significant investment into our mobile operations. This, coupled
with regulatory issues, and the need to commit significant investment to
continue to grow, has led us to reassess our plans for this business and the
company recorded a $10.4 million impairment charge, in 2001, on the carrying
value of the long-lived assets of this division. More detailed information on
this matter is included under "Management Discussion and Analysis." We intend to
refocus our mobile operations as an additional service from Golden Telecom BTS
to corporate clients.

This completes our discussion of our operating divisions.

     We also hold a minority interest in MCT Corp. ("MCT"), which in turn has
ownership interests in twenty-four mobile operations located throughout Russia
and in Uzbekistan and Tajikistan. We treat our ownership interest in MCT as an
investment and are not actively involved in the day-to-day management of the
operations.

EMPLOYEES

     On December 31, 2001, we and our consolidated subsidiaries employed a total
of 1,243 full-time employees and our joint ventures, excluding MCT, employed 536
full-time employees. On December 31, 2000, we and our consolidated subsidiaries
employed a total of 944 employees and our joint ventures employed 504 full-time
employees. Included in the number of full-time employees were 16 and 20
expatriates as of December 31, 2001 and 2000, respectively.

     We do not have any collective bargaining agreements with our employees, and
we believe that our relations with our employees are good. We believe our future
success will depend on our continued ability to attract and retain highly
skilled and qualified employees.

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<PAGE>

OUR LICENSES AND NETWORK FACILITIES

  SIGNIFICANT LICENSES

     Our subsidiaries and ventures hold the following licenses in Russia and
Ukraine, which are materially significant to their operations:

     Switched Voice Services.  In Russia, we hold several licenses for switched
services. Sovintel holds four such licenses. The first license was issued to
Sovintel by the Ministry of Communications and authorizes Sovintel to provide
local, intra-zonal, intercity and international telephone services in a number
of cities, including Moscow and St. Petersburg. This license expires on March
17, 2008. The second license authorizes the provision of the same services in
different regions and expires on July 20, 2005. Two other licenses authorize the
provision of the same services in other Russian regions and expire on February
15, 2006 and October 4, 2006, respectively. On April 27, 2000, a five-year
license was reissued to TeleRoss for provision of local and intercity services
in forty-four regions including the cities of Moscow and St. Petersburg. This
license allows our networks in these regions to interconnect with the local
public network.

     In Kiev, Ukraine, we hold licenses for provision of overlay network
services, including local, domestic long distance and international long
distance services, in the name of Golden Telecom LLC Ukraine. The first license
authorizes the provision of intercity and international telephone services in
several regions of Ukraine, including Kiev and Odessa. It expires on December
31, 2013. The second license authorizes the provision of local telephone
services in several cities, including Kiev and Odessa. The license expires on
December 31, 2007. Two more licenses authorize the provision of intercity and
local telephone services in several Ukrainian cities. These licenses expire on
January 28, 2014 and January 28, 2009, respectively.

     Leased Circuits.  On October 23, 1998 TeleRoss was issued a license to
lease international circuits in fourteen regions, including Moscow. This license
will expire on August 22, 2002 and a new license will be sought and we expect to
receive such. On April 9, 1999 TeleRoss was issued a five-year license to lease
local, intercity and international circuits in forty-two regions of Russia,
including Moscow and St. Petersburg. On April 27, 2000 TeleRoss was issued a
five-year license to lease local and intercity circuits in forty-three regions
of Russia, including Moscow. Sovintel holds five licenses to provide local,
intercity and international circuits in twelve regions of Russia, including
Moscow and St. Petersburg which expire on April 16, 2004, July 20, 2005,
February 15, 2006, July 5, 2006 and October 4, 2006, respectively.

     Data Services.  On April 9, 1999 TeleRoss was granted a five-year license
to provide data transmission services via a dedicated network to seventy-four
regions covering a large portion of Russia. The license permits TeleRoss to
interconnect with other data transfer networks in Russia. Five similar licenses
were issued to Sovintel for twelve regions including Moscow and St. Petersburg.
The licenses are through June 26, 2003, April 16, 2004, July 20, 2005, February
15, 2006 and October 4, 2006, respectively. Cityline was granted a five-year
license to provide data transmission services in St. Petersburg and the
Leningrad region that expires on November 17, 2003. A similar license for the
Kaliningrad region will expire on March 30, 2003. PTK was granted a five-year
data transmission license for Moscow and the Moscow region. This license expires
on May 18, 2006.

     Local Access Services.  The five-year license issued to TeleRoss on April
27, 2000 authorizes TeleRoss to provide local telephone service to 150,000
subscriber local access lines in Moscow and 22,000 subscriber local access lines
in various regions of Russia. PTK was issued a license to provide local
telephone services to 10,000 subscriber local access lines in Moscow. This
license expires on November 10, 2010.

     Telematics Services.  A five-year license was granted to TeleRoss on April
9, 1999 to provide telematics services for subscribers in Moscow. A similar
five-year license was granted to TeleRoss on April 7, 2000 for subscribers in
seventy-three regions of Russia. Five similar licenses were issued to Sovintel
for sixteen regions including Moscow and St. Petersburg. The licenses are valid
through June 26, 2003, April 16, 2004, July 20, 2005, February 15, 2006 and
October 4, 2006, respectively. Cityline holds a five-year license to provide
telematics services in Moscow, St. Petersburg and in the Moscow, Leningrad and
Kaliningrad regions. This license expires September 18, 2003. PTK was granted a
five-year license to provide telematics services for subscribers in Moscow and
the Moscow region. This license expires on March 15, 2006.

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     Mobile Services.  Golden Telecom (Ukraine) holds an operating license for
mobile services in Kiev and surrounding regions, which expires on December 31,
2007. The associated frequency licenses expire on July 31, 2013 and July 7,
2014. In addition, Golden Telecom (Ukraine) received a national operating
license for provision of GSM-1800 mobile services within the remaining territory
of Ukraine valid until January 28, 2009, as well as a frequency license for
Odessa and the Odessa region valid until January 19, 2010. Golden Telecom
(Ukraine) also holds a relay license for Kiev and the Kiev region, which expires
on January 25, 2005 and for the Odessa region, which expires on August 2, 2015.

  NETWORK FACILITIES

     Our telecommunication networks reflect the licensing regime adopted by the
Ministry of Communications and consist of technologically advanced systems
designed for businesses and other high usage customers. We own the electronic
hardware and software elements of the network, including transmission equipment,
and depending upon economic and strategic criteria, we own or lease the network
transport elements.

  Metropolitan Area Networks

     In Moscow, St. Petersburg, Nizhny Novgorod and Kiev we operate metropolitan
area networks (MANs) through the CLEC Services Division of TeleRoss, Sovintel,
ADS and Golden Telecom (Ukraine). In each of these locations, we own or lease
local access lines and private branch exchanges (PBXs), local exchange switches,
local numbering capacity, fiber optic transmission rings and a fiber optic
backbone.

     Our facilities in Moscow are fully integrated with our domestic and
international networks, as well as with the networks of Rostelecom and the
Moscow city public telephone network. The elements of this Moscow MAN operated
by the CLEC Services division of TeleRoss and Sovintel include the following
facilities:

     - Access lines supporting over 190,000 local numbers connecting
       approximately 2,500 buildings to more than 450 PBXs. These PBXs are often
       located on customer premises to distribute advanced telephony services in
       those premises to the end-users. These PBXs function as switches that
       permit users to receive incoming calls, to dial any other telephones on
       the premises that are connected to the PBX, to access a line leading to
       another PBX or to access an outside line to the public switched telephone
       network;

     - A network of 16 hub PBXs connected to the fiber optic network,
       complemented by a Nortel DMS 100I, a Nortel DMS 100E local switch with
       advanced functionality, and a Siemens EWSD combined local and long
       distance switch. The hub PBXs act as traffic aggregators for our 450 PBXs
       located in customer premises;

     - Approximately 1,750 kilometers of fiber optic backbone and access network
       using Synchronous Digital Hierarchy rings and Plesiosynchronous Digital
       Hierarchy tails. This fiber optic network carries our traffic between all
       our network elements in Moscow. This network connects us to major office
       buildings, hotels, business centers, and factories and is co-located with
       22 central offices of Moscow City Telephone Network, where we have access
       to copper wire facilities. The copper wire facilities are used in
       circumstances where a customer's requirements do not justify the
       immediate investment in fiber optic facilities.

       Of this fiber optic backbone and access network, approximately 850
       kilometers connects our network switches with over 78 local/tandem
       switches of the Moscow public telephone network and Rostelecom's long
       distance and international network to provide full interconnectivity; and

     - A Nokia DX200 local and tandem switch, with 150,000 operational local
       numbers, is interconnected to the local public switched telephone network
       via our backbone fiber optic network and leased channels. Of these
       approximately 32,000 are included in Sovintel's 82,000 local access
       numbers.

     Sovintel provides local access for its data service offering in Moscow
generally using the same intra-city transport and customer access network as
described above. This network is complemented by access lines leased from other
Moscow-based operators that possess their own local access networks in cases
where our

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data customers are not otherwise on our network. In these circumstances,
involving approximately half of our Moscow data customers, we lease local access
from Moscow City Telephone Network, Combelga, Macomnet, Golden Line and other
competitors. Thus, our customers for data services may use the same local access
as provided by their voice service providers.

     Sovintel's and TeleRoss' St. Petersburg network consists of a Siemens EWSD
tandem, local and long distance switch, interconnected to the St. Petersburg
public telephone network through St. Petersburg City Telephone Network and
Petersburg Transit Telecom Network, with capacity for 10,000 local numbers, and
49 PBXs that are installed on customer premises and within business centers. We
have constructed approximately 350 kilometers of fiber optic cable in and around
St. Petersburg, which is used to connect office buildings and business centers
to our network. This is complimented by TeleRoss's data and IP network with an
additional 80 kilometers of fiber optic cable, 14 PBXs and STM-4 capacity on our
international cable system.

     ADS' Nizhny Novgorod network consists of interconnect to 11 exchanges,
installed capacity of 15,400 local numbers, of which approximately 13,500 are
activated, connections to 10 PBXs that are installed on customer premises and
within business centers. ADS has constructed 46 kilometers of fiber optic cable
in and around Nizhny Novgorod which is used to connect office buildings and
business centers to their network. This is complemented by the KIS data and IP
network with an additional 34 kilometers of fiber optic cable and STM-1
capacity. Additionally, TeleRoss Nizhny Novgorod and Cityline's subsidiary,
Inforis, have last mile and a total of 480 lines of dial-up access capacity. In
13 nodes of the Nizhny Novgorod city network, KIS provides Asymmetric Digital
Subscriber Line access for dedicated Internet provisioning over the customers'
copper pair connection.

     In Ukraine, Golden Telecom (Ukraine) provides local exchange carrier
services through our MAN in Kiev. Golden Telecom BTS provides last mile
connections (both copper and fiber optic) from three large PBX switches acting
as central offices in the city and a large quantity of smaller PBXs. In Kiev, we
have constructed a 177-kilometer fiber optic ring consisting of a main loop and
five sub-rings. We plan to extend the total fiber optic network to serve
additional customers. We have also constructed a data network consisting of
seven data switches.

     We offer combined voice and data services with access to the local public
switched telecommunications network (PSTN) in 16 different major metropolitan
areas in Russia through our Data and Internet and Long Distance Services
divisions of TeleRoss. Depending on the region, we have between 100 to 1,000
local lines in service, for a total combined capacity of more than 5,000 lines.
Last mile access to the customers is usually provided through leased copper or
fiber optic lines.

     The Data and Internet Services division of TeleRoss also employs dial-up
Internet access servers using more than 1,000 dial-up lines in 43 cities in
Russia, Ukraine, Kazakhstan and Uzbekistan, allowing our customers Internet
access through a local call. This dial-up roaming service is also available in
over 80 countries through the international data-roaming entity, GRIC Dial.
Through these dial-up access servers, we offer local roaming for Internet
access, whereby an Internet customer normally residing in Moscow may travel to
other regions in Russia and internationally, call a local access number, and
access the Internet. This service may further expand with the development of our
network.

     We are continuing to review alternative access technologies with technology
providers, our partners, and other providers in the Russian Internet market. We
are building a premium Internet network for our subscribers, and to this end we
were the first to order Gigabit Switch Routers (GSR) from Cisco for the Russian
market. Currently we have two of these routers in major traffic points in our
network, and we will be expanding, as necessary, with similar or other
large-scale technologies in the future. As of December 2001 there were almost
3,800 modems available for access in Moscow, and more than 8,000 modems
throughout the ROL network. We are continuing to expand our modem pools as
necessary to meet market demands, subject to the limitations of the
infrastructures that are currently in place. In all cases, our major backbone
links are 100% redundant and provide immediate backup and recovery facilities.

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<PAGE>

     The hub of our Internet Protocol network is our Internet Data Center in
Moscow. This location has redundant power supplies as well as high level
security and fire systems. The center was built taking world class standards
into consideration. In addition, during 2000, our Network Monitoring Center was
completely refurbished to aid in preventative and reactive maintenance of the
backbone.

  International Networks

     Sovintel and the Long Distance Services division of TeleRoss provide
international switched voice, data and IP services in Russia using leased
transmission capacity that they obtain from Rostelecom and Transtelecom within
Russia, and international carriers beyond the Russian borders. Similarly, in
Ukraine, Golden Telecom (Ukraine) leases capacity from Ukrtelecom for domestic
segments and international operators for international segments. We operate two
international gateway switches. One switch, Sovintel's Nortel DMS 300, is
located in Moscow, and the other international gateway switch, Golden Telecom
(Ukraine)'s Siemens EWSD, is in Kiev. These international gateway switches carry
our international switched voice traffic to international operators with which
we have interconnect and settlement agreements.

     The Data and Internet Services division of TeleRoss uses Nortel
asynchronous transfer mode Passport technology for its core data network to
provide certain international private line circuits and international data
transmission services, such as X.25, asynchronous transfer mode and frame relay
and Cisco routers for Internet access. The Data and Internet Services Divisions
of TeleRoss and Golden Telecom BTS lease domestic fiber optic capacity necessary
to implement these service offerings from Rostelecom, Transtelecom, Ukrtelecom,
Rascom and Sonera. International segments of these offerings are provided in
cooperation with international operators such as Sonera, Ebone, Cable &
Wireless, AT&T and Infonet. In Ukraine, international outgoing and incoming
traffic is similarly routed by Golden Telecom (Ukraine) via fiber optic cable to
Ebone, Cable & Wireless and Sovintel in Moscow and several other international
operators. In addition to their land-based network, the Data and Internet
Services and the Long Distance Services divisions of TeleRoss also use satellite
transmission to offer the same services between Moscow and other major
Commonwealth of Independent States cities such as Almaty, Tashkent, Tbilisi and
Baku.

     Additionally we lease STM-16 capacity (2.4 Gbps) from Moscow to Stockholm
from Sonera and its subsidiary companies. In Stockholm, this capacity connects
directly to the Ebone network, providing access to complementary broadband
Internet and data networks in Europe and the United States of America. The
capacity on the Sonera fiber optic network was acquired on February 7, 2000,
through a 10-year lease agreement with an option to renew for 5 years. Initially
the equivalent of an STM-1 (155 Mbps) was activated in March 2000 and the
capacity was incrementally upgraded to STM-4 (622 Mbps) in August 2000 and to
STM-16 (2.4 Gbps) in the first quarter of 2001.

  Domestic Long Distance Networks

     TeleRoss developed a land and satellite-based regional network to provide
domestic long distance and data services in Russia. Our land-based domestic long
distance network consists primarily of fiber optic capacity leased from
Rostelecom and Transtelecom. We use this land-based network primarily to serve
our regional Data and Internet businesses. This network together with our
satellite-based network currently accesses 140 different points of presence
across Russia and in certain other large cities in the Commonwealth of
Independent States. We may further develop our land-based network to meet the
demands of our customers, especially customers in our Data Service division.

     TeleRoss also leases capacity on a satellite transponder (72 MHZ) from
Intelsat in accordance with the terms of a five-year lease, which expires in
March 2004. The coverage area of this satellite, or "footprint", includes the
full territory of Russia and other countries of the Commonwealth of Independent
States. Using this leased satellite transponder, TeleRoss serves fourteen
Regional Earth Stations (RESs) and 50 VSAT stations across the country. A VSAT
is a relatively small satellite antenna, typically 1.5 to 5 meters in diameter,
used primarily for satellite-based point-to-point applications. These RESs and
VSATs interconnect with our central hub in Moscow and with local facilities in
the areas where the RESs and VSATs are located.

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<PAGE>

TeleRoss's central hub in Moscow interconnects with the Moscow-based
international, domestic long distance and local facilities of TeleRoss and
Sovintel.

     TeleRoss developed land-based technology in parallel with a satellite
network for a number of reasons, including the following:

     - Fiber transmission is more suitable for data applications than satellite
       transmission because of fewer transmission delays;

     - VSAT technology is expensive for customers with limited capacity
       requirements; and

     - There is no "public data network", so we need to establish land-based
       points of presence in each location where customers require data
       services.

     We are implementing a strategy to integrate the land-based and satellite
networks and to integrate the different technologies integral to each, thereby
developing a single, multi-purpose network. The technologies required to carry
voice over packet networks, such as voice over frame relay, voice over Internet
Protocol and voice over asynchronous transfer mode, have become available and
allow for such network integration. This integration may benefit us in different
ways, as it:

     - Creates a possibility to carry voice "on net" between multiple locations.
       This application was not possible with a satellite-only network because
       the time delays in consecutive satellite "hops" are impractical for
       efficient communications at multiple locations;

     - Creates a possibility to terminate traffic in significantly more points
       of presence. Points of presence established originally for data services
       may be extended to carry voice over an interface to a local voice
       operator, allowing us to extend our service offering to other operators;

     - Improves network resilience both for voice and data networks through the
       optimal combination of land-based fiber and satellite transport capacity;
       and

     - Enables us to operate an integrated network over which we could offer
       voice, data and Internet services.

     We have already upgraded 30 points of presence to carry packet switched
voice, and we intend to upgrade other points of presence to provide this
capability as well.

  Mobile Network

     Golden Telecom (Ukraine) operates a GSM-1800 network in Kiev, Ukraine and
the immediately surrounding areas with a mobile switching center and 60 base
stations. In August 2000 we commenced operations in Odessa, Ukraine and now have
a mobile switching center and 29 base stations. The networks also include
various value-added service platforms offering voicemail, short message service,
and prepaid cellular administration.

THE ENVIRONMENTS IN WHICH WE OPERATE

     To facilitate a more complete understanding of our business and our
operations, this section provides an overview of some of the key features of the
markets where we operate and derive substantially all of our revenue. These
overviews focus on our two largest markets, Russia and Ukraine and include:

     - An overview of the telecommunications markets;

     - An overview of the political and economic environment; and

     - An overview of the legal, tax and regulatory regimes.

  OVERVIEW OF TELECOMMUNICATIONS' MARKETS IN RUSSIA AND UKRAINE

     The Telecommunications' Market in Russia.  Prior to the early 1990s, the
telecommunications network in the former Soviet Union was inefficient,
unreliable and underdeveloped relative to the networks in more-

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<PAGE>

developed countries. In the early 1990s, the Ministry of Communications, which
had formerly controlled the Soviet telecommunications infrastructure, ceded
operational control to a single long distance and international carrier,
Rostelecom, and 80 regional operators, including four independent city networks
in Moscow, St. Petersburg and two other cities. The local telcos provide local
exchange services for customers within their regions, but they are not licensed
to provide domestic long distance or international services. Likewise,
Rostelecom is prohibited from offering local exchange and local access services.
In the incumbent network domestic long distance calls to and from areas outside
the local telcos' service area, as well as international calls, are switched
through Rostelecom, which interconnects with the local telcos to complete
domestic long distance calls and with foreign carriers to complete international
calls.

     The disintegration of the Soviet Union and the collapse of the centrally
planned economy reduced the funding available to the local telcos at a time when
demand for telecommunications was increasing. The growth in the Russian
telecommunications industry since the early 1990s has been principally driven by
businesses in Moscow requiring international and domestic long distance voice
and data services and by mobile telephony users. The growth in Moscow
accelerated as multinational corporations established a presence in the capital
and Russian businesses expanded. The formerly state-owned local telcos, however,
which generally employed an outdated, dilapidated infrastructure, could not
support the requirements of high-volume consumers of sophisticated
telecommunications services. As a result, the inadequacies of the existing
legacy networks constructed during the Soviet era became more apparent. Further,
the proceeds received by the Russian government from the privatization of state
telecommunications assets were not used for the infrastructure improvements
required to meet increased demand. As a result, the Ministry of Communications
issued licenses to domestic and foreign funded companies to encourage investment
in the telecommunications infrastructure. The licensing structure adopted by the
Ministry of Communications directly reflected the areas of the legacy networks
in most urgent need of investment. Generally, voice and telephony licenses were
issued to provide local access, local exchange, international and domestic long
distance services.

     Although it remains subject to certain restrictions, significant progress
in privatization of the telecommunications industry in Russia has occurred.
Under Russian law, state-owned enterprises within the telecommunications sector
were subject to privatization but only pursuant to a decision of the Russian
government in each individual case and with the state retaining a certain
percentage of the stock of the privatized entity for three years, subject to
extension for national security reasons. At present, virtually all the former
state telecommunications enterprises have been privatized and, subject to the
above restrictions, shares of the newly formed joint stock companies have been
sold to the public. Also, a significant number of private operators provide a
wide variety of telecommunications services pursuant to licenses issued by the
Ministry of Communications.

     In September 1995, the Russian government established Svyazinvest as a
holding company for the state's telecommunications assets. Svyazinvest now holds
the Russian government's equity interests in all the local telcos, as well as
Rostelecom. In July 1997, a 25% plus one share interest in Svyazinvest was sold
to a private consortium, Mustcom Limited, for approximately $1.9 billion. The
Russian government repeatedly stated that it intends to sell a further 25% minus
two shares but has not completed any tenders. In 2000 the government announced a
plan to restructure and consolidate Svyazinvest's holdings. Svyazinvest
currently owns controlling voting interests in over 80 local telcos and
Rostelecom and owns substantial equity interests in four other local telcos,
including Moscow City Telephone Network. The consolidation is proceeding as
planned and it is expected that the 80 local telcos will be consolidated into
seven operating companies.

     The August 1998 Russian financial crisis severely restricted the
profitability of the local telcos and their ability to make payments on
liabilities denominated in foreign currencies and their ability to access new
capital. The crisis also had a negative effect on demand for telecommunications
services and on the ability of some customers to make timely payments. Since the
August 1998 Russian financial crisis, we have seen continued reductions in per
minute tariffs, in US Dollar terms, due to ruble devaluation, competitive
pressures and also following the world-wide trend of reduced tariffs. This has
led to reduced revenues for many operators but the effect on the margins in the
industry has been partially mitigated by reductions in per minute settlements to
be paid to other operators.

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<PAGE>

     In 2000 traffic volumes surpassed the levels carried by our network prior
to the crisis and continued to increase during 2001. We believe this indicates
an expansion in the Russian economy, especially within the telecommunications
industry.

     The Telecommunications Market in Ukraine.  The evolution of the
telecommunications sector in Ukraine is similar to that in Russia. The
infrastructure is outdated, the industry is inefficient and provides low-
quality services, and many tariffs are set as a result of political
considerations.

     In contrast to Russia, there has been no privatization of the state-owned
telecommunications sector in Ukraine. Whereas privatization of Ukrtelecom, the
state monopoly, was considered crucial for raising funds for the state in 2000,
several changes in priorities and political positioning has resulted in further
delay. To date, only about 3% of the monopoly has been privatized to employees
and managers through a privileged sale of shares.

     The State Committee of Communications is the regulatory body that oversees
the Ukrainian telecommunications industry. In 2001, the Committee also became
the 100% owner of Ukrtelecom, the State monopoly. The Committee has
responsibility for the management of state telecommunications holdings,
licensing, and setting tariff regulations. Tariffs for local calls and calls
between and within regions are set at levels far below those which would prevail
in a deregulated market. Inter-operator tariffs, however, are often set at
levels which challenge the ability of competing operators to effectively
position themselves against the monopoly operator.

     Ukrtelecom, the Ukrainian incumbent public operator, is the main provider
of telecommunications services in the country. Utel, a venture in which
Ukrtelecom last year acquired total control from foreign shareholders, is the
dominant national and long distance operator. Golden Telecom LLC Ukraine is the
primary competitor to Utel in the capital city of Kiev. Ukrtelecom is the
holding company for the state's telecommunications interests, including 24
regional local telcos, two municipal telecommunications operators, and the
national transmission networks, along with broadcasting, research and satellite
assets. The State Committee of Communications has made public statements to the
effect that it considers competition a threat to the future privatization of
Ukrtelecom, which the Committee owns, and that effective legislation must be
introduced and enforced to limit and control the activities of competing
operators.

     Public switched voice telephony in Kiev is delivered through a layered
hierarchy similar to that used in Moscow. We connect our customers using our
local access network with fiber optic and copper-based facilities, which provide
direct interconnection with the Kiev city telephone network.

     The Ukrainian mobile telecoms market is currently served by five operating
companies. Ukrainian Mobile Communications was the first operator to be licensed
in Ukraine using NMT-450 technology. The original license for this incumbent
allows it to receive permits and licenses for virtually any and all other
standards. UMC operates a GSM-900 network and recently received approval to
implement GSM-1800. Other GSM-900 operators are Kyivstar and Ukrainian Radio
Systems, also known as Wellcome. Golden Telecom LLC Ukraine commenced operations
in accordance with its GSM-1800 license in late 1996. There is one licensed
DAMPS operator in Ukraine, Digital Cellular Communications.

  OVERVIEW OF THE POLITICAL AND ECONOMIC ENVIRONMENT IN RUSSIA AND UKRAINE

     Russia's Political Environment.  Since the dissolution of the Soviet Union
in December 1991, Russia has been in the process of a substantial political
transformation. The Russian Constitution, ratified in 1993, establishes a
three-branch governing system that replaced the Communist dominated Soviet
system. The three-branch system consists of a powerful executive branch led by
the President, a bicameral legislative branch with an upper assembly, the
Federation Council, and a lower assembly, the State Duma, and an underdeveloped
judicial branch. Boris Yeltsin was elected to a second term as President in July
1994 but shortly thereafter lost popular support on account of political and
economic dislocations, disaffection with economic reform, institutionalized
corruption and his erratic stewardship of the country. On December 31, 1999
Yeltsin resigned the presidency, thereby enabling the Prime Minister, Vladimir
Putin, to be elevated to the role of acting president and to emerge as the
winning candidate in the presidential election which was held on an accelerated
basis on March 26, 2000.

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<PAGE>

     Prior to his election to the presidency, President Putin was appointed
Prime Minister by former President Yeltsin and confirmed by the Duma on August
16, 1999. Prior to his appointment as Prime Minister, President Putin served as
the Head of the Russian Federal Counter-Intelligence Agency and as the Head of
the Internal Controls Department of the President's Administration. President
Putin has stated that he intends to follow his predecessors' policies but with
an increasing emphasis on the fight against corruption and the effective
exercise of the power of the state. Mr. Putin has also pursued a policy
emphasizing increased cooperation with European powers and the United States,
especially in the proclaimed "War Against Terrorism" initiatives in response to
the attacks on the United States on September 11, 2001. With the frequent
changes of government in Russia and the other countries of the Commonwealth of
Independent States government policies are subject to rapid and potentially
radical change.

     The political and economic changes in Russia over the last eleven years
have resulted in significant dislocations of authority. As a result of the
frequent turnover at the federal government level, the continuing absence of an
effective central government and direct elections at the local level, certain
regions of Russia are exercising more independence in both political and
economic policies. Significant organized criminal elements have taken advantage
of these dislocations. High levels of corruption exist among government
officials and among commercial enterprises in which the state has an ownership
interest. In an attempt to increase the influence of federal authorities in the
regions, President Putin organized the Russian regions into seven administrative
regions and appointed special presidential representatives to coordinate and
enforce federal policies in each of these regions.

     Russia's Economic Environment.  In the immediate aftermath of the 1998
financial crisis, the ruble's value declined substantially below the 9.5
rubles/US dollar floor set on that date, but in the last year has settled at
approximately 29-30 rubles/US dollar. World oil prices have contributed to the
recent relative stability of the ruble as the Russian Central Bank has reported
hard currency reserves of over $37.4 billion, as at March 15, 2002. It is
predicted that these reserves will increase to $39 billion in 2002. According to
government figures, inflation has come under relative control since the crises
with annual inflation numbers for 1998 at 84%, 1999 at 36%, 20% for 2000 and 19%
for the year 2001. Inflation is expected to be in the 15 percent range for 2002.
Officials estimate that there will be US$36 billion trade surplus in 2002 and
gross domestic product increase of over 3.5% in 2002 as compared to 2001.
Foreign direct investment is expected to increase from $5.5 billion in 2001 to
$6 billion in 2002. Further, there has been a steady decline in capital flight
since 1998 and this trend is predicted to continue in 2002. These positive
economic indicators must be considered in the context of Russia's status as a
major exporter of oil and any decline in world oil prices may severely impact
the value of the ruble and the continued development of Russia's economy.

     Russian and other Commonwealth of Independent States businesses have a
limited operating history in market-oriented conditions. Many Russian banks are
undercapitalized and continue to have cash shortages. The Russian Central Bank
has reduced banks' reserve requirements in order to inject more liquidity into
the Russian financial system, but has stressed that it will not bail out the
weaker banks. Many of these banks are expected to close over the next several
years as a result of bank failure and anticipated consolidation in the industry.
Owing to a chronic lack of transparency in the banking industry, it is very
difficult to determine the relative stability of the vast majority of banks.

     Ukraine's Political Environment.  Ukraine declared independence from the
Soviet Union in 1991. Since that time, Ukraine has established a three-branch
system of government similar to that in Russia. Following a period of
significant political debate, the new Ukrainian Constitution was ratified in
June 1996. Independent Ukraine's first President Leonid Kravchuk led the country
through a period of significant economic and social decline. Following the 1995
presidential elections, Leonid Kuchma succeeded him. Ukraine is one of the few
former Soviet republics to smoothly and peaceably transfer executive power.
President Kuchma was re-elected for another five-year term in November 1999.

     The appointment of Anatoly Kinach to replace the pro-reform Victor
Yuschenko as Prime Minister, whose government was voted down in a vote of
no-confidence by the Parliament, was seen as a convenient way to resolve the
ongoing conflict that existed between the President and Mr. Yuschenko.
Parliamentary elections are scheduled to take place at the end of March 2002 and
Mr. Kinach has established a reputation as being a

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<PAGE>

cooperative Prime Minister acting in a caretaker role until the elections.
During this period, President Kuchma has been able to implement policy as he
sees fit.

     Although President Kuchma has been able to maintain a fair amount of
control over policy, power is fairly evenly divided between the president and
parliament. Political reform efforts have progressed somewhat during Ukraine's
first ten years as an independent country, but there is still more to do in
creating a judicial system which acts independent of political motivations.

     Ukraine's Economic Environment.  In September 1996 a new currency, the
hryvna, was introduced, replacing the temporary karbovanets (coupons) that were
in circulation following the country's independence from the Soviet Union. The
National Bank of Ukraine, the nation's central bank, has steadfastly refused to
permit wholesale printing of the currency despite much pressure from Parliament.
The hryvna is now subject to a floating exchange rate whereas it was previously
kept within a fixed range. It has remained relatively stable due to support from
the International Monetary Fund and World Bank although the IMF has temporarily
suspended the further issuance of credits under an Extended Funding Facility
citing slow reform and the need for government restructuring.

     Even with the repeated delays in obtaining further credits from the IMF and
World Bank, Ukraine was able to achieve GDP growth of approximately 9% in 2001
following 6% growth in 2000. Annual inflation was kept below 15% due to currency
stability, increased productivity, and a working fiscal policy.

     Ukraine's fiscal budget and economic stability continues to be dependent
upon continued support from foreign lending institutions. Although negotiations
with the IMF and other creditors appear to be proceeding well there can be no
assurance that Ukraine will continue to receive funding from the IMF or any
other lending institution. There can also be no assurance that Ukraine will be
able to continue to restructure its foreign debt.

  OVERVIEW OF THE LEGAL, TAX AND REGULATORY REGIMES IN RUSSIA AND UKRAINE

     Russia's Legal, Tax and Regulatory Regime.  After the dissolution of the
Soviet Union in December 1991, former President Yeltsin and the Duma enacted
piecemeal legislation in an attempt to develop a legal framework to guide the
transition from a centralized command economy to a more market-oriented economy.
While a rudimentary legal framework has partially developed, legislation is
often inconsistent, contradictory, poorly drafted and unclear. This general
characterization is particularly applicable to corporate governance regulations
and tax legislation. During 2000, at the urging of President Putin's government,
the State Duma approved the first two parts of the revised and reportedly
simplified Russian Tax Code. The second part entered into effect as of January
1, 2001 and additional provisions came into effect as of January 1, 2002.
Similarly, under pressure from the executive branch, the Duma finally enacted a
new Labor Code, which entered into effect in February 2002 and replaced the
antiquated Labor Code left over from the Soviet era. Still, ambiguities in the
law are exploited by bureaucrats struggling to increase state budgetary
resources. Administrative regulations and decrees are frequently not published
and are not available for review. The judiciary lacks the power necessary to
enforce its judgments and judges are frequently underpaid, inexperienced and
commercially unsophisticated. In addition, judges are subject to intimidation,
and corruption in the judiciary is not unusual. Hence, in such an environment,
contracts are frequently unenforceable in courts of law.

     The State Duma has enacted legislation to protect foreign investment and
other property against expropriation and nationalization. In the event that such
property is expropriated or nationalized, legislation provides for reimbursement
of the value of the property and damages. However, due to the lack of state
budgetary resources, experience and political will to enforce these provisions,
and due to potential political changes, it is uncertain whether such protections
could be enforced.

     In addition to telecommunications legislation, the Russian
telecommunications industry is also shaped by privatization legislation and the
resulting privatization of state-owned telecommunications enterprises over the
last several years.

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<PAGE>

     Generally, taxes payable by Russian companies are numerous and substantial.
They include taxes on profits, revenue, assets and payroll, as well as
value-added tax. The recently enacted Tax Code represents an attempt to
rationalize the federal tax system. The effect of the new Tax Code on our
operations has and should become increasingly evident as the new Code is
implemented. We expect an overall reduction in our Russian tax burden. For
example, from January 1, 2001 under the new Tax Code, taxes calculated on the
basis of revenue have decreased from 4% to 1% of revenue and the maximum unified
payroll tax decreased from 38.5% to 35.6%. From January 1, 2002, the rate of
corporate profit tax has decreased from 35% to 24%.

     Russian companies within the same ownership group cannot be consolidated,
and therefore, each company must pay its own Russian taxes. Because there is no
consolidation provision, dividends are subject to Russian taxes at each level
that they are paid. Currently, dividends are taxed at 15% and the payor is
required to withhold such tax when paying dividends, except with respect to
dividends paid to foreign entities that qualify for an exemption under treaties
on the avoidance of double taxation. Until recently, the system of tax
collection has been ineffective, resulting in the continual imposition of new
taxes in an attempt to raise government revenues. Although collection efforts
seem to have improved over the last year, the continuing possibility of large
government budget deficits raises the risk of a sudden imposition of arbitrary
or onerous taxes, which could adversely affect us.

     In various foreign jurisdictions, we are obligated to pay value-added tax
on the purchase or importation of assets, and for certain other transactions. In
many instances, value-added tax liabilities can be offset against value-added
tax which we collect and otherwise would remit to the tax authorities, or may be
refundable. Because the law in some jurisdictions is unclear, the local tax
authorities could assert that we are obligated to pay additional amounts of
value-added tax. In our opinion, any additional value-added tax which we may be
obligated to pay would be immaterial.

     In addition, the new Tax Code authorizes Russia's regional legislative
authorities to impose a local tax on the sale of goods and services on their
territories. A number of such subdivisions have exercised this authority,
including Moscow and St. Petersburg which have each established a local sales
tax rate of 5 percent.

     Pursuant to the Communications Law and subsequent governmental decrees, the
Ministry of Communications is assigned the authority to regulate and control the
development of the communications industry in Russia. Additional legislation
defines the roles of other communications regulatory organs, with the Ministry
exercising responsibility over the issuance of operator's licenses and the
supervision of each of those organs. The State Service for the Supervision of
Communications (Gossvyaznadzor) is empowered to issue certain permits required
for network operation and for the importation and use of telecommunications
equipment. Gossvyaznadzor conducts periodic inspections to determine an
operator's compliance with the terms and conditions of its licenses and is
authorized to issue orders and instructions requiring operators to bring their
network into compliance with their licenses or to face fines and/or to recommend
to the Ministry that a license should be suspended or revoked. In addition,
entities such as Svyazinvest at the federal level, as well as other entities in
Moscow and St. Petersburg and other administrative regions within Russia
exercise significant control over their respective local telephone networks and
may therefore affect the licensing process.

     The State Commission for Radio Frequencies (GKRCh) is responsible for
administering the utilization of the radio spectrum. This government agency
assigns and oversees the operation of radio frequencies. The State Commission
for Information is charged to coordinate the development and integration of
governmental and private telecommunications projects and networks. The State
Commission for Electrosvyaz (GKES) is responsible for improving the legislative
and regulatory base governing the telecommunication industry and for
coordinating the development of different telecommunications networks.

     Legislation and normative acts specific to the telecommunications industry
provide the regulatory framework that guides our operations. Specifically,
Russian Federation Law No. 15-FZ of February 16, 1995, On Communications,
outlines the regulatory framework for the telecommunications industry. It sets
forth general principles for the right to carry on telecommunications
activities, describes government involvement in telecommunications regulation
and operation, establishes the institutional framework involved in regulation
and administration of telecommunications, and deals with various operational
matters, such as ownership of

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<PAGE>

networks, protection of fair competition, interconnection, privacy and
liability. Separate legislation and administrative regulations implement this
institutional framework.

     Pursuant to Article 15 of the Communications Law, any entity that offers
any communications service must obtain the appropriate license from the Ministry
of Communications in accordance with the Communications Law and relevant
licensing regulations. In fact, neither the Communications Law nor such
regulations provide clear guidelines or base standards for the issuance or
extension of a license and the Ministry exercises broad discretion when
determining whether to approve a license application and when setting the terms
and conditions of the license. Telecommunications licenses are typically issued
for terms between three and ten years, and are not transferable.

     Article 17 of the Communications Law provides that communications networks
and facilities in Russia may be owned by legal entities and individuals acting
as communications operators, including foreign organizations and individuals.
Article 18 of the Communications Law states that foreign investors may
participate in the privatization of state-owned communications enterprises
within limits established by relevant privatization legislation. Contrary to
this provision, recent pronouncements from the Ministry indicate that the
government is reconsidering the efficacy of foreign controlled
telecommunications operators.

     It can be difficult and expensive to comply with applicable Russian
telecommunications regulations. For example, the Communications Law provides
that telecommunications in Russia are confidential and may only be intercepted
by a court order. Nevertheless, we are subject to SORM, the Russian acronym for
the surveillance system operated partly by the Federal Security Service, a
government agency that is responsible for electronic surveillance. SORM requires
telecommunications networks to facilitate monitoring of electronic traffic. Many
operators and commentators consider that SORM, as applied, is inconsistent with
the privacy provisions of the Russian constitution. Full compliance with SORM
may expensive, burdensome and unconstitutional, yet noncompliance with SORM may
lead to the administration of fines, penalties or the revocation of our
operating licenses.

     A new draft law "On Communications" is being considered by the government
and is expected to be passed in 2002. There have been some indications that the
law may contain restrictions on foreign ownership in the telecommunications
industry.

     Ukraine's Legal, Tax, and Regulatory Regime.  A primary contributor to the
relatively slow pace of reform in Ukraine has been the absence of a coherent and
enforceable legal framework to facilitate widespread privatization of government
assets. As an example, the privatization of Ukrtelecom, the State
telecommunications monopoly, has been repeatedly delayed because of the absence
of key laws required to enable such privatization. The new government headed by
Prime Minister Yuschenko has acknowledged this deficiency and has stated its
intention to address this issue.

     As with other former Soviet Republics, Ukraine is plagued with widespread
corruption and criminal activity. Organized criminal groups are active
throughout Ukraine. High levels of corruption exist among government officials
and among commercial enterprises in which the state has an ownership interest.
Although we do not believe we have been adversely affected by these activities
to date, organized or other crime could in the future have a material adverse
effect on our operations and the market price of our common stock.

     The tax regime in Ukraine is similar to that in Russia, including taxes on
profits, revenue, payroll, and VAT. In order to stimulate economic growth and
broaden the tax base, in 1999 the Government introduced a significant reduction
in payroll taxes followed by a subsequent reduction in revenue-based taxes in
2000. Despite these recent positive changes, Ukrainian tax legislation still
remains unstable and unclear and, therefore, is open to broad interpretation and
enforcement by tax authorities.

     In August 2000, Ukrainian legislation removed the limitation on the
establishment and operation of telecommunications ventures that are more than
49%-owned by foreign investors. Although we do not believe that the previous
prohibition extended to indirect investment by a foreign entity through a wholly
owned Ukrainian subsidiary, it is now beyond dispute that foreign entities may
wholly own and control Ukrainian telecommunications operators.

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<PAGE>

     The regulatory framework governing the telecommunications industry in
Ukraine, while relatively less developed and less comprehensive, is generally
similar to the Russian regulatory framework. In the Ukrainian framework, the
Ministry of Communications and the position of Minister of Communications is
supplanted by the State Committee for Communications headed by the Chairman of
the Committee. A new draft of the telecommunications law has been prepared and
is being reviewed by the government. The law is expected to provide clearer
guidelines about the relationship between the state monopoly and independent
operators than exist today.

     In the middle of 2001, the Chairman of the State Committee for
Communications who was considered to be fairly reformist was suddenly replaced
by a significantly more conservative Chairman. Since that time, Golden Telecom
and other operators have experienced delays in receiving telecommunication
services from Ukrtelecom. The Chairman has gone on record as saying that market
liberalization in Ukraine has occurred too fast and that privatization of
Ukrtelecom will be hindered should sufficient controls not be put in place.

     A faction within the Parliament introduced a bill which would have
prevented telecommunications operators from charging for incoming calls of any
kind. Although the sponsors of the bill were attempting to expedite the calling
party pays concept common in other countries, they overlooked the basic
requirements needed to fully support the concept in Ukraine; namely legislation
governing inter-operator settlements and billing functionality enhancements
within the local infrastructure. The bill was defeated in early 2002 after
successful lobbying by the major players in the market.

                FACTORS THAT MAY ADVERSELY AFFECT FUTURE RESULTS

RISKS ASSOCIATED WITH DOING BUSINESS IN RUSSIA, UKRAINE AND OTHER COUNTRIES OF
THE COMMONWEALTH OF INDEPENDENT STATES

     We generate substantially all our revenues from operations in Russia,
Ukraine and other countries of the Commonwealth of Independent States. All
companies operating in the Commonwealth of Independent States, including our
company, face significant political, economic, regulatory, legal and tax risks,
some of which are described below.

  POLITICAL INSTABILITY IN THE COUNTRIES IN WHICH WE OPERATE COULD DEPRESS
  FOREIGN AND LOCAL INVESTMENT AND SPENDING, WHICH COULD ADVERSELY AFFECT OUR
  RESULTS OF OPERATIONS

     Since the dissolution of the Soviet Union in December 1991, Russia, Ukraine
and the other countries in which we operate have, to varying degrees, been
undergoing significant political and economic transformation. A generally stable
political climate has emerged ten years after this transformation but economic
development remains hampered by the absence of a consistent and comprehensive
legislative framework necessary to implement and enforce market oriented reforms
and by widespread corruption among government officials. A re-occurrence of the
political instability that characterized the first several years of the
transformation could disrupt the direction and the pace of economic development.
Such a disruption could discourage foreign and local investment and spending, in
which case demand for our services could decrease and our results of operations
could deteriorate. If this were to occur, then the market price of our stock
could decrease.

  RECENT TERRORIST ACTIVITY IN THE UNITED STATES AND THE MILITARY SITUATION IN
  AFGHANISTAN MAY AFFECT THE RUSSIAN POLITICAL AND ECONOMIC SITUATION AND DEMAND
  FOR OUR SERVICES

     The September 11, 2001 terrorist attacks in the United States caused
widespread worldwide economic disruption and uncertainty, threatening recession
in many countries. If major national economies experience economic recession,
there could be negative spillover effects on the Russian economy. Recent
military action in Afghanistan could spread to countries of Central Asia that
share commons borders with the Russian Federation or to other countries, such as
Iraq, which are traditional allies of Russia. If these areas become unstable,
there could be less investment and less development in the markets where we
operate and therefore less demand for our services.

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<PAGE>

     Such events could also lead to increased Russian nationalism that could
negatively impact Russian attitudes to foreign direct investment and to business
relationships with suppliers like us. These factors could lead to decreased
demand for our services. Russia's public support of the military action in
Afghanistan could cause Russia to become a target of terrorist actions. If
widespread terrorist acts are committed in Russia and other markets where we
operate, our operations and financial results could be adversely effected.
Further, the terrorist attacks, military action and threats of future terrorist
actions have created volatility on world stock markets. If such volatility
continues, it could negatively affect our share price.

  ECONOMIC INSTABILITY IN RUSSIA AND UKRAINE COULD ADVERSELY AFFECT THE DEMAND
  FOR OUR SERVICES AND OUR ABILITY TO COLLECT ON OUR INVOICES

     After August 1998, the Russian and Ukrainian economies entered into an
economic downturn that was exacerbated by political instability. The political
situation in Russia and Ukraine has recently stabilized, but any future
instability or lack of economic growth in the countries in which we operate
could mean that demand for our services will remain depressed. The failure and
subsequent stagnation of the Russian and Ukrainian economies in 1998 weakened
the financial condition and the results of operations of many of our customers.
As a result, some of these customers were unable to pay our invoices or maintain
their telecommunication services, and our revenues suffered accordingly. The
demand for our services could again become depressed if the Russian and
Ukrainian political and economic situations deteriorate to a degree that may
precipitate the reoccurrence of financial crises.

  MONOPOLIZATION OF THE ECONOMY BY LARGE BUSINESS COULD ADVERSELY AFFECT THE
  DEMAND FOR OUR SERVICES

     Since the break-up of the Soviet Union in 1991, the development of a market
economy in Russia has been characterized by the concentration of economic power
in a small number of large enterprises centered for the most part in the natural
resources industries. Unlike in other countries of eastern Europe, the
development of small and medium-sized enterprises ("SME's") in Russia has been
slow, due in part to the lack of financial resources for SME's, administrative
restraints on SME development and inadequate support from a poorly functioning
banking system. The SME sector is one from which we anticipate demand for our
services. The Russian government has made statements expressing the need to
develop SME participation in the economy, but the legislative framework
necessary for the development of the SME sector is not consistently implemented
and enforced. If the SME sector does not develop as expected, the potential
market for our services may be limited.

  THE RUSSIAN MONETARY AND CURRENCY CONTROL SYSTEM COULD ADVERSELY AFFECT OUR
  ABILITY TO CONVERT RUBLES TO HARD CURRENCY AND MANAGE CASH FLOWS

     The ruble is generally non-convertible outside Russia, so our ability to
hedge against further devaluation by converting to other currencies is
significantly limited. Within Russia, our ability to convert rubles into other
currencies is subject to rules that restrict the purposes for which conversion
and payment in foreign currencies are allowed. A default on Russia's sovereign
debt could lead to greater protectionism and stricter controls on currency
conversion which in turn could further restrict our ability to manage currency
risk. We manage intercompany liquidity through a cash-collateralized debt
facility offered through a Western bank operating under a Russian banking
license. If we lose access to this facility or a similar hard currency facility,
our ability to manage our liquidity position and foreign exchange risk may
suffer.

     The Russian government's default on its obligations to make payments on its
internal debt in August 1998 triggered a substantial decline in the value of the
ruble and the bankruptcy of a number of prominent Russian banks and businesses.
As a result, the value of the ruble against the US dollar fell significantly,
and this decline has negatively affected, and continues to affect, our financial
performance. Our consolidated and non-consolidated entities recorded an
aggregate $13.1 million pre-tax charge in the third quarter of 1998, $5.3
million in fiscal year 1999, $2.0 million in fiscal year 2000, and $0.6 million
in fiscal year 2001. These charges related primarily to foreign currency
exchange losses for ruble-denominated net monetary assets. Continued decline in
the value of the ruble would negatively affect our results of operations and
could require us to record another significant pre-tax charge.

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<PAGE>

  FLUCTUATIONS IN THE GLOBAL ECONOMY MAY ADVERSELY EFFECT RUSSIA'S ECONOMY AND
  OUR BUSINESS

     Russia's economy is vulnerable to market downturns, volatile currency
fluctuations and economic recessions in other parts of the world. As has
happened in the past, financial problems or an increase in the perceived risks
associated with investing in emerging economies could dampen foreign investment
in Russia and adversely affect the Russian economy. Additionally, because Russia
produces and exports large amounts of natural resource commodities in the world
market for hard currency, the Russian economy is especially vulnerable to world
oil prices and other commodity prices; a steep decline in world commodity prices
could disrupt the Russian economy or cause significant state budgetary
shortfalls. Further, certain economic indicators suggest that some large
economies are in the midst of economic recession. These developments could
severely limit our access to capital and could adversely affect the purchasing
power of our customer base. A dramatic decline in world oil prices could cause
severe budgetary shortfalls leading to increased social and political
instability.

  CONTINUED RUSSIAN INFLATION COULD REDUCE DEMAND FOR OUR SERVICES

     Russia experienced a marked increase in consumer price inflation in 2001 at
a rate of 18%. In January 2002, the monthly rate hit a 3-year high and the
Russian government expects inflation to be in the 12-15% range for 2002. Heavy
and sustained inflation could lead to market instability, new financial crises,
reductions in consumer buying power and erosion of consumer confidence. Any one
of these events could lead to a decreased demand for our services.

  REORGANIZATION OF THE RUSSIAN TELECOMMUNICATIONS INDUSTRY MAY AFFECT OUR
  RELATIONSHIP WITH ROSTELECOM

     The Russian government has structured the telecommunications industry so
that one entity, Svyazinvest, controls Rostelecom, our partner in Sovintel, and
most of our other principal wire-line joint venture partners. During the last
several quarters the Russian business press has reported that Rostelecom may be
merged with Svyazinvest. This reorganization could make it more difficult for us
to attract and retain customers because our business relationships with our
joint venture partners, which make up a major component of our business strategy
in Russia, may suffer. Further, Svyazinvest is in the process of consolidating
the regional entities that it controls. With the proposed merger of Svyazinvest
companies into larger regional companies, we may face stronger competition from
these new entities. Further, if we are able to consummate the Sovintel
transaction such that we purchase the remaining 50% ownership interest in
Sovintel from Rostelecom, we are not sure that we may rely on continued strong
commercial relations with Rostelecom.

  REORGANIZATIONS IN THE UKRAINIAN TELECOMMUNICATIONS SECTOR MAY HAVE
  STRENGTHENED THE POSITION OF THE MONOPOLY INCUMBENT AND ENCOURAGED UNFAIR
  COMPETITION

     In preparation for a large-scale privatization of the telecommunications
industry, the Ukrainian government reorganized the state telecommunications
sector so that Ukrtelecom, the state telecommunications operator, holds all the
government's interests in the telecommunications industry. The ownership of
Ukrtelecom has been transferred from the State Property Fund to the State
Committee for Communications (effectively the Ministry of Communications). Thus,
the committee responsible for regulating telecommunications in Ukraine now owns
and theoretically regulates the incumbent monopoly. Although it is planned that
a portion of Ukrtelecom shares will be sold into the market during the
privatization process, it is expected that the Ukrainian government will
continue to control 51% of the Ukrtelecom shares. This will allow the Ukrainian
government to control Ukrtelecom and will afford the Ukrainian government the
opportunity to further control the telecommunications industry through
Ukrtelecom.

     The emergence of a single self-regulating Ukrainian telecommunications
monopoly may have adverse financial consequences for us because:

     - We have no effective recourse against the state monopoly carrier since
       the state regulator controls and manages the monopoly carrier and the
       judiciary system is severely underdeveloped and unreliable;

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<PAGE>

     - A single Ukrainian self-regulating monopoly is able to create favorable
       market conditions for itself and cause unfavorable conditions for us;

     - Our ability to negotiate reasonable interconnection rates may suffer; and

     - Any subsequent privatization of Ukrtelecom may bring in strong management
       and resources from a major telecommunications operator, increasing its
       competitive strengths.

  DISPUTES BETWEEN GOLDEN TELECOM LLC UKRAINE AND UKRTELECOM MAY NOT BE RESOLVED
  IN OUR FAVOR

     Golden Telecom LLC Ukraine has been involved in litigation with Ukrtelecom,
the state telecommunications operator, over Ukrtelecom's failure to fulfill
contractual operations to provide numbering capacity to Golden Telecom LLC
Ukraine. Due to the fact that there is no effective legal recourse available to
Golden Telecom LLC Ukraine, we have entered into negotiations with Ukrtelecom to
reach a compromise solution. Because of Ukrtelecom's monopolistic position in
the market and antagonistic positions towards Golden Telecom LLC Ukraine, we
cannot be sure that this dispute will be settled in a manner satisfactory to
Golden Telecom LLC Ukraine. Failure to resolve this dispute favorably will
damage our business.

     In another dispute with Ukrtelecom, Golden Telecom LLC Ukraine has brought
a case against Ukrtelecom before the Ukrainian Anti-Monopoly authorities
charging Ukrtelecom with abuse of their monopoly position by not providing
additional local, intercity and international transmission capacity as required
by law. The Anti-Monopoly authorities may rule against Golden Telecom LLC
Ukraine. Further, negotiations between Golden Telecom LLC Ukraine and Ukrtelecom
to settle this dispute may not be resolved to the satisfaction of Golden Telecom
LLC Ukraine. Our ability to grow our business services operations in Ukraine
will be limited if we do not have access to adequate numbering capacity at
reasonable rates.

  THE CITY PROSECUTORS OFFICE IN KIEV IS INVESTIGATING GOLDEN TELECOM UKRAINE
  LLC

     On March 1, 2002 we became aware that the Kiev City Prosecutor's Office has
initiated an investigation into the activities of our 69% owned subsidiary in
Ukraine, Golden Telecom (Ukraine). Although all the facts concerning the
allegations are not to known to us at this time, the investigation appears to
concern alleged improprieties in the manner in which Golden Telecom (Ukraine)
routed certain traffic through the state owned monopoly carrier, Ukrtelecom. Any
prosecution of these alleged offences could result in the imposition of heavy
fines, the revocation of our licenses or the shutting down of our businesses.
Any one of these events would have a serious detrimental effect on our
operations.

  RUSSIAN AND UKRAINIAN TELECOMMUNICATIONS POLICIES COULD RESTRICT OUR
  OPERATIONS

     Russian and Ukrainian telecommunications regulations govern the procurement
and continuing validity of our licenses and the terms and conditions under which
we provide services. Adverse changes to these regulations may make it
prohibitively expensive for us to provide services or otherwise frustrate the
implementation of our business plans causing a material adverse effect on our
results of operations.

     Russia's parliament recently adopted legislation that could restrict
foreign ownership of telecommunications operators if necessary to protect the
social order and national security. The Russian government is currently drafting
a new law on telecommunications that could further restrict foreign ownership of
telecommunications operators. The president of Ukraine recently issued an edict
drafted by the Ukrainian National Security and Defense Board that introduces
additional regulations in the telecommunications industry in Ukraine. Any change
to current government regulations or policies that negatively affects our
ownership structure, our licenses or our ability to obtain licenses in the
future would restrict our operations in Russia and Ukraine.

     It may be difficult and prohibitively expensive for us to comply with
applicable Russian telecommunications regulations related to state surveillance
of communications traffic. Full compliance with these regulations that allow the
state to monitor voice and data traffic may be overly burdensome and expensive.
Noncompliance may lead to the administration of fines, penalties, or the
revocation of our operating licenses. Further,

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<PAGE>

some customers may decline to utilize the services of a telecommunications
provider whose networks facilitate state surveillance of communications traffic.

     Ukrainian regulatory authorities have established mandatory tariff
guidelines for fixed operator services. The national carrier, Ukrtelecom and its
joint venture, Utel, charge settlement fees in excess of the mandatory
guidelines. In addition, the mandatory guidelines set tariffs in local currency
units and the guidelines do not adjust to reflect the creeping devaluation of
the local currency. Consequently, our pricing structure in Golden Telecom LLC
Ukraine may, from time to time, exceed the limits established in the mandatory
guidelines. Any enforcement action undertaken in regard to the pricing
guidelines by Ukrainian authority could result in fines or in the suspension or
revocation of our Ukrainian licenses.

     Until August 2000, Ukrainian legislation prohibited the establishment and
operation of telecommunications ventures in which foreign investors own more
than 49%. Our investments in Golden Telecom LLC Ukraine are made both directly
through a foreign company and indirectly through a wholly owned Ukrainian
subsidiary. If Ukrainian authorities determine that the prohibition against
foreign participation extended to indirect holdings, we would have been in
violation of this legislation. Similarly, if Ukrainian authorities re-instate
the prohibitive legislation against foreign ownership of telecommunications
ventures, we could be found to be in violation of the prohibition. The
consequences of any historical or future violations are unpredictable and may
include fines, license suspension or revocation, or an order to divest a portion
of our holdings.

     In 2001, the Ukrainian government attempted to regulate the provision of
voice traffic over the Internet ("VoIP") through the introduction of VoIP
licenses and by enforcing obligatory VoIP traffic settlement payments to
Ukrtelecom. Although this license process has not been formalized, we cannot be
sure that any resulting licensing and related fees will not adversely affect our
business should they be implemented.

  OUR OPERATING LICENSES MAY NOT AUTHORIZE US TO PROVIDE ALL OF THE SERVICES
  THAT WE OFFER

     The licensing and regulatory regime in Russia, Ukraine, and the markets in
which we operate frequently do not keep pace with the technological advances in
the telecommunications industry. Further, the rules and regulations are
frequently not sufficiently detailed so as to provide meaningful guidance for
compliance. Thus there exists a great deal of ambiguity in regard to the
interpretation of licenses and the application of rules and regulations in
regard to new services enabled by technological developments in
telecommunications infrastructure and software. Although our operating companies
possess a wide range of licenses issued by the Russian and Ukrainian ministries
of communications, it is possible that the technical means by which we deliver
some of our service offerings, or the service offerings themselves, may be
subject to licensing requirements or restrictions and that our existing licenses
do not satisfy these requirements or that we are in violation of these licensing
requirements and restrictions. In the event that regulatory authorities
determine that we are offering services without the requisite license or that we
are delivering services in violation of our existing licenses, one or more of
our operating licenses could be suspended or revoked or we could be subject to
fines and penalties. The suspension, limitation in scope or revocation of a
significant license or the levying of substantial fines could have a significant
adverse effect on our operations and our financial results.

  RUSSIAN ANTI-TRUST POLICIES MAY LIMIT OUR ABILITY TO EXPAND OUR BUSINESSES AND
  TO ESTABLISH MARKET RATES FOR OUR SERVICE OFFERINGS

     Recently, the Russian Ministry for Anti-Monopoly Policy (MAP), the state
agency responsible for establishing and enforcing the state's anti-trust
policies, adopted a policy decision whereby each licensed telecommunications
operator, including our operating companies, may be classified as a
"monopolist". The policy was declared to be without effect by the Russian
courts, however, if the policy were to be successfully enforced, our operating
companies could be subject to increased state regulation. Since our product
offerings are frequently priced at a premium in comparison with the state-owned
incumbent offerings, it is possible that we could be required to reduce our
tariffs. Any such regulation of our pricing would be detrimental to our
financial results.

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  SPECIAL FEES AND TAXES LEVIED AGAINST TELECOMMUNICATIONS OPERATORS COULD
  ADVERSELY AFFECT OUR RESULTS OF OPERATIONS

     From time to time, Ukrainian and Russian government officials seek to
offset budgetary shortfalls by increasing levies extracted from the cellular
phone industry. For example, in 1999 the Ukrainian parliament passed legislation
introducing a 6% "pension tax" on cellular calls. This cost is passed along to
our Ukrainian customers and may affect the ability of some of our customers to
subscribe to our services. Although that legislation was introduced for a
one-year period, it has been subsequently prolonged for the years 2001 and 2002.
The enactment of other similar industry-specific legislation may have a material
adverse effect on demand for our services and on our results of operations.
Similarly, the results of our operations could deteriorate if the government
introduces any new frequency or licensing fees substantially in excess of the
amounts previously budgeted for such fees.

  RUSSIAN AND UKRAINIAN LEGISLATION MAY NOT ADEQUATELY PROTECT AGAINST
  EXPROPRIATION AND NATIONALIZATION

     The governments of Russia and Ukraine have enacted legislation to protect
foreign investment and other property against expropriation and nationalization.
In the event that our property is expropriated or nationalized, legislation
provides for fair compensation. However, we cannot assure you that such
protections would be enforced. This uncertainty is due to several factors,
including:

     - the lack of state budgetary resources;

     - the lack of an independent judiciary and sufficient mechanisms to enforce
       judgments; and

     - widespread corruption among government officials.

     Expropriation or nationalization of our business would obviously be
detrimental to our operations.

  BROAD DISCRETION OF RUSSIAN AND UKRAINIAN REGULATORS RESULTS IN INCONSISTENT
  LEGISLATION AND UNPREDICTABLE ENFORCEMENT

     The dispersion of regulatory powers among a number of government agencies
in Russia and Ukraine has resulted in inconsistent or contradictory regulations
and unpredictable enforcement. This situation has made it difficult for us to
comply with all laws and regulations that appear to apply to us and has resulted
in unpredictable regulatory enforcement. For example, pursuant to the Russian
Communications Law, Minsvyaz, the Ministry of Communications, has authority to
regulate and control the development of the communications industry in Russia.
However, there is additional legislation that recognizes and defines the roles
of other regulatory organs and jurisdictional boundaries are unclear.

     The Russian Communications Law requires any entity that offers any
communications service to obtain the appropriate license in accordance with the
Communications Law and other applicable licensing regulations. A similar
licensing regime exists in Ukraine. However, neither the Communications Law, nor
applicable regulations in Russia or Ukraine, provide clear guidelines for the
issuance or extension of a license, and state agencies exercise broad discretion
when determining whether to approve a license application, as well as the terms
and conditions of any license. Similarly, our licenses may not be renewed on the
same terms and conditions as preexisting licenses. Such broad discretion in the
issuance of licenses may result in arbitrary decision making and may also give
rise to opportunities for corruption.

     The Ukrainian regulatory agency requires that the terms of international
licenses include provisions requiring licensees to pay unspecified annual
amounts into local network development. The required amount of investment has
yet to be defined but may be substantial, and we cannot predict whether failure
to comply will lead to the revocation of our license or whether the financial
burden associated with compliance may be so burdensome as to cause a
deterioration of our financial results.

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  WE MAY BE UNABLE TO ENFORCE OUR RIGHTS DUE TO CONFUSION IN THE LAWS AND LEGAL
  STRUCTURES OF THE COUNTRIES WHERE WE OPERATE

     The current confusion with the Russian and CIS legal structure makes it
difficult to know if we would be able to enforce our rights in disputes with our
joint venture partners or other parties, or if we are in compliance with all
applicable laws, rules and regulations. Furthermore, the dispersion of
regulatory power among a number of government agencies in Russia and the other
independent countries of the CIS has resulted in inconsistent or contradictory
regulations and unpredictable enforcement. The Russian and other CIS governments
have rapidly introduced laws and regulations and have changed their legal
structures in an effort to make their economies more market-oriented, resulting
in considerable legal confusion, especially in areas of the law that directly
affect our operations. We cannot assure you that local laws and regulations will
become stable in the future. Our ability to provide services in Russia and the
other independent countries of the CIS could be adversely affected by
difficulties in protecting and enforcing our rights and by future changes to
local laws and regulations.

  OUR RUSSIAN AND UKRAINIAN TAX BURDENS MAY BE SIGNIFICANTLY GREATER THAN
  CURRENTLY ANTICIPATED

  Russia

     It is possible that our Russian taxes may be greater than the estimated
amount that we have expensed to date and paid or accrued on our balance sheets.
Because of the need for additional sources of budgetary finance, Russian tax
authorities are often arbitrary and aggressive in their interpretation of tax
laws and their many ambiguities, as well as in their enforcement and collection
activities. Foreign companies are often forced to negotiate their tax bills with
tax inspectors who demand higher taxes than applicable law appears to provide.
Any additional tax liability, as well as any unforeseen changes in the tax law,
could have a material adverse effect on our future results of operations or cash
flows in a particular period. Under Russian accounting and tax norms, financial
statements of Russian companies are not consolidated for tax purposes. As a
result, each Russian-registered entity in our group pays its own Russian taxes
and we cannot offset the profits or losses in any single entity against the
profits and losses in any other entity. Our overall effective tax rates may
increase or our financial results may worsen as we expand our operations and if
we are unable to implement an effective corporate structure that minimizes the
effect of these accounting and tax norms.

  Ukraine

     Like the situation in Russia, Ukrainian tax law is unpredictable and tax
authorities are often arbitrary and aggressive in their interpretation of tax
laws and their many ambiguities, as well as in their enforcement and collection
activities. The constitution prohibits retroactive legislation, and the tax code
requires new tax laws to be adopted no later than six months prior to the
beginning of the next fiscal year. Nevertheless, sudden shifts in tax law and
policy and retroactive legislation are common. For example, we are currently
allowed to deduct losses in hryvna, the Ukrainian currency, on hard currency
borrowings. This allowance resulted in a significant tax benefit in 1998. Recent
decisions by the tax authorities, however, make it unclear as to whether this
tax benefit will continue to be available. If this tax benefit is removed, we
will be subject to significantly higher tax liability in the event of the
continued devaluation of the hryvna.

  THE IMPLEMENTATION OF RUSSIA'S NEW TAX CODE MAY INCREASE OUR EFFECTIVE TAX
  BURDEN AND ADVERSELY AFFECT OUR RESULTS OF OPERATIONS

     Russia introduced the first part of its new Tax Code in 1999. The second
part of the new Tax Code entered into effect as of January 1, 2001 and
additional provisions came into effect as of January 1, 2002. We cannot assure
you that the new Tax Code will not result in a greater tax burden for our
Russian operations or that our tax planning to date will not be frustrated by
provisions of the new code, either of which could cause a material adverse
effect in our operating results and cash flows.

     Tax authorities are beginning to implement the new code but during the
transition period and until appropriate regulations consistent with the new code
are promulgated, there is likely to be a period of confusion and ambiguity as
tax inspectors and taxpayers become acquainted with the new code and the

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<PAGE>

regulations that will guide its implementation and interpretation. Aggressive
tax collectors may exploit any ambiguities in an attempt to collect additional
tax revenue. In addition, as Russian tax legislation becomes increasingly
sophisticated and as issues connected with capital flight remain unresolved,
state bodies may introduce new legislation designed to minimize tax-avoidance
schemes, such as transfer pricing, that have been abused in the past by
Russian-registered companies. Additionally, Russian legislators may attempt to
collect revenue generated from outside of Russia, but with a strong nexus to
Russian nationals or Russian-registered entities, by introducing into the Tax
Code concepts such as "controlled foreign company." As a result of these
measures, our tax burden could increase and our financial results may suffer.

  WE MAY BE AT A COMPETITIVE DISADVANTAGE BECAUSE OF RESTRICTIONS IN THE FOREIGN
  CORRUPT PRACTICES ACT

     It is widely reported that Russia, Ukraine, and the other markets where we
operate are plagued with widespread corruption and criminal activity. It is
alleged that high levels of corruption exist among governmental officials and
among quasi-commercial enterprises in which the state has an ownership interest.
Commercial bribery is likewise believed to be widespread.

     The anti-bribery restrictions of the US Foreign Corrupt Practices Act make
it illegal for us to give anything of value to foreign officials in order to
obtain or retain any business or other advantage. Some of our current and
potential competitors are not subject to these anti-bribery restrictions. As a
result, we may be subject to competitive disadvantages to the extent that our
competitors are able to secure business, licenses or other preferential
treatment by making payments to corrupt government officials or commercial
purchasing agents. We believe that bribery is commonplace in Russia and the
other countries of the Commonwealth of Independent States where we operate, and
we cannot ensure that we will be able to compete effectively with companies that
are free from such limitations.

RISKS ASSOCIATED WITH OUR BUSINESS

  WE ARE IN A HIGHLY COMPETITIVE INDUSTRY AND OUR COMPETITORS MAY BE MORE
  SUCCESSFUL IN ATTRACTING AND RETAINING CUSTOMERS

     The market for our products and services is highly competitive and we
expect that competition, especially in underdeveloped markets, will continue to
intensify. As we expand the scope of our offerings, we will compete directly
with a greater number of competitors providing business services in the same
markets. Negative competitive developments could have a material adverse effect
on our business and the trading price of our stock.

     Specifically, in our Internet business, a large number of web sites and
online services as well as high-traffic e-commerce merchants offer or are
expected to offer informational and community features that are or may be
competitive with the services that we offer. In order to effectively compete, we
may need to expend significant internal resources or acquire other technologies
and companies to provide or enhance such capabilities. Any of these efforts
could have a material adverse effect on our business, operating results and
financial condition and be dilutive to our stockholders.

  MARKET CHANGE MAY IMPACT OUR ABILITY TO SUSTAIN GROWTH LEVELS

     Because of the uncertain nature of the rapidly changing market for Internet
products and services we offer, period-to-period comparisons of operating
results are not likely to be meaningful. In particular, although we experienced
strong subscriber growth during 1999, 2000 and 2001 in our dial-up Internet
access business, we are not certain that this level of subscriber growth on a
percentage basis will be sustained in future periods. In addition, we currently
expect that our operating expenses will continue to increase significantly as we
expand our sales and marketing operations, continue to develop and extend the
Russia-On-Line brand, fund greater levels of product development, develop and
commercialize additional media properties, and acquire complementary businesses
and technologies. If we are unable to achieve long-term revenue growth in the
Internet market, our financial results will be adversely affected.

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<PAGE>

  OUR NETWORK MAY NOT BE ABLE TO SUPPORT THE GROWING DEMANDS OF OUR CUSTOMERS

     The uninterrupted operation of our network is vital to our success. The
stability of our systems depends on our ability to provide sufficient capacity
to meet the needs of our customers, and that, in turn, depends on the
integration of suitable technology into our networks. As we continue to increase
both the capacity and the reach of our network, and as traffic volume continues
to increase, we will face increasing demands and challenges in managing our
circuit capacity and traffic management systems. Any prolonged failure of our
communications network or other systems or hardware that causes significant
interruptions to our operations could seriously damage our reputation and result
in customer attrition and financial losses.

     It is possible that the current economic difficulties and historical
circumstances in Russia may create difficulties in maintaining our network. We
rely to a significant degree on the Russian network being able to deliver our
services, and the Russian network's underdevelopment may hinder our ability to
obtain sufficient capacity for our traffic volumes, especially as we expand our
Internet access business. Moreover, it is increasingly difficult to expand
within Moscow because the existing city network does not have sufficient
capacity, and we may be unable to procure enough telephone numbers and
connection lines for our customers utilizing dial-up Internet access services.
These factors may have a material adverse effect on our expansion plans and our
ability to provide services to new customers.

     In addition, the telecommunications industry is subject to rapid and
significant changes in technology. We cannot predict the effect of technological
changes on our business, even though our operations depend on our ability to
integrate new and emerging technologies successfully.

  WE MAY HAVE DIFFICULTY SCALING AND ADAPTING OUR EXISTING ARCHITECTURE TO
  ACCOMMODATE INCREASED TRAFFIC AND TECHNOLOGY ADVANCES

     Much of the telecommunication network architecture that we employ and the
architecture of local public networks were not originally designed to
accommodate levels or types of use that we hope to experience in our operations
and it is unclear whether current or future anticipated levels of traffic will
result in delays or interruptions in our service. In the future, we may be
required to make significant changes to our architecture, including moving to a
completely new architecture, or we may be required to invest in upgrades to the
local public networks. If we are required to switch architectures, we may incur
substantial costs and experience delays or interruptions in our service. If we
experience delays or interruptions in our service due to inadequacies in our
current architecture or as a result of a change in architectures, users may
become dissatisfied with our service and move to competing providers of online
services. Any loss of traffic, increased costs, inefficiencies or failures to
adapt to new technologies and the associated adjustments to our architecture
would have a material adverse effect on our business.

  WE RELY ON A SMALL NUMBER OF MAJOR CUSTOMERS FOR A SUBSTANTIAL PORTION OF OUR
  REVENUES

     Revenues from our five largest customers represented approximately 28% of
our revenue for the year ended December 31, 2001, 32% of our revenue for the
year ended December 31, 2000 and approximately 37% of our consolidated revenues
for the year ended December 31, 1999. Accordingly, the loss of business from any
of our key customers, or a reduction in tariffs charged to these customers could
have a material adverse effect on our financial condition and results of
operations.

     Vimpelcom, a Moscow cellular provider and our largest customer, has its
prices regularly reviewed in the light of market conditions, which generally
leads to a reduction in the fees paid to the CLEC Services division of TeleRoss.
Revenues from Vimpelcom and its affiliates represented approximately 14% of our
revenue for the year ended December 31, 2001, 16% of our consolidated revenues
for the year ended December 31, 2000 and approximately 21% of our consolidated
revenues for the year ended December 31, 1999. We agreed to reductions in
Vimpelcom's fees through 1999, 2000 and 2001 and we may agree to further
reductions in the future. Further negotiations may lead to a significant
additional reduction in payments by Vimpelcom and may have a material adverse
effect on our consolidated revenues. In addition, although we are currently
unaware of any plans on the part of our key customers to move their business to
other carriers, we cannot assure you that they will not reduce their reliance on
us by developing relationships with other service providers.

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<PAGE>

  FALLING PRICES FOR OUR SERVICES MAY LEAD TO A DECLINE IN REVENUES

     Prices for international and domestic long distance calls, as well as
Internet access and wireless services, have fallen substantially over the last
few years in most of our current and potential markets. We expect that the
prices for our services will continue to decrease for the foreseeable future as
competitive pressures increase. These reductions are attributable, in part, to
increased competition and the creeping devaluation of the currencies in the
markets where we operate. Unlike us, most local carriers do not link their
prices to the dollar exchange rate, so as the local currency devalues, their
prices become relatively cheaper than our prices. In order to compete with these
local operators, we expect that we will continue to lower our tariffs, which may
result in declining margins.

  WE MAY BE SUBJECT TO LEGAL LIABILITY FOR OUR ONLINE SERVICES

     We host a wide variety of services that enable individuals to exchange
information, generate content and engage in various online activities. The law
in the jurisdictions in which we operate and in most other jurisdictions
relating to the liability of providers of these online services for activities
of their users is currently unsettled. Claims in some jurisdictions have been
threatened and brought against service providers for defamation, negligence,
copyright or trademark infringement, unlawful activity, and tort. Due to the
unsettled nature of the law in this area, we may be subject to these and other
actions in the jurisdictions in which we conduct our business. Our defense of
any such actions could be costly and could distract our management and other
resources.

  RUSSIAN MEDIA PROPERTIES AND THE CONTENT OF OUR INTERNET PORTALS MAY BE
  SUBJECT TO INCREASED EDITORIAL SCRUTINY BY GOVERNMENTAL AUTHORITIES

     It has been widely reported in the international press that the Russian
government is increasingly exercising direct and indirect control over media
properties and the editorial content of news providers. There has been
speculation in the same press that media properties that are critical or
non-supportive of governmental policies or initiatives may be subject to
increased governmental scrutiny or harassment. It was reported that the Russian
government was actively involved in the ownership and shareholder dispute that
resulted in the closure of a leading independent television station.

     A wide range of topical news is available on our Internet portals. Third
party writers and organizations provide the vast majority of this news. It is
our expectation that these Internet portals will continue to support our
Internet access business. If governmental authorities determine that the
editorial views expressed in the content on our Internet portals is detrimental
to or inconsistent with the interests of the state, our operating licenses could
be suspended or revoked, we could be subjected to fines or other penalties or we
could otherwise be required to cease the operations of our media and other
properties. If governmental authorities determined that foreign ownership of
media properties is detrimental to the interests of the state, we could be
required to divest these properties or we could be denied the licenses or
permits necessary to operate these properties. Any undue governmental intrusion
into the operations of our media properties could frustrate our ability to
implement our business strategy and could cause our financial results to
deteriorate.

  WE MUST MANAGE OUR GROWTH, INCLUDING THE INTEGRATION OF RECENTLY ACQUIRED
  COMPANIES, SUCCESSFULLY IN ORDER TO ACHIEVE OUR DESIRED RESULTS

     We have experienced significant growth in personnel in the short and medium
term as the result of acquisitions and expect such growth to continue. As the
number of our employees grows, it will become increasingly difficult and more
costly to manage our personnel. As part of our business strategy, we have
completed several acquisitions, including our recent acquisitions of Glasnet,
Nevalink, Fintek, KIS, Referat.ru, Absolute Games, InfoArt, the Agama family of
assets, and the Cityline group of companies and expect to enter into additional
business combinations and acquisitions, including the acquisition of the 50% of

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<PAGE>

Sovintel that we currently do not own. Acquisition transactions are accompanied
by a number of risks, including:

     - the difficulty of assimilating the operations and personnel of the
       acquired companies;

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

     - the difficulty of incorporating acquired technology or content and rights
       into our products and media properties and unanticipated expenses related
       to such integration;

     - the potential negative impact on reported earnings;

     - the possibility that revenues from acquired businesses may not
       materialize as anticipated, especially advertising revenues from our
       portal acquisitions;

     - the impairment of relationships with employees and customers as a result
       of any integration of new management personnel; and

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

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

  FURTHER DECLINES IN VALUATIONS OF OUR PROPERTIES COULD LEAD TO FURTHER
  IMPAIRMENT CHARGES

     We have acquired several website and internet-based companies. A
significant portion of the value of these companies has been booked on our
balance sheet as intangible assets. Due to downturns in the telecommunications
markets and changing expectations concerning the value of these assets, we have
had to take impairment charges associated with some of our properties. If the
market for our internet-based services does not increase as expected, we may be
required to take further impairment charges on these assets.

     Our mobile operations in Ukraine continue to be under strong competitive
pressure and we foresee that average revenue per subscriber will continue to
decline. This, coupled with regulatory issues, both in our mobile and our fixed
line businesses, and the need to commit significant investment to continue to
grow, has led us to reassess our plans for this business and we have recorded
impairment charges of $10.4 million in the fourth quarter of 2001. In the event
that revenues continue to decline faster than expected, we may be required to
take further impairment charges on these assets. Further, if we are unable to
resolve our ongoing disputes with the state monopoly carrier our fixed line
business may also be subject to impairment.

  OUR INTELLECTUAL PROPERTY RIGHTS ARE COSTLY AND DIFFICULT TO PROTECT

     We regard our copyrights, trademarks, trade dress, trade secrets, and
similar intellectual property, including our rights to certain domain names, as
important to our continued success. We rely upon trademark and copyright law,
trade secret protection and confidentiality or license agreements with our
employees, customers, partners and others to protect our proprietary rights.
Still, intellectual property rights are especially difficult to protect in the
markets where we operate. In these markets the regulatory agencies charged to
protect intellectual property rights are inadequately funded, legislation is
underdeveloped, piracy is commonplace and enforcement of court decisions is
difficult. We cannot guarantee that the steps we have taken to protect our
proprietary rights will be adequate.

  WE COMPETE WITH ESTABLISHED COMPETITORS WHO MAY HAVE GREATER RESOURCES THAN WE
  DO

     Our competitors include incumbent Russian and Ukrainian operators and other
large international telecommunications providers doing business in the
Commonwealth of Independent States. Our competitors may have substantially
greater resources, closer ties to governmental authorities and longer operating
histories. These advantages may give them a competitive edge over alternative
providers like us. This competition may result in a loss of customers, falling
prices and a decline in revenues.

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<PAGE>

     We compete with large established national carriers, some of which are
powerful companies with political connections, as well as joint ventures of
large international operators doing business in Russia and Ukraine. Such
ventures include Global One and Combelga in Russia and Ukrtelecom and Utel in
Ukraine. Other competitors are alliances among telecommunications companies,
companies that own equipment and networks, companies that purchase and resell
the services of other carriers, Internet service providers and other providers
of bundled services. We may also face increasing competition from wireless
telephone companies and satellite companies. Many of these competitors,
including the Russian incumbent operators, have established customer bases and
extensive brand name recognition and possess greater financial, management and
other resources. Our results of operation would suffer if we are unable to keep
up with the increasing levels of competition in the countries in which we
operate.

  OUR RELATIONSHIPS WITH OUR JOINT VENTURE PARTNERS LIMIT OUR INDEPENDENCE AND
  OUR FLEXIBILITY

     We depend to a significant degree on local partners in our joint ventures
to provide us with interconnection with local networks, regulatory and marketing
expertise and familiarity with the local business environment. They also help to
facilitate the acquisition of necessary licenses and permits. As a result, any
significant disruption in our relationship with these parties could make it more
difficult for us to expand our operations and to maintain our existing services.
As we expand further into regions of Russia outside of Moscow, we will have to
rely more on local partners, thereby increasing our reliance on local partners
in these regions and decreasing management control from our head office.

     Under the terms of some of our joint venture agreements, we have the right
to nominate key employees, direct operations and determine strategies for these
joint ventures. However, our partners in some ventures have the ability to
frustrate our exercise of these rights. Significant corporate decisions by most
ventures, such as approving budgets and business plans, declaring and paying
dividends, and entering into substantial transactions, effectively require the
consent of our local partners. Moreover, we would prefer not to take significant
actions without the consent and support of our partners. Accordingly, we do not
have unilateral control over the operations of our joint ventures.

     In addition, until recently Ukrainian legislation restricted the level of
foreign ownership in the telecommunications industry. These regulations, if
revived, may restrict our ability to increase our holdings in ventures and
increase our reliance on local partners who may lack significant financial
resources and may be unable to meet capital calls at the level of their
ownership interests.

  OUR PARTNERS ARE OFTEN ALSO OUR COMPETITORS

     Notwithstanding our agreements with our joint venture partners, they
sometimes compete directly with our joint ventures. Competition with our joint
venture partners in the same markets may create conflicts of interest and may
result in a loss of customers. For example, our partner in Sovintel, Rostelecom,
is the dominant international and domestic long distance carrier in Russia.
Similarly, most of our regional partners across Russia offer local and long
distance services in competition with our local joint ventures and TeleRoss.

     We may consider acquiring some of our partners' interests in certain joint
ventures if we are able to do so within regulatory guidelines and on
commercially attractive terms. If we were to make such acquisitions, we expect
that we would continue to employ local personnel in order to retain the benefit
of their local expertise. After an acquisition, however, we would be directly
competing with a powerful, formerly state-owned enterprise that had been our
partner before we acquired its interest. In some such acquisitions, we would
have to rely on this partner-turned-competitor to gain access from our networks
to customer sites along the so-called "last mile". It is possible that this
competitor would attempt to create adverse operating conditions for our business
leading to a worsening of our operating results.

  OUR TARGETED CUSTOMERS MAY NOT SELECT A PRIVATELY OWNED, FOREIGN ENTITY FOR
  THEIR COMMUNICATIONS NEEDS

     Before 1991, the telecommunications industry in the countries where we
operate was wholly owned and controlled by the state. After 1991, private
companies, including foreign companies, entered these markets as
telecommunications service providers. Many potential customers may be unwilling
to entrust their communi-

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<PAGE>

cations systems to non-state-controlled companies, and, in particular, to
foreign companies. Furthermore, state entities that require the types of
services that we offer may refuse to select a service provider that is
registered in other jurisdictions. Because we are a foreign company, some of our
targeted customers may decide not to utilize our telecommunications offerings.

  FAILURE TO LEASE SUFFICIENT AND RELIABLE TRANSMISSION CAPACITY AT REASONABLE
  COSTS COULD CAUSE US TO INCUR LOSSES

     Historically, we have leased a substantial portion of our network
transmission capacity under agreements that generally have twelve- to
thirty-six-month fixed terms. In addition to this capacity, in 2001, we leased
significant additional domestic and international capacity that we intend to
utilize for data transmission under long-term lease agreements that may be
extended up to fifteen years. We rely on third parties' ability to provide
capacity to us. These third parties themselves may be receiving capacity from
others. If our lease arrangements deteriorate or terminate and we are unable to
enter into new arrangements or if the entities from whom we lease such capacity
are unable to perform their obligations under such arrangements, our cost
structure, service quality and network coverage could be adversely affected.

     We currently provide international switched voice, data and IP services in
Russia by relying on Rostelecom and Transtelecom to provide leased transmission
capacity within Russia. We rely on local operators for last-mile access to
end-users. These companies may be subject to political and economic pressures
not to lease capacity to foreign operators or competitors. Further, if we
consummate the Sovintel transaction to purchase the remaining 50% ownership
interest of Sovintel from Rostelecom, there will be less commercial incentive
for Rostelecom to provide telecommunication services to us. Any changes in
regulation or policies that restrict us from leasing adequate capacity could
have an adverse effect on our business. Local telecommunications operators may,
for business reasons or otherwise, resist giving us access to the last mile.

  THE SATELLITES WE USE TO TRANSMIT LONG DISTANCE SIGNALS MAY MALFUNCTION

     Our domestic long distance business throughout Russia and other countries
of the Commonwealth of Independent States relies on a satellite to receive and
transmit caller signals. Satellites are subject to significant risks that may
prevent or impair proper commercial operation, including satellite defects, loss
of power, loss of orbit, or damage from passing objects. One of our Russian
satellites has not remained stationary in its orbit and, consequently, we have
switched our signal transmission to an Intelsat satellite. The operation of the
satellite that we use to transmit caller signals is beyond our control, and,
although we have backup capacity on other satellites, a disruption of
transmission on these satellites could adversely affect our domestic long
distance operations.

  WE MAY BECOME VICTIMS OF "HACKING" INTO OUR COMPUTER NETWORKS

     Our ability to operate our business depends on our ability to protect the
computer systems on which we operate from the intrusion of "hackers" who may
attempt to enter our computer networks through the internet. Hackers regularly
attempt to gain access to our computer systems and we cannot be sure that we
will be able to protect our computer systems from such attacks. Further, if such
hacking occurs, some of the problems we may encounter include theft or
destruction of our data, including commercial, financial and product
information. Further, disgruntled employees may cause similar damage to, or take
similar actions with respect to our Company computer networks to which they have
access or to which they gain unauthorized access. If customers do not think that
their confidential information is secure, they may discontinue using our
services and our business would suffer.

  WE MAY BE UNABLE TO RAISE ADDITIONAL CAPITAL NECESSARY TO IMPLEMENT OUR
  BUSINESS STRATEGY

     We may need additional capital to maintain and expand our networks. Our
ability to raise additional funding to pursue our strategies depends on our
access to capital markets. We are currently negotiating a credit facility in the
amount of $30.0 million to enable us to consummate the acquisition of Sovintel,
discussed earlier in this report. At the present time, excluding the Sovintel
transaction, we feel that our current cash

                                        41
<PAGE>

reserves and cash flows from operations should be sufficient to finance our
capital requirements for the next 12 to 24 months. However, market conditions
and other factors, especially large transactions, or numerous acquisitions, may
cause us to seek additional financing sooner. Significant elements of our
business strategy that may require substantial capital expenditures include the
following:

     - the construction or the acquisition of fiber optic links between heavy
       traffic routes;

     - expanding our existing network infrastructure to other parts of Russia,
       Ukraine and other countries of the Commonwealth of Independent States;

     - developing additional Internet capability and acquiring other Internet
       service providers;

     - expanding our wireless capabilities, including investments in upgraded
       technology; and

     - pursuing consolidation opportunities through acquisitions.

     In addition, we will need to maintain our existing infrastructure. The
costs for expanding and maintaining our infrastructure may exceed projected
costs and result in unforeseen deficits.

     The current slump in the worldwide telecommunications sector has diminished
the ability of telecommunication companies to borrow money from banks and other
lenders. Should it be necessary for us to borrow money, we may find it difficult
to borrow or that the cost of borrowing is prohibitively expensive due to the
perceived risk in the sector as a whole.

     If we fail to generate sufficient funds from a combination of operating
cash flow and additional debt or equity financing, we may have to delay or
abandon our expansion plans or fall behind in our maintenance obligations. Any
of these events could have a material adverse effect on our operations.

  DEBT RAISED TO CLOSE THE SOVINTEL TRANSACTION AND OTHER TRANSACTIONS COULD
  EXPOSE US TO RISK

     We are currently negotiating with an internationally known bank for
medium-term financing to enable us to complete the Sovintel transaction and
other acquisitions that may materialize. If we are unable to obtain the loan, we
may not be able to close the Sovintel transaction. This would significantly
alter our business plans and models. If the loan is obtained, it is expected
that we will pledge significant assets as security for the loan. Restrictive
covenants in the loan documentation could limit our flexibility to operate.
Should our business suffer and our cash flow decrease, we may not be able to
service the debt. This situation could lead to the bank calling in the loan or
taking action to extract value from any pledged assets. If Russia suffers
another banking crisis similar in nature to that experienced after the August
1998 financial crisis, another moratorium on repayment of loans could be
implemented which could put our pledged assets at risk of seizure by the bank
for defaulting on loan payment.

  OUR BILLING AND MANAGEMENT INFORMATION SYSTEMS MAY NOT BE ABLE TO MEET OUR
  NEEDS

     We encounter difficulties in using and enhancing our billing and management
information systems and in integrating new technology into such systems. We have
historically operated through distinct companies, but we are in the process of
integrating our billing and management information systems so that we will be
able to bill our customers and to manage other administrative tasks through a
single system. If we are unable to integrate and upgrade our billing and
management information systems to support our integrated operations, we may not
be able to record accurate call details or bill our customers promptly and
accurately.

     Additionally, any damage to our network management center or our major
switching centers could harm our ability to monitor and manage network
operations and generate accurate call detail reports from which we derive our
billing information.

     In our operations outside Moscow, Kiev and St. Petersburg, we rely on our
ventures' switches to provide information necessary to generate invoices. We
cannot ensure that their systems will meet our needs or the needs of our
customers.

                                        42
<PAGE>

  WE ARE EXPOSED TO RISKS OF BAD DEBT AND FRAUD

     We have experienced problems relating to the failure of some customers to
make full payment for services rendered and to the fraudulent use of our access
codes to Internet and cellular services. Furthermore, it is difficult for us to
gauge the creditworthiness of most of our customers because there are no
reliable mechanisms for evaluating their financial condition and because
credible credit reports on Russian and Commonwealth of Independent States
companies and individuals are usually not available. We expect that the credit
risk of our customer base will increase as the share of our revenue derived from
small- to medium-sized enterprises and from service provider/reseller customers'
increases.

  OUR INTERNAL CONTROLS MAY BE INSUFFICIENT TO ENSURE THAT WE COMPLY WITH
  APPLICABLE LAWS

     Our reporting and control standards may be insufficient to ensure that
certain practices comply with all applicable laws. If we or any of our ventures
are found to be involved in unlawful practices, then we may be exposed, among
other things, to significant fines, the risk of prosecution or the loss of our
licenses. Russia and the other countries of the Commonwealth of Independent
States have inadequate corporate management and financial reporting legal
requirements, and have underdeveloped banking, computer and other internal
control systems. These countries often have commercial practices and legal and
regulatory frameworks that differ significantly from practices in the United
States and other Western countries. The application of the laws of any
particular country is not always clear or consistent. As a result, it is often
difficult to hire qualified management and accounting staff who can ensure
compliance with changing legal requirements. Thus, we have had and may again
have, difficulty establishing internal management, legal and financial controls,
preparing financial statements and corporate records, and instituting business
practices that meet Western standards.

     In light of these circumstances, in the second half of 1996, we increased
our efforts to improve our management and financial controls and business
practices. In early 1997, we retained special outside counsel to conduct a
thorough review of our business practices in the emerging markets in which we
operate. In addition, in June 1999, our special counsel completed an update of
the 1997 review in Russia and Ukraine. Neither the review nor the update
identified any violations of law that we believe would have a material adverse
effect on our financial condition. However, we cannot ensure that all potential
deficiencies have been properly identified or that governmental authorities will
not disagree with our assessment. If our control procedures and compliance
programs are not effective or the government authorities determine that we have
violated any law, depending on the penalties assessed and the timing of any
unfavorable resolution, our future results of operations and cash flows could be
materially adversely affected.

  LOSS OF KEY PERSONNEL COULD AFFECT OUR GROWTH AND FUTURE SUCCESS

     We believe that our growth and our future success will depend in large part
upon a small number of key executive officers, as well as on our ability to
attract and retain highly skilled personnel to work in Russia and other parts of
the Commonwealth of Independent States, including senior management and
technical personnel. The competition for qualified technical personnel who are
familiar with the telecommunications industry in the Commonwealth of Independent
States is intense, particularly outside the major urban centers. We cannot
assure you that we will be able to hire and retain qualified personnel.

  OUR INVESTMENT IN MCT CORP. MAY FAIL TO PRODUCE THE INTENDED RESULTS

     In the fourth quarter of 2000, we contributed our Russian Mobile Services
division to MCT Corp. in exchange for an equity interest of approximately 24% in
MCT Corp. At December 31, 2001 we owned approximately 23% of MCT Corp. We do not
actively participate in the day-to-day management of MCT Corp. and do not
control its operations. MCT Corp., in turn, does not control all of its joint
ventures. MCT Corp. operates its businesses in some geographic areas, such as
Uzbekistan and Tajikistan, where we have limited experience. MCT Corp. has
substantial debt obligations which they may be unable to meet without
significant cash infusions. MCT Corp. operates in a very competitive industry in
a difficult environment. We

                                        43
<PAGE>

cannot guarantee that MCT Corp. will be able to raise the additional capital
that it requires to service its debt obligations and to implement its business
strategy.

  ANY US AND OTHER WESTERN JUDGMENTS YOU MAY OBTAIN AGAINST US MAY NOT BE
  ENFORCEABLE IN OTHER COUNTRIES

     Substantially all of our assets are located in Russia and Ukraine. Although
arbitration awards are generally enforceable in Russia and Ukraine, judgments
obtained in the US or other Western courts, including those with respect to
federal securities law claims, may not be enforceable. Therefore, any US or
other Western court judgment obtained against us or any of our operating
companies may not be enforceable in Russia or Ukraine.

RISKS ASSOCIATED WITH OUR POSITION AS A RECENTLY ESTABLISHED COMPANY

  ADDITIONAL FINANCING

     We have a limited operating history as a stand-alone company. Prior to the
IPO, our working capital requirements were satisfied pursuant to the
corporate-wide cash management policies of our former parent, GTS. We do not
have any agreements with our major shareholders to provide financial assistance
and cash injections to us. We believe that the proceeds from the IPO and our
cash flows from operations will be sufficient to finance our capital
requirements for the next 12 to 24 months, excluding the Sovintel transaction,
discussed earlier in this report. Should market conditions change or we decide
to make especially large or numerous acquisitions, we may need to seek
additional financing and we cannot ensure that we will be able to obtain
financing on favorable terms. In this case, our cost of capital would be higher
than that reflected in our historical financial statements. In addition, we may
need to issue additional equity. Any additional sales of our equity interests
may dilute existing shareholders and any new debt instruments may add further
restrictive covenants, interest and other obligations.

  WE HAVE INCURRED NET LOSSES

     If considered as a stand-along entity, we have incurred net losses for the
past five years. We do not expect to incur net losses in the future, however, as
we spend substantial resources on expanding our network, maintaining our
existing network, participating in the consolidation of the communications
industry in Russia and other countries of the Commonwealth of Independent States
and marketing, we cannot assure you that we will achieve or sustain
profitability.

  THE RELEVANCE OF OUR FINANCIAL INFORMATION MAY BE LIMITED

     The financial information we have incorporated by reference may not reflect
what our results of operations, financial position and cash flows would have
been, had we been a separate, stand-alone entity during the periods presented or
what our results of operations, financial position and cash flows will be in the
future. The financial information incorporated by reference herein does not
necessarily reflect the many significant changes that have and will occur in our
business and the funding of our operations as a result of our separation from
GTS and recent changes in our shareholding structure.

  WE HAVE NOT IDENTIFIED SPECIFIC USES OF OUR CASH RESOURCES

     We intend to use the funds we have now for potential acquisitions and
business development, network expansion, working capital and general corporate
purposes. We may, when an appropriate opportunity arises, use a portion, or all,
of the funds to acquire or invest in businesses, products or new technologies.
Our management's failure to apply these funds effectively could cause our
business to suffer.

                                        44
<PAGE>

RISKS ASSOCIATED WITH OUR SHAREHOLDING STRUCTURE

  OUR SIGNIFICANT SHAREHOLDERS HAVE ENTERED INTO A SHAREHOLDERS AGREEMENT
  WHEREBY THESE SHAREHOLDERS EXERCISE EFFECTIVE CONTROL OVER OUR BOARD OF
  DIRECTORS

     In May 2001, Global TeleSystems, Inc. ("GTS"), our former majority
shareholder, sold approximately 12.2 million shares of our common stock, or an
approximately 50% stake in the Company, to a group of investors led by Alfa
Bank, a leading Russia-based financial and industrial concern ("Alfa"), and two
of our current shareholders, Capital International Global Emerging Markets
Private Equity Fund ("Capital") and investment vehicles controlled by Barings
Private Equity Partners Group ("Barings"). Alfa Telecom Limited ("Alfa
Telecom"), a British Virgin Islands company, acquired approximately 10.7
million, or about 43.8%, shares of our then outstanding common stock. Through
this transaction and subsequent share purchases, Barings increased its ownership
position in the Company to approximately 2.6 million, or about 11.4%, of the
outstanding shares of our common stock, and Capital increased its ownership
position in the Company to 2.2 million, or about 9.6%, shares of the outstanding
amount of our common stock. These purchasers also acquired options from GTS
which they transferred to us and which we exercised to acquire 2,272,727 shares
of our common stock. Consequently, Alfa's relative ownership of Company shares
increased to 48.02%. GTS no longer owns any shares of our common stock. Alfa
currently owns approximately 48% of our common stock.

     In May 2001, Global TeleSystems Europe Holdings, B.V. (as assignee of GTS),
Alfa Telecom, Capital, and Barings entered a Shareholders' Agreement that allows
these shareholders to exercise effective control over our Board of Directors. In
accordance with the terms of a Standstill Agreement, the Shareholders' Agreement
provides that Alfa Telecom, Capital and Barings together control six of the
seats on the Company's nine member Board of Directors. These relationships
create the potential for conflicts of interest. Although the Shareholders
Agreements and other agreements among the shareholders reduce the chance for
conflicts of interest, we cannot assure that any conflicts of interest will be
resolved in our favor. Further, we cannot assure you that any group of directors
will not take any actions that may adversely affect the interests of minority
shareholders.

  THE CURRENT GOVERNMENT'S WELL-PUBLICIZED CAMPAIGN AGAINST RUSSIA'S SO-CALLED
  "OLIGARCHS" COULD HAVE ADVERSE EFFECTS ON OUR COMPANY

     It has been widely reported in Russian and foreign media that the Russian
government is exerting pressure on the so-called "oligarchs" to cause them to
divest their commercial interests in certain economic areas of activity. The
media has reported also that the government has exerted significant influence on
companies owned or controlled by the oligarchs through tax inspections,
management changes, threats of and actual prosecution of management and key
officials, and other means. Real and perceived pressure on the oligarchs and
their businesses has seriously affected the economic activities of these
enterprises and their management.

     If the current or future governments in Russia were to apply significant
pressure on Alfa Telecom and its affiliated companies, it could have serious
adverse effects on the operations and financial results of our Company. Such
effects could include, but would not be limited to, the inability of the Board
of Directors to act independently from external pressure and the distraction of
management from the day-to-day operations of the Company.

RISKS ASSOCIATED WITH OUR SHARES OF COMMON STOCK

  OUR ABILITY TO PAY DIVIDENDS ON OUR COMMON STOCK MAY BE LIMITED

     We do not expect to pay any cash dividends in the foreseeable future. If we
raise any capital in the future, we may be restricted from paying dividends
under the terms of such financings. In addition, the governments in the
countries where we operate may further devalue their currencies and take other
actions that may restrict the ability of our subsidiaries to declare and pay
dividends.

                                        45
<PAGE>

  OUR SHARE PRICE HAS BEEN AND MAY CONTINUE TO BE HIGHLY VOLATILE

     The price of our shares has been subject to significant volatility since
our initial public offering. In addition, a number of particular factors may
adversely affect the market price of our shares or cause the market price to
fluctuate and decline materially. These factors include:

     - issues concerning the perceived risks of investing in Russia and the CIS,
       including significant ownership of our shares by a company that is part
       of a large Russia-based financial and industrial concern;

     - the limited number of our shares available for trading in public markets;

     - introduction of new services;

     - the potential sale of any large blocks of our shares by our management or
       large shareholders;

     - mergers and strategic alliances in the telecommunications industry; and

     - inconsistent government regulation in the Russian and Ukrainian
       telecommunications industries.

     In recent years, the market for stock in technology, telecommunications and
computer companies has been highly volatile. This is particularly true for
companies with relatively small capitalization, such as ours.

ITEM 2.  PROPERTIES

     We possess the right to occupy and utilize two floors, 1886 square meters,
of a building in Moscow which serves as the principal sales office for TeleRoss
and which houses our representative office. The right to occupy and utilize this
space is through a three-year lease. We believe that our facilities are adequate
for our current needs and have an option to extend the lease for an additional
term. This lease expires in June 2003.

     We possess the right to occupy and utilize four floors of a building in
eastern Moscow, which serve as the principal office for TeleRoss. The right to
occupy and utilize the space is through a fifty-five year lease, which expires
in 2050.

     Golden Telecom (Ukraine) occupy office and technical premises located in
Kiev under long-term leases which expire in 2006. Additionally they lease a
dealer-center and shop premises. Golden Telecom (Ukraine) also occupies an
office and technical premises in Odessa under a long-term lease which expires in
2003.

     Sovintel leases its offices, which occupy approximately two floors of a
building in central Moscow under a cancelable lease, which expires in 2004.
Additionally they have leases on a number of technical premises.

     We lease various buildings and space in buildings throughout the
Commonwealth of Independent States that we use for our offices. Beside these
office spaces, our principal facilities consist of telecommunications
installations, including switches of various sizes, cables and VSAT and other
transmission devices located throughout the Commonwealth of Independent States.

ITEM 3.  LEGAL PROCEEDINGS

     On March 1, 2002 we became aware that the Kiev City Prosecutor's Office has
initiated an investigation into the activities of our 69% owned subsidiary in
Ukraine, Golden Telecom (Ukraine). Although all the facts concerning the
allegations are not to known to us at this time, the investigation appears to
concern alleged improprieties in the manner in which Golden Telecom (Ukraine)
routed certain traffic through the state owned monopoly carrier, Ukrtelecom. Our
partners in Golden Telecom (Ukraine), who act as General Director and Technical
Director under the terms of that entity's foundation agreements, are of the
opinion that these events are related to ongoing commercial disputes and
litigation between Golden Telecom (Ukraine) and Ukrtelecom. We have requested,
and our local partners have agreed, that they will cease to actively participate
in the daily management of the entity. It is the express policy of Golden
Telecom, Inc. to comply with all legislation and regulation in the jurisdictions
where we operate. We intend to fully comply with the ongoing investigation.

                                        46
<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

     None

                                    PART II

ITEM 5.  MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our common stock has traded on the Nasdaq National Market since September
30, 1999 under the symbol "GLDN". The following table sets forth, for the
periods indicated, the high and low closing prices per share for our common
stock, as reported on the Nasdaq National Market. We have not paid any cash
dividends on our common stock and do not intend to pay cash dividends in the
foreseeable future.

<Table>
<Caption>
                                                               HIGH     LOW
                                                              ------   ------
<S>                                                           <C>      <C>
2000:
  First quarter.............................................  $48.00   $18.13
  Second quarter............................................   44.50    22.88
  Third quarter.............................................   34.63    15.88
  Fourth quarter............................................   17.44     5.13
2001:
  First quarter.............................................   12.25     5.69
  Second quarter............................................   14.10     8.00
  Third quarter.............................................   14.15     6.90
  Fourth quarter............................................   13.90     7.49
</Table>

     As of March 19, 2002, there were approximately 23 holders of record of our
common stock.

RECENT SALES OF UNREGISTERED SECURITIES

     On September 30, 1999, the Company issued 420,000 shares of common stock,
par value $0.01 to First NIS Regional Fund SICAV in exchange for its ownership
interest in Golden Telecom (Ukraine). In accordance with the subscription
agreement filed with the SEC at the time of our IPO, a further 30,000 shares of
common stock were issued on March 1, 2000 to First NIS Regional Fund SICAV in
full and final payment for its ownership interest in Golden Telecom (Ukraine).
No underwriter or underwriting discount was involved in the offering. Exemption
from registration was claimed under the Securities Act pursuant to Regulation S.

     On December 12, 2000, the Company issued 399,872 shares of common stock,
par value $0.01 to Digital Holdings, Inc. in partial settlement for its
ownership interest in Agama Limited. No underwriter or underwriting discount was
involved in the offering. Exemption from registration was claimed under the
Securities Act pursuant to Regulation S.

USE OF PROCEEDS FROM OUR IPO

     We have used and intend to use the net proceeds, of approximately $128
million, from our IPO for the following purposes:

     - potential acquisitions and business development;

     - network expansion;

     - service current maturities of debt and capital lease obligations;

     - working capital; and

     - general corporate purposes.

                                        47
<PAGE>

     As of December 31, 2001 we have used approximately $90.0 million of the
proceeds of our IPO on acquisitions, related debt instruments and our fiber
optic network expansion. Until we use the net proceeds, we are investing them in
short-term interest-bearing US government securities and short-term US money
market instruments.

ITEM 6.  SELECTED FINANCIAL DATA

     The following selected historical consolidated financial data at December
31, 1997, 1998, 1999, 2000 and 2001, and for all of the years presented are
derived from consolidated financial statements of Golden Telecom, Inc. which
have been audited by Ernst & Young (CIS) Limited, independent auditors.

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

<Table>
<Caption>
                                                    FOR THE YEARS ENDED DECEMBER 31,
                                          ----------------------------------------------------
                                            1997       1998       1999       2000       2001
                                          --------   --------   --------   --------   --------
                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                       <C>        <C>        <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................  $ 27,198   $ 86,086   $ 97,931   $113,089   $140,038
Cost of revenues........................    20,420     43,574     40,516     50,954     63,685
Gross margin............................     6,778     42,512     57,415     62,135     76,353
Selling, general and administrative.....    21,249     45,327     41,011     45,420     48,935
Depreciation and amortization...........     4,363     16,709     28,143     31,851     41,398
Abandonment and restructuring charge....        --         --     19,813         --         --
Impairment charge.......................        --         --         --         --     31,291
Operating loss..........................   (18,834)   (19,524)   (31,552)   (15,136)   (45,271)
Equity in earnings (losses) of
  ventures..............................    12,428      2,559     (6,677)      (285)     8,155
Interest income (expense), net..........      (431)    (3,003)     2,814      7,126        777
Foreign currency loss...................      (399)    (7,452)    (2,739)      (390)      (647)
Minority interest.......................        --     (1,040)    (1,477)      (431)      (117)
Other non-operating expense.............        --         --         --       (148)        --
Provision for income taxes..............       647      5,184      6,823        990      1,902
Net loss................................    (7,883)   (33,644)   (46,454)   (10,254)   (39,005)
Net loss per share(1)...................     (0.74)     (3.17)     (3.38)     (0.43)     (1.65)
Dividends per share.....................        --         --         --         --         --
Weighted average shares(1)..............    10,600     10,600     13,736     24,096     23,605
</Table>

<Table>
<Caption>
                                                            AT DECEMBER 31,
                                          ----------------------------------------------------
                                            1997       1998       1999       2000       2001
                                          --------   --------   --------   --------   --------
                                                             (IN THOUSANDS)
<S>                                       <C>        <C>        <C>        <C>        <C>
BALANCE SHEET DATA:
Cash and cash equivalents...............  $  3,934   $ 14,164   $162,722   $ 57,889   $ 37,404
Investments available for sale..........        --         --         --     54,344      8,976
Property and equipment, net.............    16,812     52,186     62,176     82,377     98,590
Investments in and advances to
  ventures..............................    74,332     46,519     45,196     49,629     45,981
Goodwill and intangible assets, net.....    10,649     71,924     53,467     70,045     57,146
Total assets............................   129,620    235,849    366,624    348,456    300,384
Total debt, including current portion...     1,625     24,459     28,029     18,997     22,220
Minority interest.......................        --      7,993      2,816      3,337      5,967
Shareholders' equity....................   115,568    168,783    288,552    283,193    220,844
</Table>

                                        48
<PAGE>

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

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

     Refer to Note 3 to the Consolidated Financial Statements for descriptions
of recent acquisitions that impact the comparability of financial information.
Other business combinations not disclosed in the footnotes were as follows:

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

                                        49
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     The following discussion and analysis relates to our financial condition
and results of operations of the Company for each of the years ended December
31, 2001, 2000 and 1999. This discussion should be read in conjunction with the
"Selected Historical Consolidated Financial Data" and the Company's Consolidated
Financial Statements and the notes related thereto appearing elsewhere in this
Report.

OVERVIEW

     We are a leading facilities-based provider of integrated telecommunications
and Internet services in major population centers throughout Russia, Ukraine and
other countries of the Commonwealth of Independent States ("CIS"). We organize
our operations into four business groups, as follows:

     - Competitive Local Exchange Carrier ("CLEC") Services.  Using our local
       access overlay networks in Moscow, Kiev, St. Petersburg and Nizhny
       Novgorod, we provide a range of services including local exchange and
       access services, international and domestic long distance services, data
       communications, Internet access and the design of corporate networks;

     - Data and Internet Services.  Using our fiber optic and satellite-based
       networks, including 140 points of presence in Russia, Ukraine and other
       countries of the CIS, we provide data and Internet services including:
       (a) Business to Business services, such as data communications, dedicated
       Internet access, web design, web-hosting, co-location and
       data-warehousing and (b) Business to Consumer services, such as dial-up
       Internet access and web content and a family of Internet portals;

     - Long Distance Services.  Using our fiber optic and satellite-based
       network, we provide long distance voice services in Russia; and

     - Mobile Services.  Using our mobile networks in Kiev and Odessa, Ukraine,
       we provide long distance services with value-added features, such as
       voicemail, roaming and messaging services on a subscription and prepaid
       basis.

     Additionally, we hold a minority interest in MCT Corp. ("MCT"), which in
turn has ownership interests in mobile operations located throughout Russia and
in Uzbekistan and Tajikistan. We treat our ownership interest in MCT as an
investment and are not actively involved in the day-to-day management of the
operations.

     Most of our revenue is derived from high-volume business customers and
carriers. Our business customers include large multi-national companies, local
enterprises, financial institutions, hotels and government agencies. We believe
that the carriers, including mobile operators, which contribute a substantial
portion of our revenues, in turn derive a portion of their business from
high-volume business customers. Thus, we believe that the majority of our
ultimate end-users are businesses that require access to highly reliable and
advanced telecommunications facilities to sustain their operations.

     We have traditionally competed for customers on the basis of network
quality, customer service and range of service offered. In the past several
years, other telecommunications operators have also introduced high-quality
services to the segments of the business market in which we operate. Competition
with these operators is intense, and frequently results in declining prices for
some of our services, which adversely affect our revenues. In addition, some of
our competitors do not link their prices to the dollar/ruble exchange rate, so
when the ruble devalues, their prices effectively become relatively cheaper than
our prices. In order to compete with these carriers in the regions outside
Moscow and St. Petersburg, we were forced to lower our tariffs in late 1998 and
during 1999, which resulted in reduced revenues and reduced margins. Since the
ruble exchange rate with the dollar has become relatively stable since early
2000 and during 2001, despite increasing inflation, price pressures associated
with devaluation have eased considerably. We cannot be certain that the exchange
rate will remain stable in the future and therefore we may experience additional
price pressures.

     Since early 2000, we appear to have witnessed a recovery in the Russian
market, but with downward pricing pressures persisting. The downward pricing
pressures result from increased competition in Russia and the global trend
toward lower telecommunications tariffs. In early 2000, the increases in traffic
volume did not

                                        50
<PAGE>

keep pace with the reduction in prices, however, in the fourth quarter of 2000
volumes were increasing faster than tariffs were declining. In 2001 our volume
increases have exceeded the reduction in tariffs on certain types of voice
traffic. This is a contributory factor to the increases in our revenue in 2001.
We expect that this trend of year over year increases will continue as long as
the Russian economy continues to develop.

     Although we expect competition to continue to force the general level of
tariffs downward, we expect to mitigate partially the effects of this pressure
by seeking, where possible, further reductions in the settlement and
interconnection rates that we pay to other telecommunications operators. In
general, we expect settlement and interconnection rates to continue to decline
in line with tariffs.

     We have expanded and will continue to expand our fiber optic capacity along
our heavy traffic and high cost routes to reduce our unit transmission costs and
ensure sufficient capacity to meet the growing demand for data and Internet
services. As part of this strategy, during 2000, we acquired the rights to use
up to STM-16 fiber optic capacity on the Moscow to Stockholm route,
significantly reducing our unit cost per E-1 fiber optic link on this route. In
September 2001, we acquired rights to use up to VC-3 fiber optic capacity on
major routes within Russia to support the increase in our interregional traffic
and our regional expansion strategy.

     Our mobile operations in Ukraine continue to be under strong competitive
pressure and we foresee that average revenue per subscriber will continue to
decline. This, coupled with regulatory issues, and the need to commit
significant investment to continue to grow, has led us to reassess our plans for
this business. We evaluated the future cash flows for this business, using a
risk adjusted rate of 19.9% and as a result we have recorded an impairment
charge of $10.4 million in the fourth quarter of 2001. Our current plans show
that we expect to see revenues continue to decline, although we will refocus our
mobile operations as an additional service offered by business services
operations to corporate clients.

     In Kiev, Ukraine we are also experiencing issues relating to obtaining
further numbering capacity for our business services operations. In this regard,
we are currently negotiating with Ukrtelecom, the state-owned operator, for
performance of overdue obligations related to the provision of numbering
capacity for which we have prepaid. Our ability to grow our business services
operations in Kiev will be limited if we do not have access to numbering
capacity.

     GTU is involved in a number of other commercial disputes with Ukrtelecom.
The most significant disputes include alleged incorrect routing of traffic and
Golden Telecom (Ukraine)'s lease rights of Ukrtelecom's technical premises.

     We reassessed and suspended our incoming international traffic off-network
termination activities, pending the resolution of certain regulatory issues and
as a result we experienced a reduction of approximately $1.6 million in revenue
in the fourth quarter of 2001. On March 1, 2002 we became aware that the Kiev
City Prosecutor's Office has initiated an investigation into the activities of
GTU. Although all the facts concerning the allegations are not known to us at
this time, the investigation appears to concern alleged improprieties in the
manner in which GTU routed certain traffic through the state owned monopoly
carrier, Ukrtelecom. Our partners in GTU, who act as General Director and
Technical Director under the terms of that entity's foundation agreements, are
of the opinion that these events are related to ongoing commercial disputes and
litigation between GTU and Ukrtelecom. We have requested, and our local partners
have agreed, that they will cease to actively participate in the daily
management of the entity. We expect that the suspended traffic will be partially
reestablished during 2002.

     If these disputes are not resolved amicably in the near term, they may have
an adverse impact on the financial condition, results of operations and
liquidity of GTU. The risks of an adverse impact are assessed as possible but
not quantifiable.

     In addition to the traditional voice and data service provision, we have
been actively pursuing a strategy of developing non-traditional telecom service
offerings including those related to the Internet, such as web hosting, web
design, and vertical and horizontal Internet portal development. To this end, we
acquired InfoArt Stars and the Agama family of Web properties to add to our
Russia-On-Line Internet portal, which also incorporates some of our other
acquisitions in the year ended December 31, 2000, referat.ru, Absolute Games and
Fintek. In line with experience outside of Russia, we have not seen the rapid
development of Internet
                                        51
<PAGE>

based services that was expected. Internet based advertising and e-commerce
revenues have not developed to significant levels and we have reviewed our long
term strategy for Internet based products. As a result of this review, we
evaluated the future cash flows for this business, using a risk adjusted
discount rate of 19.9%, and we have recorded an impairment charge of $20.9
million in the fourth quarter of 2001. We expect to see some growth in Internet
based advertising and will continue to offer this service as one of our range of
Internet services and be in a position to capitalize on any upturn in demand for
this service.

     We have seen a significant increase in our dial-up Internet subscriber
numbers and we expect the increase to continue, as our base of regional
subscribers expands. As additional dial-up capacity becomes available in Moscow,
we expect to increase our market share in the capital as well. On June 1, 2001
we completed the purchase of a leading Russian Internet Service Provider
("ISP"), Cityline, together with ISP Uralrelcom and infrastructure company PTK,
and together, these entities allow us to increase our regional dial-up Internet
presence and increase our numbering capacity and access lines in Moscow. The new
Moscow capacity is not yet functional and we currently expect that the capacity
will be available early in the second quarter of 2002. If the dial-up capacity
does not materialize, we will explore additional options for local dial-up
capacity. The Moscow numbering capacity and some of the access lines to be
provided by PTK are intended to support incremental CLEC Services division
end-user customers, with the majority of the access lines being allocated to
support planned increases in dial-up Internet subscribers in our data and
Internet Services division.

     We have continued our process of integrating our acquisitions, improving
operational efficiency and cost containment, which is intended to improve our
operating performance. We expect to incur further costs associated with overall
restructuring of our operations in the first and second quarters of 2002.

     In November 2001, we announced that we had signed a Memorandum of
Understanding with Rostelecom, to acquire Rostelecom's 50% holding in Sovintel.
On March 13, 2002 we executed a Sale and Purchase Agreement finalizing the terms
of the acquisition. The closure of the transaction is dependent upon the
performance or fulfillment of a number of conditions precedent, including the
receipt of necessary regulatory approvals from currency control and anti-trust
agencies in Russia and the United States of America. We expect the transaction
to close during the second quarter of 2002. The consolidation of Sovintel into
our Consolidated Financial Statements will have a significant impact on our
results of operations and our financial position. Revenue will increase, subject
to intercompany eliminations, and net income will increase, but partially offset
by a reduction in equity in earnings of ventures. Amortization expense will
increase subject to the amount of intangible assets identified as part of the
purchase price accounting.

RECENT ACQUISITIONS

     In June 2001, we completed the purchase of 100% of leading ISP, Cityline,
together with 51% of Ekaterinburg-based, ISP Uralrelcom, and 100% of
infrastructure company PTK. Cityline operates primarily in Moscow, but also
operates in other major Russian cities, including Saint Petersburg, Nizhny
Novgorod, Tyumen and Kaliningrad. It is expected that these acquisitions will
allow us to increase our regional dial-up Internet presence and increase our
access to dial-up capacity in Moscow. The dial-up capacity in Moscow is not yet
fully functional and the anticipated capacity did not materialize in accordance
with the terms and conditions of the initial interconnect agreements between PTK
and a third party. However, the agreements contained contingent arrangements,
which have been invoked, allowing us to negotiate an acceptable solution, which
includes the transfer to us of Moscow numbering capacity and access lines and a
reduction in the purchase price through the recovery of funds held in escrow.
The numbering capacity and access lines are expected to be available early in
the second quarter 2002.

     In September 2001, we completed the purchase of 51% of leading CLEC,
Agentstvo Delovoi Svyazi ("ADS"), which owns network infrastructure in Russia's
third largest city, Nizhny Novgorod. This acquisition, together with our other
Nizhny Novgorod based companies, TeleRoss Nizhny Novgorod, Commercial
Information Networks ("KIS") and Inforis give us a significant presence in this
important regional market. We expect to merge these operations in the second
quarter of 2002.

                                        52
<PAGE>

SHARES AND OWNERSHIP

     In March 2001, 141,961 restricted shares of common stock, par value $0.01,
were issued to senior management and employees to be held in escrow by us. The
restricted shares were issued in accordance with restricted stock agreements
dated October 1, 1999 concluded as part of our Initial Public Offering ("IPO")
and were held in escrow by us until such restriction lapsed on October 1, 2001.

     When the 1999 Golden Telecom, Inc. ("GTI") Equity Participation Plan (the
"Equity Plan") was adopted, the number of shares available for issuance under
the Equity Plan was calculated as 15% of the issued and outstanding shares on a
fully diluted basis. Since the adoption of the Equity Plan, the Company has
issued an additional 1,679,872 shares of common stock in connection with fund
raising activities and acquisitions. In March 2001, the Compensation Committee
of the Board of Directors approved an increase in shares available for issuance
under the Equity Plan from 4,023,551 to 4,320,000 in order to preserve the 15%
ratio referenced above. The decision of the Compensation Committee of the Board
of Directors was ratified by GTI shareholders on June 26, 2001.

     In March 2001 and April 2001, the Compensation Committee of the Board of
Directors adopted resolutions amending the terms of the Stock Option Award
Agreements. These resolutions are discussed in detail in Note 8 to the
Consolidated Financial Statements.

     In May 2001, Global TeleSystems, Inc. ("GTS"), our former majority owner,
completed the sale of approximately 12.2 million shares of our common stock to a
group of investors led by Alfa Group, a leading Russia-based financial and
industrial concern ("Alfa"), and two of our then current shareholders, Capital
International Global Emerging Markets Private Equity Fund L.P. ("Capital") and
investment funds managed by Barings Vostok Capital Partners ("Baring Vostok").
Upon closure, affiliates of Alfa acquired approximately 10.7 million, or about
43.6%, shares of our common stock, Baring Vostok increased its ownership
position in the company to approximately 1.9 million, or about 7.6% shares of
our common stock, and Capital increased its ownership position in the company to
2.2 million, or about 8.8%, of our common stock. These purchasers also acquired
options from GTS under which they could, under certain circumstances and subject
to the terms and conditions of a Standstill Agreement executed by the
purchasers, GTS and us on April 2, 2001, acquire GTS' remaining shareholding in
the Company, consisting of approximately 2.9 million, or 11.6%, shares of GTI's
common stock. In July 2001, the Company completed the buy-back for $25.0
million, of approximately 2.3 million shares of GTI common stock from GTS. To
effect the buy-back, we acted as designated purchaser and exercised the options
held by Alfa, Capital, and Baring Vostok to acquire our common stock for $11.00
per share from GTS.

CRITICAL ACCOUNTING POLICIES

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

     Revenue recognition policies; as discussed in Note 2 to the Consolidated
Financial Statements, GTI recognizes operating revenues as services are rendered
or as products are delivered to customers. Certain revenues are deferred in
accordance with Staff Accounting Bulletin ("SAB") No. 101. In connection with
recording revenue, estimates and assumptions are required in determining the
expected conversion of the revenue streams to cash collected. As of December 31,
2001 and 2000, we had $5.9 million and $4.7 million, respectively, in deferred
telecommunications connection fee revenue recorded on our balance sheet. In line
with guidance in SAB No. 101, we also defer direct incremental costs related to
connection fees, not exceeding the revenue deferred. As of December 31, 2001 and
2000, we had $2.7 million and $2.3 million, respectively, in deferred
incremental costs related to connection fees.

                                        53
<PAGE>

     Allowance for doubtful accounts policies; the allowance estimation process
requires management to make assumptions based on historical results, future
expectations, the economic and competitive environment, changes in the
creditworthiness of our customers, and other relevant factors.

     Long-lived asset recovery policies; in relation to long-lived assets,
consisting primarily of property, plant and equipment and intangibles, which
comprise a significant portion of GTI's total assets. Changes in technology or
changes in GTI's intended use of these assets may cause the estimated period of
use or the value of these assets to change. GTI performs annual internal studies
to confirm the appropriateness of estimated economic useful lives for each
category of current property, plant and equipment. Additionally, long-lived
assets, including goodwill and intangibles, are reviewed for impairment whenever
events or changes in circumstances have indicated that their carrying amounts
may not be recoverable. Estimates and assumptions used in both setting useful
lives and testing for recoverability require both judgment and estimation. GTI's
policies regarding accounting for these assets and assessing their
recoverability are discussed in Notes 2 and 15 to the Consolidated Financial
Statements.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statements on Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which was amended in June 1999.
We adopted the statement effective January 1, 2001. The adoption of the new
statement did not have an effect on our results of operations or financial
position.

     In July 2001, the FASB issued SFAS No. 141, "Business Combinations", and
No. 142, "Goodwill and Other Intangible Assets", effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests. Other intangible assets will continue to be
amortized over their useful lives. We adopted SFAS No. 141 with respect to the
acquisition of 51% of ADS in September 2001.

     We will apply the new rules on accounting for goodwill and other intangible
assets beginning in the first quarter of 2002. Application of the
non-amortization provisions of the Statement is expected to result in an
improvement in net loss of approximately $12 million in 2002. During 2002, we
will perform the first of the required impairment tests of goodwill and
indefinite lived intangible assets as of January 1, 2002. We have not yet
determined what the effect of these tests will be on our earnings and financial
position. Upon the adoption of SFAS No. 142, we will record a cumulative effect
of the change in accounting for negative goodwill arising on our equity method
investments in the amount of $1.0 million.

     In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This statement deals with the costs of closing
facilities and removing assets. SFAS No. 143 requires entities to record the
fair value of a legal liability for an asset retirement obligation in the period
it is incurred. The cost is initially capitalized and amortized over the
remaining life of the asset. Once the obligation is ultimately settled, any
difference between the final cost and the recorded liability is recognized as a
gain or loss on disposition. SFAS No. 143 is effective for years beginning after
June 15, 2002. We are currently evaluating the impact the pronouncement will
have on future consolidated financial statements.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," and the accounting and reporting
provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results
of Operations -- Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,"
for the disposal of a segment of a business (as previously defined in that
opinion). This statement also amends Accounting Research Bulletin No. 41,
"Consolidated Financial Statements", to eliminate the exception to consolidation
for a subsidiary for which control is likely to be temporary. The provisions of
the statement will be effective for financial statements issued for fiscal years
beginning after December 15, 2001. We are currently evaluating the impact the
pronouncement will have on future consolidated financial statements.
                                        54
<PAGE>

RESULTS OF OPERATIONS

     Golden Telecom, Inc. was formed in June 1999 to be the holding company for
all of GTS's businesses in the Commonwealth of Independent States. The
consolidated financial statements included in this annual report have been
prepared as if Golden Telecom, Inc. had been in existence throughout 1999.

     In addition, we have included a discussion of EDN Sovintel LLC, our primary
non-consolidated operation, which entity is material to our business. We believe
that this discussion is helpful to develop an understanding of the factors
contributing to our overall financial condition and results of operations.

     The results of our four business groups from the operations of both our
consolidated entities combined with the non-consolidated entities where we are
actively involved in the day-to-day management, are shown in footnote 13
"Segment Information -- Line of Business Data" to our consolidated financial
statements.

     Our functional currency is the US dollar, as the majority of our cash flows
are indexed to, or denominated in US dollars. Russia is considered to be a
highly inflationary environment.

     The discussion of our results of operations is organized as follows:

  YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

     - Consolidated Results.  Consolidated Results of Operations for the Year
       Ended December 31, 2001 compared to the Consolidated Results of
       Operations for the Year Ended December 31, 2000

     - Non-consolidated Results.  Results of Non-Consolidated Operations of EDN
       Sovintel LLC for the Year Ended December 31, 2001 compared to the Results
       of Non-Consolidated Operations of EDN Sovintel LLC for the Year Ended
       December 31, 2000

  YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

     - Consolidated Results.  Consolidated Results of Operations for the Year
       Ended December 31, 2000 compared to the Consolidated Results of
       Operations for the Year Ended December 31, 1999

     - Non-consolidated Results.  Results of Non-Consolidated Operations of EDN
       Sovintel LLC for the Year Ended December 31, 2000 compared to the Results
       of Non-Consolidated Operations of EDN Sovintel LLC for the Year Ended
       December 31, 1999

CONSOLIDATED RESULTS -- CONSOLIDATED RESULTS OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 2001 COMPARED TO THE CONSOLIDATED RESULTS OF OPERATIONS FOR THE
YEAR ENDED DECEMBER 31, 2000

  REVENUE

     Our revenue increased by 24% to $140.0 million for the year ended December
31, 2001 from $113.1 million for the year ended December 31, 2000. The breakdown
of revenue by business group was as follows:

<Table>
<Caption>
                                             CONSOLIDATED REVENUE FOR   CONSOLIDATED REVENUE FOR
                                                  THE YEAR ENDED             THE YEAR ENDED
                                                DECEMBER 31, 2000          DECEMBER 31, 2001
                                             ------------------------   ------------------------
                                                                (IN MILLIONS)
<S>                                          <C>                        <C>
REVENUE
  CLEC Services............................           $ 42.0                     $ 45.1
  Data and Internet Services...............             41.5                       63.2
  Long Distance Services...................             14.8                       18.4
  Mobile Services..........................             17.5                       14.4
  Eliminations.............................             (2.7)                      (1.1)
                                                      ------                     ------
TOTAL REVENUE..............................           $113.1                     $140.0
</Table>

                                        55
<PAGE>

     CLEC Services.  Revenue from CLEC Services increased by 7% to $45.1 million
for the year ended December 31, 2001 from $42.0 million for the year ended
December 31, 2000.

     The CLEC Services division of TeleRoss revenue increased by 9% to $27.8
million for the year ended December 31, 2001 from $25.5 million for the year
ended December 31, 2000. This is mainly due to increases in monthly recurring
and traffic revenue due to an increase in numbering capacity in active service.

     The CLEC Services division of Golden Telecom BTS revenue decreased by 2% to
$16.2 million for the year ended December 31, 2001 from $16.5 million for the
year ended December 31, 2000. The decrease in revenue was mainly due to a $1.6
million decrease in revenue in the fourth quarter of 2001, from the termination
of incoming international traffic from other carriers, partially offset by
increases in recurring revenues from an increased end user customer base.

     As a result of the acquisition of ADS in the third quarter of 2001, revenue
from CLEC Services increased in 2001 by $1.1 million.

     Data and Internet Services.  Revenue from Data and Internet Services
increased by 52% to $63.2 million for the year ended December 31, 2001 from
$41.5 million for the year ended December 31, 2000. The increase is largely the
result of increases in Internet revenue from both dial-up and dedicated Internet
subscribers, increases in private line channel revenue, increases in Internet
traffic and other Internet related revenues. Dial-up Internet revenues increased
by $4.0 million as a result of our acquisitions of Cityline and Uralrelcom in
2001. We acquired KIS in the second quarter of 2000.

     Long Distance Services.  Revenue from Long Distance Services increased by
24% to $18.4 million for the year ended December 31, 2001 from $14.8 million for
the year ended December 31, 2000. Recurring fees and traffic revenues increased
due to an expanding end-user customer base in Moscow and our acquisition of
controlling interests in some of the TeleRoss regional ventures. Tariffs for
end-user long distance traffic were mainly flat during 2001, with traffic
increasing. These increases offset a decline in equipment sales.

     Mobile Services.  Revenue from Mobile Services decreased by 18% to $14.4
million for the year ended December 31, 2001 from $17.5 million for the year
ended December 31, 2000. Despite an increase of approximately 9% in the number
of active subscribers at Golden Telecom GSM, pricing competition in Ukraine has
reduced average revenue per active subscriber by 29% to approximately $31 per
month. Additionally, $0.9 million of the decrease was attributable to Vostok
Mobile Novgorod no longer being consolidated in 2001 as a result of the MCT
transaction.

                                        56
<PAGE>

  EXPENSES

     The following table shows our principal expenses for the year ended
December 31, 2001 and December 31, 2000:

<Table>
<Caption>
                                                 CONSOLIDATED EXPENSES   CONSOLIDATED EXPENSES
                                                  FOR THE YEAR ENDED      FOR THE YEAR ENDED
                                                   DECEMBER 31, 2000       DECEMBER 31, 2001
                                                 ---------------------   ---------------------
                                                                 (IN MILLIONS)
<S>                                              <C>                     <C>
COST OF REVENUE
  CLEC Services................................         $ 15.4                   $17.4
  Data and Internet Services...................           21.9                    30.2
  Long Distance Services.......................           12.3                    13.5
  Mobile Services..............................            4.1                     3.7
  Eliminations.................................           (2.7)                   (1.1)
                                                        ------                   -----
TOTAL COST OF REVENUE..........................           51.0                    63.7
Selling, general and administrative............           45.4                    48.9
Depreciation and amortization..................           31.9                    41.4
Impairment charge..............................             --                    31.3
Equity in (earnings)/losses of ventures........            0.3                    (8.2)
Interest income................................          (10.4)                   (3.1)
Interest expense...............................            3.3                     2.4
Foreign currency loss..........................            0.4                     0.6
Provision for income taxes.....................         $  1.0                   $ 1.9
</Table>

  Cost of Revenue

     Our cost of revenue increased by 25% to $63.7 million for the year ended
December 31, 2001 from $51.0 million for the year ended December 31, 2000.

     CLEC Services.  Cost of revenue from CLEC Services increased to $17.4
million, or 39% of revenue, for the year ended December 31, 2001 from $15.4
million, or 37% of revenue, for the year ended December 31, 2000.

     The CLEC Services division of TeleRoss' cost of revenue increased by 13% to
$8.5 million, or 31% of revenue, for the year ended December 31, 2001 from $7.5
million, or 29% of revenue, for the year ended December 31, 2000. The increase
as a percentage of revenue resulted from settlements to other operators not
decreasing in line with the pricing concessions to customers.

     The CLEC Services division of Golden Telecom BTS cost of revenue increased
by 8% to $8.5 million, or 52% of revenue, for the year ended December 31, 2001
and was $7.9 million, or 48% of revenue, for the year ended December 31, 2000.
Cost of revenue increased as a percentage of revenue due to settlements to other
operators not decreasing in line with pricing concessions to customers and a
lower margin on the carrier traffic carried.

     Data and Internet Services.  Cost of revenue from Data and Internet
Services increased by 38% to $30.2 million, or 48% of revenue, for the year
ended December 31, 2001 from $21.9 million, or 53% of revenue, for the year
ended December 31, 2000. The decrease as a percentage of revenue was mainly due
to the operational improvements in terms of reduced cost for fiber capacity and
the integration of our Internet acquisitions.

     Long Distance Services.  Cost of revenue from Long Distance Services
increased by 10% to $13.5 million, or 73% of revenue, for the year ended
December 31, 2001 from $12.3 million, or 83% of revenue, for the year ended
December 31, 2000. The improvement in cost of revenue as a percentage of revenue
is partly due to an increase in end-users in the long distance traffic mix and
the decrease in low margin equipment sales.

                                        57
<PAGE>

     Mobile Services.  Cost of revenue from Mobile Services decreased by 10% to
$3.7 million, or 26% of revenue, for the year ended December 31, 2001 from $4.1
million, or 23% of revenue, for the year ended December 31, 2000. The cost of
revenue increased as a percentage of revenue due to increased competition, which
has in turn led to lower traffic and equipment margins.

  Selling, General and Administrative

     Our selling, general and administrative expenses increased by 8% to $48.9
million, or 35% of revenue, for the year ended December 31, 2001 from $45.4
million, or 40% of revenue, for the year ended December 31, 2000. There were
increases in employee related costs, largely due to acquisitions and bad debt
expense also increased, but the increases were partially offset by a reduction
in revenue related taxes.

  Depreciation and Amortization

     Our depreciation and amortization expenses increased by 30% to $41.4
million for the year ended December 31, 2001 from $31.9 million for the year
ended December 31, 2000. This increase is due to the continuing capital
expenditures of the consolidated entities and increased intangible assets and
goodwill amortization due to acquisitions.

  Impairment Charge

     In the fourth quarter of 2001 we recorded impairment charges totaling $31.3
million covering two aspects of our business. Severely reduced expectations in
demand for Internet advertising in Russia, as throughout western markets, had
impacted the value of our Internet portal assets and as a result we recorded an
impairment charge of $20.9 million. Operating difficulties had impacted our
mobile business in Ukraine and as a result we recorded an impairment charge of
$10.4 million. For further details of these charges, refer to Note 15 of the
Notes to the Consolidated Financial Statements.

  Equity in Earnings/Losses of Ventures

     The earnings after interest and tax charges from our investments in
non-consolidated ventures were $8.2 million for the year ended December 31,
2001, and losses after interest and tax charges from our investment in
non-consolidated ventures were $0.3 million for the year ended December 31,
2000. We recognized earnings at Sovintel of $10.7 million for the year ended
December 31, 2001, which more than offset our recognized losses in MCT. In the
year ended December 31, 2000, our recognized earnings at Sovintel were $5.1
million, which were more than offset by our recognized losses of $5.6 million
from our Russian mobile ventures.

  Interest Income

     Our interest income was $3.1 million for the year ended December 31, 2001
down from $10.4 million for the year ended December 31, 2000. The decrease in
interest income mainly reflects the reduced balance of cash, cash equivalents
and investments available for sale following the use of a significant part of
the proceeds from our IPO for acquisitions and capital expenditure and the
reduction in interest rates during 2001.

  Interest Expense

     Our interest expense was $2.4 million for the year ended December 31, 2001
down from $3.3 million for the year ended December 31, 2000. The decrease in
interest expense reflects the reduced level of debt in the company.

  Foreign Currency Loss

     Our foreign currency loss was $0.6 million for the year ended December 31,
2001, compared to a $0.4 million loss for the year ended December 31, 2000. The
increased loss, in part reflects the increased devaluation of the ruble, as
compared to the dollar, in the year ended December 31, 2001.

                                        58
<PAGE>

  Provision for Income Taxes

     Our charge for income taxes was $1.9 million for the year ended December
31, 2001 compared to $1.0 million for year ended December 31, 2000. The overall
increase in the provision for income taxes was due to the increase in tax
incurred at Golden Telecom Ukraine, as its brought-forward tax losses had been
fully utilized, and the increasing profitability at TeleRoss operating company.
TeleRoss operating company's provision for income taxes was reduced by a
deferred tax benefit relating to loss carry-forwards that are expected to be
utilized in 2002. In 2001, Russia enacted a reduction in the tax rate effective
January 1, 2002, from 35% to 24%.

  Net Loss and Net Loss per Share

     Our net loss for the year ended December 31, 2001 was $39.0 million,
compared to $10.3 million for the year ended December 31, 2000. The significant
increase in our net loss was due to the impairment charge of $31.3 million,
together with the other items discussed above.

     Our net loss per share of common stock was $1.65 in the year ended December
31, 2001, compared to $0.43 in the year ended December 31, 2000. The increase in
loss per share of common stock was due the increase in net loss and a decrease
in the number of weighted average shares to 23,604,914 in the year ended
December 31, 2001, compared to 24,095,884 in the year ended December 31, 2000.
The decrease in weighted average shares largely resulted from a buy-back of
2,272,727 shares of our common stock in July, 2001.

NON-CONSOLIDATED RESULTS -- NON-CONSOLIDATED RESULTS OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 2001 COMPARED TO THE NON-CONSOLIDATED RESULTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000

     This section is comprised of a limited discussion of the results of
operations of our principal non-consolidated entity, Sovintel, in which we own a
50% interest.

  SOVINTEL

  Revenue

     Sovintel's revenue increased by 23% to $115.7 million for the year ended
December 31, 2001 from $93.9 million, for the year ended December 31, 2000.
Increases in traffic volumes, particularly incoming traffic, more than offset
reductions in tariffs. Also, increases in recurring fees, equipment sales and
other service offerings contributed to the increase in revenue.

  Cost of Revenue

     Sovintel's cost of revenue increased by 29% to $63.9 million for the year
ended December 31, 2001 from $49.7 million for the year ended December 31, 2000.
The increase to 55% from 53% of revenue was primarily the result of increases in
lower margin traffic in the revenue mix.

  Selling, General and Administrative

     Sovintel's selling, general and administrative expenses decreased by 23% to
$13.0 million, or 11% of revenue, for the year ended December 31, 2001 from
$16.8 million, or 18% of revenue for the year ended December 31, 2000. The
decrease was largely due to a reduction in the rate of revenue related taxes
incurred, also reductions in employee related costs and bad debt.

                                        59
<PAGE>

CONSOLIDATED RESULTS -- CONSOLIDATED RESULTS OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 2000 COMPARED TO THE CONSOLIDATED RESULTS OF OPERATIONS FOR THE
YEAR ENDED DECEMBER 31, 1999

  REVENUE

     Our revenue increased to $113.1 million for the year ended December 31,
2000 from $97.9 million for the year ended December 31, 1999. The breakdown of
revenue by business group was as follows:

<Table>
<Caption>
                                             CONSOLIDATED REVENUE FOR   CONSOLIDATED REVENUE FOR
                                                  THE YEAR ENDED             THE YEAR ENDED
                                                DECEMBER 31, 1999          DECEMBER 31, 2000
                                             ------------------------   ------------------------
                                                                (IN MILLIONS)
<S>                                          <C>                        <C>
REVENUE
  CLEC Services............................           $44.7                      $ 42.0
  Data and Internet Services...............            27.2                        41.5
  Long Distance Services...................            11.4                        14.8
  Mobile Services..........................            17.6                        17.5
  Eliminations.............................            (3.0)                       (2.7)
                                                      -----                      ------
TOTAL REVENUE..............................           $97.9                      $113.1
</Table>

     CLEC Services.  Revenue from CLEC Services decreased by 6% to $42.0 million
for the year ended December 31, 2000 from $44.7 million for the year ended
December 31, 1999.

     The CLEC Services division of TeleRoss revenue decreased by 18% to $25.5
million for the year ended December 31, 2000 from $31.1 million for the year
ended December 31, 1999. This decrease is mainly due to a reduction in monthly
fees and a decrease in traffic related revenue, largely as a result of pricing
concessions made to our largest customer.

     The CLEC Services division of Golden Telecom BTS revenue increased by 21%
to $16.5 million for the year ended December 31, 2000 from $13.6 million for the
year ended December 31, 1999. The increase in revenue was mainly due to
increased traffic revenue from end-users and other carriers, partially offset by
reduced tariffs.

     Data and Internet Services.  Revenue from Data and Internet Services
increased by 53% to $41.5 million for the year ended December 31, 2000 from
$27.2 million for the year ended December 31, 1999. The increase is largely the
result of increases in Internet revenue from both dial-up and dedicated
subscribers. The significant increase in dial-up Internet subscribers and
revenue has been achieved primarily through organic growth and through the
acquisitions of Glasnet, Nevalink and Commercial Information Networks (KIS).
There was continued steady growth of Data revenue due to increases in frame
relay customers and capacity sold, plus an increase in international private
line circuits sales over our leased international fiber optic link.

     Long Distance Services.  Revenue from Long Distance Services increased by
30% to $14.8 million for the year ended December 31, 2000 from $11.4 million for
the year ended December 31, 1999. Increases in long distance traffic exceeded
the decreases in tariffs and there were increases in both recurring monthly fees
and equipment revenue.

     Mobile Services.  Revenue from Mobile Services decreased slightly to $17.5
million for the year ended December 31, 2000 from $17.6 million for the year
ended December 31, 1999. Although there has been a significant increase,
approximately 44%, in the number of active subscribers at Golden Telecom GSM, in
part due to our commencing operations in Odessa in August 2000, pricing
competition from large operators has limited overall revenue growth.

                                        60
<PAGE>

  EXPENSES

     The following table shows our principal expenses for the year ended
December 31, 2000 and December 31, 1999:

<Table>
<Caption>
                                                 CONSOLIDATED EXPENSES   CONSOLIDATED EXPENSES
                                                  FOR THE YEAR ENDED      FOR THE YEAR ENDED
                                                   DECEMBER 31, 1999       DECEMBER 31, 2000
                                                 ---------------------   ---------------------
                                                                 (IN MILLIONS)
<S>                                              <C>                     <C>
COST OF REVENUE
  CLEC Services................................          $12.8                  $ 15.4
  Data and Internet Services...................           15.8                    21.9
  Long Distance Services.......................            9.3                    12.3
  Mobile Services..............................            4.6                     4.1
  Eliminations.................................           (2.0)                   (2.7)
                                                         -----                  ------
TOTAL COST OF REVENUE..........................           40.5                    51.0
Selling, general and administrative............           41.0                    45.4
Depreciation and amortization..................           28.2                    31.9
Equity in losses of ventures...................            6.7                     0.3
Interest income................................           (5.2)                  (10.4)
Interest expense...............................            2.4                     3.3
Foreign currency loss..........................            2.7                     0.4
Provision for income taxes.....................          $ 6.8                  $  1.0
</Table>

  Cost of Revenue

     Our cost of revenue increased by 26% to $51.0 million for the year ended
December 31, 2000 from $40.5 million for the year ended December 31, 1999.

     CLEC Services.  Cost of revenue from CLEC Services increased to $15.4
million, or 37% of revenue, for the year ended December 31, 2000 from $12.8
million, or 29% of revenue, for the year ended December 31, 1999.

     The CLEC Services division of TeleRoss' cost of revenue increased to $7.5
million, or 29% of revenue, for the year ended December 31, 2000 from $7.0
million, or 23% of revenue, for the year ended December 31, 1999. The increase
as a percentage of revenue resulted from settlements to other operators not
decreasing in line with the pricing concessions to customers.

     The CLEC Services division of Golden Telecom BTS cost of revenue was $7.9
million, or 48%, of revenue, for the year ended December 31, 2000 and was $5.8
million, or 43% of revenue, for the year ended December 31, 1999. Cost of
revenue as a percentage of revenue increased because the reduction in tariffs in
response to competitive pressures exceeded the decrease in settlement costs paid
to other operators.

     Data and Internet Services.  Cost of revenue from Data and Internet
Services increased to $21.9 million, or 53% of revenue, for the year ended
December 31, 2000 from $15.8 million, or 58% of revenue, for the year ended
December 31, 1999. The decrease as a percentage of revenue was due to
operational synergies including those achieved from the Glasnet, Nevalink and
Commercial Information Networks (KIS) acquisitions. We continue to improve the
provisioning of our fiber routes to improve our network costs.

     Long Distance Services.  Cost of revenue from Long Distance Services
increased to $12.3 million, or 83% of revenue, for the year ended December 31,
2000 from $9.3 million, or 82% of revenue, for the year ended December 31, 1999.
The cost of revenue as a percentage of revenue increased due to increased low
margin equipment sales.

                                        61
<PAGE>

     Mobile Services.  Cost of revenue from Mobile Services decreased to $4.1
million, or 23% of revenue, for the year ended December 31, 2000 from $4.6
million, or 26% of revenue, for the year ended December 31, 1999. The cost of
revenue decreased as a percentage of revenue as result of operating
efficiencies.

  Selling, General and Administrative

     Our selling, general and administrative expenses increased by 11% to $45.4
million, or 40% of revenue, for the year ended December 31, 2000 from $41.0
million, or 42% of revenue, for the year ended December 31, 1999. The decrease
as a percentage of revenue is due to reductions in employee costs, bad debt
provision and various taxes as a percentage of revenue partly offset by an
increase in advertising costs as a result of the implementation of our Internet
strategy.

  Depreciation and Amortization

     Our depreciation and amortization expenses increased by 13% to $31.9
million for the year ended December 31, 2000 from $28.2 million for the year
ended December 31, 1999. This increase is due to the continuing capital
expenditures of the consolidated entities and increased goodwill and intangible
assets amortization due to acquisitions.

  Equity in Earnings/Losses of Ventures

     The losses after interest and tax charges from our investments in
non-consolidated ventures were $0.3 million for the year ended December 31,
2000, and $6.7 million for the year ended December 31, 1999. We recognized
earnings at Sovintel of $5.1 million for the year ended December 31, 2000, which
partially offset our recognized losses at other ventures. In the year ended
December 31, 1999, our recognized earnings at Sovintel were $2.8 million. There
were significant losses at our non-consolidated ventures in the year ended
December 31, 1999 due to the effects of the August 1998 Russian financial
crisis. The losses attributable to Vostok Mobile, including PrimTelefone, were
$5.6 million and $8.2 million for the years ended December 31, 2000 and December
31, 1999, respectively. The losses attributable to the abandoned Russian mobile
ventures for the year ended December 31, 1999 were $2.1 million.

  Interest Income

     Our interest income was $10.4 million for the year ended December 31, 2000
up from $5.2 million for the year ended December 31, 1999. The increase in
interest income reflects the interest received on the balance of the cash, cash
equivalents and investments available for sale from the proceeds of our IPO on
September 30, 1999.

  Interest Expense

     Our interest expense was $3.3 million for the year ended December 31, 2000
up from $2.4 million for the year ended December 31, 1999. The increase is due
to reductions in operating company debt which have been more than offset by the
increase in interest expense attributable to debt owed to GTS and Lucent
Technologies.

  Foreign Currency Loss

     Our foreign currency loss was $0.4 million for the year ended December 31,
2000, compared to a $2.7 million loss for the year ended December 31, 1999. The
decreased loss reflects the reduced level of devaluation of the ruble.

  Provision for Income Taxes

     We had a provision for income taxes of $1.0 million for the year ended
December 31, 2000 compared to $6.8 million for year ended December 31, 1999. The
decrease was due to the merger of TCM into the TeleRoss operating company with
effect from the beginning of November 1999. The earnings of TCM are

                                        62
<PAGE>

now offset against losses in the other operating divisions with the merged
TeleRoss, significantly reducing our income taxes in Russia.

  Net Loss and Net Loss per Share

     Our net loss for the year ended December 31, 2000 was $10.3 million,
compared to $46.5 million for the year ended December 31, 1999. In the year
ended December 31, 1999 we recorded an abandonment and restructuring charge of
$19.8 million, no similar charge was recorded in the year ended December 31,
2000. The improvement in our net loss was due to this, together with the items
discussed above.

     Our net loss per share of common stock was $0.43 in the year ended December
31, 2000, compared to $3.38 in the year ended December 31, 1999. The reduction
in loss per share of common stock was due the reduction in net loss and an
increase in the number of weighted average shares to 24,095,884 in the year
ended December 31, 2000, compared to 13,735,922 in the year ended December 31,
1999. The increase in weighted average shares resulted from the timing of our
initial public offering in September 1999.

NON-CONSOLIDATED RESULTS -- NON-CONSOLIDATED RESULTS OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 2000 COMPARED TO THE NON-CONSOLIDATED RESULTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999

     This section is comprised of a limited discussion of the results of
operations of our principal non-consolidated entity, Sovintel, in which we own a
50% interest.

  SOVINTEL

  Revenue

     Sovintel's revenue increased by 2% to $93.9 million for the year ended
December 31, 2000 from $91.7 million, for the year ended December 31, 1999.
Increases in traffic volumes more than offset reductions in tariffs.

  Cost of Revenue

     Sovintel's cost of revenue decreased to $49.7 million for the year ended
December 31, 2000 from $51.1 million for the year ended December 31, 1999. The
decrease to 53% from 56% of revenue was primarily a result of lower
international and domestic settlement rates paid to other operators.

  Selling, General and Administrative

     Sovintel's selling, general and administrative expenses decreased by 5% to
$16.8 million, or 18% of revenue, for the year ended December 31, 2000 from
$17.6 million, or 19% of revenue for the year ended December 31, 1999. The
decrease was mainly due to a reduction in revenue related taxes offset by slight
increases in employee and advertising expenses.

INCOME TAXES

     Our effective rate of income tax differs from the US statutory rate due to
the impact of the following factors (1) different income tax rates and
regulations apply in the countries where we operate; (2) amortization of
goodwill is not deductible for income tax purposes; (3) in the year ended
December 31, 2001 we recorded a $31.3 million impairment charge that was not
deductible for income tax purposes and (4) in the year ended December 31, 1999
we recorded a $19.8 million abandonment and restructuring charge that was not
deductible for income tax purposes. We have not recorded a tax benefit in
relation to our US net operating loss carry-forward amount as our taxable US
income is largely comprised of interest income and dividends which we do not
expect to continue over the longer term. Prior to 2001 we have not recognized a
tax benefit in relation to the deferred tax assets of our Russian and Ukrainian
entities due to uncertainty over the application and future development of the
tax regimes in the two countries. However, in 2001, as a result of TeleRoss'
history of profitability for Russian statutory purposes in the last three years
and reasonable certainty of future profits, we recorded a deferred tax asset of
approximately $1.6 million. The deferred tax asset recorded

                                        63
<PAGE>

represents one year of expected tax benefit. In respect of the impairment
charge, this created additional deferred tax assets, against which we recorded
valuation allowances as we do not expect future realization of the tax assets.

LIQUIDITY AND CAPITAL RESOURCES

     Our cash, cash equivalents and investments available for sale were $46.4
million and $112.2 million as of December 31, 2001 and December 31, 2000,
respectively. Of these amounts, our cash and cash equivalents were $37.4 million
and $57.9 million as of December 31, 2001 and December 31, 2000, respectively.
We have invested in money market instruments with an original maturity greater
than three months which are classified as investments available for sale. At
December 31, 2001 and 2000 investments available for sale were $9.0 million and
$54.3 million, respectively.

     Our total restricted cash was $3.4 million and $2.6 million as of December
31, 2001, and December 31, 2000, respectively. The restricted cash is maintained
in connection with certain of our debt obligations as described below.

     During the twelve months ended December 31, 2001, we had net cash inflows
of $24.4 million from our operating activities. During the twelve months ended
December 31, 2000, we had net cash inflows of $18.1 million from our operating
activities. This increase in net cash inflows from operating activities at
December 31, 2001 is partially due to the reduction in our net loss, net of the
impairment charge, increased revenues and a reduction in our operating expenses.
We used cash of $12.6 million and $111.4 million for investing activities, which
were principally attributable to building our telecommunications networks and
acquisitions, for the twelve months ended December 31, 2001 and 2000,
respectively, and investing in money market instruments with an original
maturity greater than three months. Network investing activities totaled $27.9
million for the twelve months ended December 31, 2001 and included additional
fiber optic capacity between Moscow and Stockholm. Network investing activities
totaled $37.1 million for the twelve months ended December 31, 2000 and included
fiber optic capacity between Moscow and Stockholm and the GSM network build out
in Odessa, Ukraine.

     We had working capital of $36.0 million as of December 31, 2001 and $100.0
million as of December 31, 2000. At December 31, 2001, we had total debt,
excluding capital lease obligations, of approximately $13.2 million, of which
$9.9 million were current maturities. At December 31, 2000, we had total debt,
excluding capital lease obligations, of approximately $19.0 million, of which
$3.3 million were current maturities. Total debt included amounts that were
fully collateralized by restricted cash. At December 31, 2001 $6.3 million of
our short-term debt was at fixed rates. At December 31, 2000 $11.0 million of
our long-term debt, including the current portion, was at fixed rates.

     In the first quarter of 2000, we entered into a lease for fiber capacity,
including facilities and maintenance, from Moscow to Stockholm. The lease has an
initial term of ten years with an option to renew for an additional five years.
Full prepayments were made to the lessor in April 2000, August 2000 and February
2001. These prepayments have been offset against the lease obligation in the
financial statements of the Company.

     In July 2001, we completed a buy-back of $25.0 million, or approximately
2.3 million shares, of our common stock at $11.00 per share, from a subsidiary
of GTS. After this sale, GTS continued to own approximately 0.6 million shares,
or approximately 2.6 percent, of our outstanding common stock. To effect the
buy-back, we acted as designated purchaser and exercised the options held by
Alfa, Capital, and Baring Vostok to acquire our common stock for $11.00 per
share from GTS. Alfa, Capital, and Baring Vostok acquired these options in
conjunction with their acquisition of $125.0 million in our common shares from
GTS in May 2001. In October 2001, GTS sold the remaining approximately 0.6
million shares of our common stock. Accordingly, GTS is no longer an affiliate
of ours.

     In September 2001, we entered into a five year capital lease for the right
to use up to VC-3 fiber optic capacity on major routes within Russia to support
the increase in our interregional traffic and regional expansion strategy. In
December 2001, we issued a $9.1 million loan to the same company that has
provided

                                        64
<PAGE>

the capital lease. The loan has payment terms of 56 months, starting in January
2002, and carries interest at the rate of 7 percent per annum.

     Some of our operating companies have received debt financing through direct
loans from affiliated companies. In addition, certain operating companies have
borrowed funds under a back-to-back, seven-year credit facility for up to $22.7
million from a Russian subsidiary of Citibank. Under this facility, we provide
full cash collateral, held in London, and recorded on our balance sheet as
restricted cash, for onshore loans made by the bank to our Russian registered
joint ventures. In a second, similar facility, we provide full cash collateral
for a short term back-to-back, revolving, credit facility for up to $10.0
million from the same bank for two of our larger Russian operating companies.
These two facilities replaced the previous $30.0 million back-to-back facility
that expired on September 30, 2000. The funding level as of December 31, 2001
for all these facilities totaled $3.0 million, of which $2.2 million was funded
to our consolidated subsidiaries and $0.8 million was funded to our
non-consolidated entities.

     In order for us to compete successfully, we may require substantial capital
to continue to develop our networks and meet the funding requirements of our
operations and ventures, including losses from operations. We may also require
capital for our acquisition and business development initiatives. The net
proceeds from our IPO and our private placement have been and will be applied to
these funding requirements. We also expect to fund these requirements through
our cash flow from operations, proceeds from additional equity and debt
offerings that we may conduct, and debt financing facilities.

     In the future, we may execute especially large or numerous acquisitions,
which may require us to raise additional funds through a dilutive equity
issuance, through additional borrowings with collateralization and through the
divestment of non-core assets, or combination of the above. We are currently
negotiating a credit facility in the amount of $30.0 million to enable us to
consummate the acquisition of Sovintel, discussed earlier in this report. In the
case these especially large or numerous acquisitions do not materialize, we
expect our current sources of funding, including the net proceeds from our IPO
and the related investment, to finance our capital requirements for the next 12
to 24 months. The actual amount and timing of our future capital requirements
may differ materially from our current estimates because of changes and
fluctuations in our anticipated acquisitions, investments, revenue, operating
costs and network expansion plans and access to alternative sources of financing
on favorable terms. However, we may not be able to obtain additional financing
on favorable terms. As a result, we may be subject to additional or more
restrictive financial covenants, our interest obligations may increase
significantly and our shareholders may be adversely diluted. Our failure to
generate sufficient funds in the future, whether from operations or by raising
additional debt or equity capital, may require us to delay or abandon some or
all of our anticipated expenditures, to sell assets, or both, which could have a
material adverse effect on our operations.

     As part of our drive to increase our network capacity, reduce costs and
improve the quality of our service, we have leased additional fiber optic and
satellite-based network capacity, the terms of these leases are generally five
years or more and can involve significant advance payments. As demand for our
telecommunication services increases we expect to enter into additional capacity
agreements and may make significant financial commitments, in addition to our
existing commitments.

     Although we have achieved positive cash flow from operations, we cannot
assure you that our operations will sustain positive operating cash flow.
Although we expect to achieve operating profitability in the future, we cannot
assure you that our operations will achieve and sustain operating profitability.
As a result, we may not be able to meet our debt service obligations or working
capital requirements, and the value of our shares of common stock may decline.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK AND TREASURY
         AND CURRENCY EXPOSURE MANAGEMENT

     Our treasury function has managed our funding, liquidity and exposure to
interest rate and foreign currency exchange rate risks. Our investment treasury
operations are conducted within guidelines that have been established and
authorized by our audit committee. In accordance with our policy, we do not
enter into any treasury management transactions of a speculative nature.
                                        65
<PAGE>

     The ruble and the hryvna are generally non-convertible outside Russia and
Ukraine, respectively, so our ability to hedge against further devaluation by
converting to other currencies is significantly limited. Further, our ability to
convert rubles and hryvna into other currencies in Russia and Ukraine,
respectively, is subject to rules that restrict the purposes for which
conversion and the payment of foreign currencies are allowed.

     Given that much of our operating costs are indexed to or denominated in US
dollars, including employee compensation expense, capital expenditure and
interest expense, we have taken specific steps to minimize our exposure to
fluctuations in the appropriate foreign currency. Although local currency
control regulations require us to collect virtually all of our revenue in local
currency, certain ventures generally either price or invoice in US dollars or
index their invoices and collections to the applicable dollar exchange rate.
Customer contracts may include clauses allowing additional invoicing if the
applicable exchange rate changes significantly between the invoice date and the
date of payment, favorable terms for early or pre-payments and heavy penalty
clauses for overdue payments. Maintaining the dollar value of our revenue
subjects us to additional tax on exchange gains.

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

     Our cash and cash equivalents are held largely in interest bearing
accounts, in US dollars, however we do have bank accounts denominated in Russian
rubles and Ukrainian hryvna. Book value as of December 31, 2001 and 2000
approximates fair value.

     Cash in excess of our immediate operating needs is invested in US money
market instruments. In accordance with our investment policy, we maintain a
diversified portfolio of low risk, fully liquid securities. Our investments
available for sale of $9.0 million as of December 31, 2001, are stated at fair
value. Our investments available for sale were $54.3 million as of December 31,
2000.

     We are exposed to market risk from changes in interest rates on our
obligations and we also face exposure to adverse movements in foreign currency
exchange rates. We have developed risk management policies that establish
guidelines for managing foreign currency exchange rate risk and we also
periodically evaluate the materiality of foreign currency exchange exposures and
the financial instruments available to mitigate this exposure.

     The following table provides information (in thousands of US$) about our
cash equivalents, investments available for sale, notes receivable, and debt
obligations that are sensitive to changes in interest rates. The amounts in the
table are identified in the period representing their contracted or expected
maturities.

<Table>
<Caption>
                                                                                             2001      2000
                                 2002      2003     2004     2005     2006     THEREAFTER    TOTAL     TOTAL
                                -------   ------   ------   ------   -------   ----------   -------   -------
<S>                             <C>       <C>      <C>      <C>      <C>       <C>          <C>       <C>
Cash equivalents
Investments available for
  sale........................  $37,404   $   --   $   --   $   --   $    --     $  --      $37,404   $57,889
  Variable rate...............  $ 8,976   $   --   $   --   $   --   $    --     $  --      $ 8,976   $54,344
  Average interest rate.......     4.10%      --       --       --        --        --           --        --
Notes receivable..............  $ 1,715   $1,840   $1,972   $2,116   $ 1,494     $  --      $ 9,137   $ 9,000
  Fixed rate..................     7.00%    7.00%    7.00%    7.00%     7.00%       --           --        --
Long-term debt, including
  current portion
  Fixed rate..................  $ 6,250   $   --   $   --   $   --   $    --     $  --      $ 6,250   $11,000
  Average interest rate.......    14.00%      --       --       --        --        --           --        --
Long-term debt, including
  current portion
  Variable rate...............  $ 3,619   $1,562   $  950   $   --   $   325     $ 500      $ 6,956   $ 7,997
  Average interest rate.......     5.06%    6.43%    6.77%      --      3.13%     3.13%          --        --
</Table>

                                        66
<PAGE>

     The following table provides information about our financial instruments by
local currency and where applicable, presents such information in US dollar
equivalents (in thousands). The table summarizes information on instruments that
are sensitive to foreign currency exchange rates, including foreign currency
denominated debt obligations.

<Table>
<Caption>
                                                                                                2001     2000
                                       2002      2003    2004    2005     2006    THEREAFTER   TOTAL     TOTAL
                                      -------   ------   -----   -----   ------   ----------   ------   -------
<S>                                   <C>       <C>      <C>     <C>     <C>      <C>          <C>      <C>
ASSETS
Current assets
Russian rubles......................  $ 7,849   $   --   $  --   $ --    $   --     $   --     $7,849   $ 5,642
  Average foreign currency exchange
    rate............................    30.14       --      --     --        --         --         --        --
Ukrainian hryvna....................    2,940   $   --   $  --   $ --    $   --     $   --     $2,940   $ 2,742
  Average foreign currency exchange
    rate............................     5.30       --      --     --        --         --         --        --
Kazakhstan Tenge....................  $    15   $   --   $  --   $ --    $   --     $   --     $   15        --
  Average foreign currency exchange
    rate............................   150.20       --      --     --        --         --         --        --
LIABILITIES
Current liabilities
Russian rubles......................  $ 2,577   $   --   $  --   $ --    $   --     $   --     $2,577   $ 1,097
  Average foreign currency exchange
    rate............................    30.14       --      --     --        --         --         --        --
Ukrainian hryvna....................  $   776   $   --   $  --   $ --    $   --     $   --     $  776   $ 1,365
  Average foreign currency exchange
    rate............................     5.30       --      --     --        --         --         --        --
Long-term debt, including current
  portion
US dollars
  Variable rate.....................  $ 3,619   $1,562   $ 950   $ --    $  325     $  500     $6,956   $ 7,618
  Average interest rate.............     5.06%    6.43%   6.77%    --      3.13%      3.13%        --        --
  Fixed rate........................  $ 6,250   $   --   $  --   $ --    $   --     $   --     $6,250   $11,000
  Average interest rate.............    14.00%      --      --     --        --         --         --        --
German marks
  Variable rate.....................  $    --   $   --   $  --   $ --    $   --     $   --     $   --   $   365
  Average interest rate.............       --       --      --     --        --         --         --        --
Ukrainian hryvna
  Variable rate.....................  $    --   $   --   $  --   $ --    $   --     $   --     $   --   $    14
  Average interest rate.............       --       --      --     --        --         --         --        --
</Table>

     Our interest income and expense are most sensitive to changes in the
general level of US interest rates. In this regard, changes in US interest rates
affect the interest earned on our cash equivalents and short-term investments as
well as interest paid on debt. The carrying value of the Ukrainian hryvna and
German mark debt obligations approximate fair value as of December 31, 2000.
Fair value of the US dollar denominated fixed rate debt obligations was $6.5
million as of December 31, 2001. At December 31, 2000 the fair value of the US
dollar denominated fixed rate debt obligations was $12.0 million.

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

     Certain statements contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and other parts of this document,
including, without limitation, those concerning (i) our proposed acquisition of
Sovintel; (ii) projected traffic volumes and other growth indicators; (iii)
anticipated revenues and expenses; (iv) the Company's competitive environment
and our stated intention

                                        67
<PAGE>

to be the largest independent communications operator in the markets where we
offer our services; (v) the future performance of consolidated and equity method
investments; and (vi) the political, regulatory and financial situation in the
markets in which we operate, are forward-looking and concern the Company's
projected operations, economic performance and financial condition. These
forward-looking statements are made pursuant to the safe harbor provisions of
the Securities Litigation Reform Act of 1995. It is important to note that such
statements involve risks and uncertainties and that actual results may differ
materially from those expressed or implied by such forward-looking statements.
Among the key factors that have a direct bearing on the Company's results of
operations, economic performance and financial condition are the commercial and
execution risks associated with implementing the Company's business plan, the
receipt of appropriate state regulatory approval necessary to consummate the
Sovintel transaction, the political, economic and legal environment in the
markets in which the Company operates, increasing competitiveness in the
telecommunications and Internet-related businesses that may limit growth
opportunities, and increased and intense downward price pressures on some of the
services that we offer. These and other factors are discussed herein under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and elsewhere in this Report.

     Additional information concerning factors that could cause results to
differ materially from those in the forward-looking statements are contained in
this Form 10-K.

     In addition, any statements that express, or involve discussions as to,
expectations, beliefs, plans, objectives, assumptions or future events or
performance (often, but not always, through the use of words or phrases such as
"will likely result," "are expected to," "estimated," "intends," "plans,"
"projection" and "outlook") are not historical facts and may be forward-looking
and, accordingly, such statements involve estimates, assumptions and
uncertainties which could cause actual results to differ materially from those
expressed in the forward-looking statements. Accordingly, any such statements
are qualified in their entirety by reference to, and are accompanied by, the
factors discussed throughout this Report and investors, therefore, should not
place undue reliance on any such forward-looking statements.

     Further, any forward-looking statement speaks only as of the date on which
such statement is made, and the Company undertakes no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors may emerge from time to time, and it is not
possible for management to predict all of such factors. Further, management
cannot assess the impact of each such factor on the Company's business or the
extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking statements.

                                        68
<PAGE>

                         INDEX TO FINANCIAL STATEMENTS

                              GOLDEN TELECOM, INC.

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
YEAR END FINANCIAL STATEMENTS
  Report of Independent Auditors............................   71
  Consolidated Balance Sheets as of December 31, 2000 and
     2001...................................................   72
  Consolidated Statements of Operations for the years ended
     December 31, 1999, 2000 and 2001.......................   74
  Consolidated Statements of Cash Flows for the years ended
     December 31, 1999, 2000 and 2001.......................   75
  Consolidated Statements of Shareholders' Equity for the
     years ended December 31, 1999, 2000 and 2001...........   76
  Notes to Consolidated Financial Statements................   77
                         EDN SOVINTEL LLC
YEAR END FINANCIAL STATEMENTS
  Report of Independent Auditors............................  105
  Balance Sheets as of December 31, 2000 and 2001...........  106
  Statements of Income for the years ended December 31,
     1999, 2000 and 2001....................................  107
  Statements of Cash Flows for the years ended December 31,
     1999, 2000 and 2001....................................  108
  Statements of Members' Equity for the years ended December
     31, 1999, 2000 and 2001................................  109
  Notes to Financial Statements.............................  110
</Table>

                                        69
<PAGE>

                          AUDITED FINANCIAL STATEMENTS

                              GOLDEN TELECOM, INC.
                  YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001
                      WITH REPORT OF INDEPENDENT AUDITORS

                                        70
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Golden Telecom, Inc.

     We have audited the accompanying consolidated balance sheets of Golden
Telecom, Inc. as of December 31, 2001 and 2000, and the related consolidated
statements of operations, cash flows, and shareholders' equity for each of the
three years in the period ended December 31, 2001. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

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

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Golden Telecom,
Inc. at December 31, 2001 and 2000, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

                                          /s/ ERNST & YOUNG (CIS) LIMITED

Moscow, Russia
March 5, 2002

                                        71
<PAGE>

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION FOR THE
        COMPANY

                              GOLDEN TELECOM, INC.

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                2000        2001
                                                              ---------   ---------
                                                              (IN THOUSANDS OF US$,
                                                               EXCEPT SHARE DATA)
<S>                                                           <C>         <C>
                                      ASSETS

CURRENT ASSETS
  Cash and cash equivalents.................................  $  57,889   $  37,404
  Investments available for sale............................     54,344       8,976
  Accounts receivable, net of allowance for doubtful
     accounts of $3,124 and $3,800 at December 31, 2000 and
     2001, respectively.....................................     19,291      21,875
  Prepaid expenses..........................................      4,413       6,356
  Deferred tax asset........................................         --       1,586
  Other current assets......................................      5,471       8,538
                                                              ---------   ---------
TOTAL CURRENT ASSETS........................................    141,408      84,735
Property and equipment:
  Telecommunications equipment..............................     90,265      96,337
  Telecommunications network held under capital leases......      9,800      23,500
  Furniture, fixtures and equipment.........................      9,361      11,844
  Other property............................................      4,655       6,502
  Construction in progress..................................     10,549       9,670
                                                              ---------   ---------
                                                                124,630     147,853
  Accumulated depreciation..................................     42,253      49,263
                                                              ---------   ---------
     Net property and equipment.............................     82,377      98,590
Investments in and advances to ventures.....................     49,629      45,981
Goodwill and intangible assets:
  Goodwill..................................................     75,543      69,936
  Telecommunications service contracts......................      5,888      33,823
  Other Intangible assets...................................     37,034      12,214
                                                              ---------   ---------
                                                                118,465     115,973
  Accumulated amortization..................................     48,420      58,827
                                                              ---------   ---------
     Net goodwill and intangible assets.....................     70,045      57,146
Restricted cash.............................................      2,519       3,369
Other non-current assets....................................      2,478      10,563
                                                              ---------   ---------
TOTAL ASSETS................................................  $ 348,456   $ 300,384
                                                              =========   =========
</Table>

                                        72
<PAGE>
                              GOLDEN TELECOM, INC.

                   CONSOLIDATED BALANCE SHEETS -- (CONTINUED)

<Table>
<Caption>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                2000        2001
                                                              ---------   ---------
                                                              (IN THOUSANDS OF US$,
                                                               EXCEPT SHARE DATA)
<S>                                                           <C>         <C>

                       LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable and accrued expenses.....................  $  27,439   $  27,327
  Debt maturing within one year.............................      3,339       9,869
  Current capital lease obligation..........................         --       1,618
  Deferred revenue..........................................      1,999       2,554
  Due to affiliates.........................................      7,957         180
  Other current liabilities.................................        704       7,177
                                                              ---------   ---------
TOTAL CURRENT LIABILITIES...................................     41,438      48,725
Long-term debt, less current portion........................      9,408       3,337
Long-term deferred tax liability............................         --       6,294
Long-term deferred revenue..................................      2,691       3,274
Long-term capital lease obligations.........................         --       7,396
Affiliate long-term debt....................................      6,250          --
Other non-current liabilities...............................      2,139       4,547
                                                              ---------   ---------
TOTAL LIABILITIES...........................................     61,926      73,573
COMMITMENTS AND CONTINGENCIES
Minority interest...........................................      3,337       5,967
SHAREHOLDERS' EQUITY
  Preferred stock, $0.01 par value (10,000,000 shares
     authorized; none issued and outstanding at December 31,
     2000 and 2001).........................................         --          --
  Common stock, $0.01 par value (100,000,000 shares
     authorized; 24,479,997 shares issued and outstanding at
     December 31, 2000 24,790,098 shares issued and
     22,517,371 shares outstanding at December 31, 2001)....        245         248
  Treasury stock (2,272,727 shares as of December 31,
     2001)..................................................         --     (25,000)
  Additional paid-in capital................................    412,754     414,407
  Accumulated deficit.......................................   (129,806)   (168,811)
                                                              ---------   ---------
TOTAL SHAREHOLDERS' EQUITY..................................    283,193     220,844
                                                              ---------   ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..................  $ 348,456   $ 300,384
                                                              =========   =========
</Table>

   The accompanying notes are an integral part of these financial statements.
                                        73
<PAGE>

                              GOLDEN TELECOM, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       2000       2001
                                                              --------   --------   --------
                                                                  (IN THOUSANDS OF US$,
                                                                  EXCEPT PER SHARE DATA)
<S>                                                           <C>        <C>        <C>
REVENUE:
  Telecommunication services................................  $ 86,807   $102,492   $128,407
  Revenue from affiliates...................................    11,124     10,597     11,631
                                                              --------   --------   --------
TOTAL REVENUE...............................................    97,931    113,089    140,038
OPERATING COSTS AND EXPENSES:
  Access and network services...............................    40,516     50,954     63,685
  Selling, general and administrative.......................    41,011     45,420     48,935
  Depreciation and amortization.............................    28,143     31,851     41,398
  Impairment charge.........................................        --         --     31,291
  Abandonment and restructuring charge......................    19,813         --         --
                                                              --------   --------   --------
TOTAL OPERATING EXPENSES....................................   129,483    128,225    185,309
LOSS FROM OPERATIONS........................................   (31,552)   (15,136)   (45,271)
                                                              --------   --------   --------
OTHER INCOME (EXPENSE):
  Equity in earnings (losses) of ventures...................    (6,677)      (285)     8,155
  Interest income...........................................     5,208     10,445      3,161
  Interest expense..........................................    (2,394)    (3,319)    (2,384)
  Foreign currency losses...................................    (2,739)      (390)      (647)
  Minority interest.........................................    (1,477)      (431)      (117)
  Other non-operating expense...............................        --       (148)        --
                                                              --------   --------   --------
TOTAL OTHER INCOME (EXPENSES)...............................    (8,079)     5,872      8,168
                                                              --------   --------   --------
Net loss before income taxes................................   (39,631)    (9,264)   (37,103)
Income taxes................................................     6,823        990      1,902
                                                              --------   --------   --------
NET LOSS....................................................  $(46,454)  $(10,254)  $(39,005)
                                                              ========   ========   ========
Net loss per share..........................................  $  (3.38)  $  (0.43)  $  (1.65)
                                                              ========   ========   ========
Weighted average common shares outstanding..................    13,736     24,096     23,605
                                                              ========   ========   ========
</Table>

   The accompanying notes are an integral part of these financial statements.
                                        74
<PAGE>

                              GOLDEN TELECOM, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                  YEAR ENDED DECEMBER 31,
                                                              -------------------------------
                                                                1999       2000        2001
                                                              --------   ---------   --------
                                                                   (IN THOUSANDS OF US$)
<S>                                                           <C>        <C>         <C>
OPERATING ACTIVITIES
  Net loss..................................................  $(46,454)  $ (10,254)  $(39,005)
Adjustments to Reconcile Net Loss to Net Cash Provided by
  Operating Activities:
  Depreciation..............................................    11,863      15,133     18,685
  Amortization..............................................    16,280      16,718     22,713
  Equity in (earnings) losses of ventures, net of dividends
     received...............................................     6,677         285     (8,155)
  Abandonment and restructuring charge......................    19,813          --         --
  Impairment charge.........................................        --          --     31,291
  Minority interest.........................................     1,477         431        117
  Foreign currency losses...................................     2,739         390        647
  Deferred tax benefit......................................        --          --     (1,656)
  Other.....................................................     1,387       1,169      1,274
  Changes in assets and liabilities:
     Accounts receivable....................................       495      (8,558)       905
     Accounts payable and accrued expenses..................     1,337       5,945     (1,390)
     Other assets and liabilities...........................       758      (3,145)      (968)
                                                              --------   ---------   --------
NET CASH PROVIDED BY OPERATING ACTIVITIES...................    16,372      18,114     24,458
INVESTING ACTIVITIES
  Purchases of property and equipment and intangible
     assets.................................................   (22,110)    (37,115)   (27,859)
  Acquisitions, net of cash acquired........................    (6,397)    (24,309)   (33,448)
  Restricted cash...........................................     7,251       4,448       (850)
  Purchase of investments available for sale................        --     (53,080)    (8,965)
  Proceeds from investments available for sale..............        --          --     54,344
  Convertible loan to affiliated company....................        --      (9,000)     9,000
  Dividend received from affiliated company.................        --       1,910      1,924
  Loans made................................................        --          --     (9,137)
  Other investing...........................................     3,073       5,776      2,359
                                                              --------   ---------   --------
NET CASH USED IN INVESTING ACTIVITIES.......................   (18,183)   (111,370)   (12,632)
FINANCING ACTIVITIES
  Proceeds from debt........................................     6,857      22,900      3,300
  Repayments of debt........................................   (13,983)    (31,540)   (10,003)
  Purchase of treasury stock................................        --          --    (25,000)
  Net proceeds from issuance of common stock................   142,453          --         --
  Net proceeds from exercise of employee stock options......        --          --        382
  Net proceeds from shareholder.............................    16,071          32         --
  Other financing...........................................        --      (2,815)      (761)
                                                              --------   ---------   --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES.........   151,398     (11,423)   (32,082)
Effect of exchange rate changes on cash and cash
  equivalents...............................................    (1,029)       (154)      (229)
                                                              --------   ---------   --------
Net increase (decrease) in cash and cash equivalents........   148,558    (104,833)   (20,485)
Cash and cash equivalents at beginning of period............    14,164     162,722     57,889
                                                              --------   ---------   --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................  $162,722   $  57,889   $ 37,404
                                                              ========   =========   ========
</Table>

   The accompanying notes are an integral part of these financial statements.
                                        75
<PAGE>

                              GOLDEN TELECOM, INC.

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
             FOR THE YEARS ENDED DECEMBER 31, 1999, 2000, AND 2001

<Table>
<Caption>
                                    COMMON STOCK      TREASURY STOCK     ADDITIONAL                     TOTAL
                                   ---------------   -----------------    PAID-IN     ACCUMULATED   SHAREHOLDERS'
                                   SHARES   AMOUNT   SHARES    AMOUNT     CAPITAL       DEFICIT        EQUITY
                                   ------   ------   ------   --------   ----------   -----------   -------------
                                                               (IN THOUSANDS OF US$)
<S>                                <C>      <C>      <C>      <C>        <C>          <C>           <C>
Balance at December 31, 1998.....  10,600    $106        --   $     --    $241,775     $ (73,098)     $168,783
  Proceeds from the sale of
    common stock, net of expenses
    of $8,348....................  13,030     131                          142,322            --       142,453
  Issuance of warrants...........      --      --        --         --       1,500            --         1,500
  Compensatory restricted stock
    grants.......................      --      --        --         --         213            --           213
  Acquisition of Ukrainian
    TeleSystems, LLC.............     420       4        --         --       5,032            --         5,036
  Capital contributions by GTS...      --      --        --         --      17,021            --        17,021
  Net loss.......................      --      --        --         --          --       (46,454)      (46,454)
                                   ------    ----    ------   --------    --------     ---------      --------
Balance at December 31, 1999.....  24,050    $241        --   $     --    $407,863     $(119,552)     $288,552
  Compensatory restricted stock
    grants.......................      --      --        --         --         852            --           852
  Acquisition of Ukrainian
    TeleSystems, LLC.............      30      --        --         --         360            --           360
  Acquisition of Agama Limited...     400       4        --         --       3,795            --         3,799
  Adjustment of shareholder
    contribution.................      --      --        --         --        (116)           --          (116)
  Net loss.......................      --      --        --         --          --       (10,254)      (10,254)
                                   ------    ----    ------   --------    --------     ---------      --------
Balance at December 31, 2000.....  24,480    $245        --   $     --    $412,754     $(129,806)     $283,193
  Compensatory restricted stock
    grants.......................      --      --        --         --         636            --           636
  Compensatory common stock
    option grants................      --      --        --         --         453            --           453
  Issuance of common stock in
    relation to restricted stock
    grants.......................     142       2        --         --          (2)           --            --
  Exercise of stock options......      43      --        --         --         517            --           517
  Exercise of common stock
    warrants.....................     125       1        --         --          (1)           --            --
  Purchase of treasury shares....      --      --    (2,273)   (25,000)         --            --       (25,000)
  Other equity transactions......      --      --        --         --          50            --            50
  Net loss.......................      --      --        --         --          --       (39,005)      (39,005)
                                   ------    ----    ------   --------    --------     ---------      --------
Balance at December 31, 2001.....  24,790    $248    (2,273)  $(25,000)   $414,407     $(168,811)     $220,844
                                   ======    ====    ======   ========    ========     =========      ========
</Table>

   The accompanying notes are an integral part of these financial statements.
                                        76
<PAGE>

                              GOLDEN TELECOM, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1:  NATURE OF BUSINESS OPERATIONS

     Golden Telecom, Inc. ("GTI", "Golden Telecom" or the "Company") is a
provider of a broad range of telecommunication services to businesses, other
telecommunications service providers and consumers. The Company provides these
services through its operation of voice, Internet and data networks,
international gateways, local access and various value-added services in the
Commonwealth of Independent States ("CIS"), primarily in Russia, and through its
fixed line and mobile operation in Ukraine. Golden Telecom was incorporated in
Delaware on June 10, 1999 for the purpose of acting as a holding company for
Global TeleSystems, Inc.'s ("GTS") operating entities within the CIS and
supporting non-CIS holding companies (the "CIS Entities"). On September 29,
1999, GTS transferred its ownership rights in the CIS Entities to the Company in
anticipation of the Company's initial public offering ("IPO") which closed on
October 5, 1999.

     The CIS Entities were subsidiaries of GTS prior to the transfer of
ownership rights of the CIS Entities to the Company, and after the IPO, GTS
retained an approximately 62% interest in the Company. As the CIS Entities were
under common control, the accompanying 1999 consolidated statement of
operations, consolidated statement of cash flows, and consolidated statement of
shareholders' equity give effect to the reorganization as if it were a pooling
of interests and the financial statements have been presented on a carve-out
basis and include the historical results of operations directly related to
Golden Telecom and have been prepared from GTS' historical accounting records.
No intangible assets were created and recorded as a result of this
reorganization.

     On May 11, 2001, GTS completed the sale of approximately 12.2 million
shares, or approximately 50%, of GTI's common stock to a group of investors led
by Alfa Group, a leading Russia-based financial and industrial concern ("Alfa"),
and two of the Company's previously existing major shareholders, Capital
International Global Emerging Markets Private Equity Fund L.P. ("Capital") and
investment funds managed by Barings Vostok Capital Partners ("Baring Vostok").

NOTE 2:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  PRINCIPLES OF CONSOLIDATION

     Wholly owned subsidiaries and majority owned ventures where the Company has
operating and financial control are consolidated. Those ventures where the
Company exercises significant influence, but does not exercise operating and
financial control are accounted for by the equity method. The Company had
certain majority-owned ventures that were accounted for by the equity method as
a result of minority shareholders possessing substantive participating rights
that prevented the Company from obtaining control of the ventures, but these
ventures were acquired by MCT Corp. ("MCT") in December 2000. All significant
inter-company accounts and transactions are eliminated upon consolidation.

     The Company recognizes profits and losses in accordance with its underlying
ownership percentage or allocation percentage as specified in the agreements
with its partners; however, the Company recognizes 100% of the losses in
ventures where the Company bears all of the financial risk. When such ventures
become profitable, the Company recognizes 100% of the profits until such time as
the excess losses previously recognized have been recovered. The results of
operations of the abandoned cellular ventures are excluded from GTI's results of
operations from August 31, 1999, the date of abandonment, through to disposition
in December 2000.

     Results of subsidiaries acquired and accounted for by the purchase method
have been included in operations from the relevant date of acquisition.

                                        77
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  FOREIGN CURRENCY TRANSLATION

     The Company's functional currency is the US dollar because the majority of
its revenues, costs, property and equipment purchased, and debt and trade
liabilities are either priced, incurred, payable or otherwise measured in US
dollars. Each of the legal entities domiciled in the CIS maintains its records
and prepares its financial statements in the local currency (principally either
Russian rubles or Ukrainian hryvna) in accordance with the requirements of
accounting and tax legislation. The accompanying financial statements differ
from the financial statements used for statutory purposes in the CIS and other
non-US jurisdictions in that they reflect certain adjustments, recorded on the
entities' books, which are appropriate to present the financial position,
results of operations and cash flows in accordance with accounting principles
generally accepted in the United States of America ("US GAAP"). The principal
adjustments are related to revenue recognition, foreign currency translation,
deferred taxation, consolidation, and depreciation and valuation of property and
equipment and intangible assets.

     The Company follows a translation policy in accordance with Statement of
Financial Accounting Standard ("SFAS") No. 52, "Foreign Currency Translation,"
(as amended by SFAS No. 130, "Reporting Comprehensive Income"). The temporal
method for translating assets and liabilities is used for translation of the
Company's legal entities domiciled in the CIS and other non-US jurisdictions.
Accordingly, monetary assets and liabilities are translated at current exchange
rates while non-monetary assets and liabilities are translated at their
historical rates. Income and expense accounts are translated at average monthly
rates of exchange. The resultant translation adjustments are included in the
operations of the subsidiaries and ventures.

     All foreign currency gains and losses recognized in the operations of
consolidated subsidiaries are included in the Company's statement of operations
as "foreign currency losses." The Company's proportionate share of all foreign
currency gains and losses recognized in the operations of ventures accounted for
by the equity method of accounting are recognized in the Company's statement of
operations as "equity in earnings of ventures".

     The local currencies of the countries located within the CIS are not
convertible outside the territory of the respective countries. Official exchange
rates are determined daily by the respective Central Banks and were considered
to be reasonable approximations of market rates until mid-August 1998. Since
that date, liquidity in the currency trading and inter-bank trading has varied.
As a result, the market rates have fluctuated significantly and have, at times,
diverged from the official rates. Nonetheless, the various market-related rates
are based on the official rates. Accordingly, the respective official rates have
been used for translation purposes in these financial statements. The
translation of local currency denominated assets and liabilities into US dollars
for the purpose of these financial statements does not indicate that the Company
could realize or settle in US dollars the reported values of the assets and
liabilities. Likewise, it does not indicate that the Company could return or
distribute the reported US dollar value of capital to its shareholders. The
Company has taken and intends to continue to take actions that may minimize the
unfavorable effect of ruble devaluation.

     The official exchange rate as of December 31, 2000 and December 31, 2001
was 28.16 and 30.14 rubles per US dollar, respectively.

  CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

     The Company classifies cash on hand and deposits in banks, including
commercial paper, money market accounts, and any other investments with an
original maturity of three months or less from the date of purchase, that the
Company may hold from time to time, as cash and cash equivalents. Restricted
cash is primarily related to cash held in escrow at a financial institution for
the collateralization of debt obligations that certain of the Company's
consolidated subsidiaries and equity ventures have borrowed from such financial
institution.
                                        78
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  INVESTMENTS AVAILABLE FOR SALE

     The Company classifies its investments in debt securities, which do not
qualify as cash equivalents due to their extended maturities, as investments
available for sale. Investments available for sale consisted of money market
instruments such as certificates of deposit and commercial paper, and the
contractual maturity of the entire balance is less than one year. Investments
available for sale are stated at fair value which approximates cost plus accrued
interest income. Accordingly, there are no unrecognized gains or losses as of
December 31, 2000 and 2001.

  ACCOUNTS RECEIVABLE, NET

     Accounts receivable are shown at their net realizable value which
approximates their fair value.

  INVENTORIES

     Inventories, which are classified as other current assets, are stated at
the lower of cost or market. Cost is computed on a specific identification
basis.

  PROPERTY AND EQUIPMENT

     Property and equipment is stated at cost. Depreciation is calculated on a
straight-line basis over the lesser of the estimated lives, ranging from five to
ten years for telecommunications equipment and three to five years for
furniture, fixtures and equipment and other property, or their contractual term.
Construction in process reflects amounts incurred for the configuration and
build-out of telecommunications equipment not yet placed into service.
Maintenance and repairs are charged to expense as incurred. The Company has
included in property and equipment, capitalized leases in the amount of $9.8
million and $23.5 million at December 31, 2000 and 2001, respectively, with
associated accumulated depreciation of $1.1 million and $2.6 million as of
December 31, 2000 and 2001, respectively. Amortization of assets recorded under
capital leases is included with depreciation expense for the year ended December
31, 2000 and 2001.

  GOODWILL AND INTANGIBLE ASSETS

     Goodwill represents the excess of acquisition costs over the fair market
value of the net assets of acquired businesses, and is being amortized on a
straight-line basis over its estimated useful life, five years. Intangible
assets, principally telecommunications service contracts, licenses, software and
content are amortized on a straight-line basis over the lesser of their
estimated useful lives, generally five to seven years, or their contractual
term. In accordance with Accounting Principles Board ("APB") Opinion No. 17,
"Intangible Assets," the Company continues to evaluate the amortization period
to determine whether events or circumstances warrant revised amortization
periods. Additionally, the Company considers whether the carrying value of such
assets should be reduced based on the future benefits of its intangible assets.

     In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations", and No. 142, "Goodwill and Other Intangible
Assets", effective for fiscal years beginning after December 15, 2001. Under the
new rules, goodwill and intangible assets deemed to have indefinite lives will
no longer be amortized but will be subject to annual impairment tests in
accordance with the Statements. Other intangible assets will continue to be
amortized over their useful lives. The Company has adopted SFAS No. 141,
"Business Combinations" which was effective for business combinations
consummated after June 30, 2001, with respect to the acquisition of 51% of
competitive local exchange carrier ("CLEC") Agentstvo Delovoi Svyazi ("ADS") in
September 2001, as disclosed in Note 3.

     The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
non-amortization provisions of the Statement is expected to result in an
improvement in the Company's results of operation by reducing amortization
expense by approximately $12.0 million in 2002. During 2002, the Company will
perform the first of the required impairment tests of goodwill and indefinite
lived intangible assets as of January 1, 2002 and has not yet determined what
the effect of these tests will be on the earnings and financial position of the
Company. Upon the adoption of SFAS
                                        79
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

No. 142, the Company will record a cumulative effect of the change in accounting
for negative goodwill (deferred credit) arising on GTI's equity method
investments in the amount of $1.0 million.

  LONG-LIVED ASSETS

     In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of," long-lived
assets to be held and used by the Company are reviewed to determine whether an
event or change in circumstances indicates that the carrying amount of the asset
may not be recoverable. For long-lived assets to be held and used, the Company
bases its evaluation on such impairment indicators as the nature of the assets,
the future economic benefit of the assets, any historical or future
profitability measurements, as well as other external market conditions or
factors that may be present. If such impairment indicators are present or other
factors exist that indicate that the carrying amount of the asset may not be
recoverable, the Company determines whether an impairment has occurred through
the use of an undiscounted cash flows analysis of assets at the lowest level for
which identifiable cash flows exist. If impairment has occurred, the Company
recognizes a loss for the difference between the carrying amount and the fair
value of the asset. The fair value of the asset is measured using discounted
cash flow analysis or other valuation techniques.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement addresses financial
accounting and reporting for the impairment of disposal of long-lived assets and
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Loved Assets and
for Long-Lived Assets to Be Disposed Of," and the accounting and reporting
provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results
of Operations -- Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,"
for the disposal of a segment of a business (as previously defined in that
opinion). This statement also amends Accounting Research Bulletin No. 51,
"Consolidated Financial Statements", to eliminate the exception to consolidation
for a subsidiary for which control is likely to be temporary. The provisions of
the statement will be effective for financial statements issued for fiscal years
beginning after December 15, 2001. The Company plans to adopt this new standard
from January 1, 2002 and is currently evaluating the impact the pronouncement
will have on future consolidated financial statements.

  INCOME TAXES

     The Company uses the liability method of accounting for income taxes.
Deferred income taxes result from temporary differences between the tax bases of
assets and liabilities and the bases as reported in the consolidated financial
statements. The Company does not provide for deferred taxes on the undistributed
earnings of its foreign subsidiaries, as such earnings are generally intended to
be reinvested in those operations permanently. In the case of non-consolidated
entities where our partner requests that a dividend be paid, the amounts are not
expected to have a material impact on the Company's income tax liability. It is
not practical to determine the amount of unrecognized deferred tax liability for
such reinvested earnings. Prior to its formation, the Company was functioning as
operating units of GTS and was included in the consolidated tax return of GTS.

  REVENUE RECOGNITION

     The Company records as revenue the amount of telecommunications and
Internet services rendered, as measured primarily by the minutes of traffic
processed, after deducting an estimate of the traffic that are partial minutes
and test traffic which will be neither billed nor collected, and the time spent
online. Revenue from service contracts is accounted for when the services are
provided. Billings received in advance of service being performed are deferred
and recognized as revenue as the service is performed. Revenues are stated net
of any value-added taxes ("VAT") charged to customers. Certain other taxes that
are based on revenues earned were incurred at 4% during 1999 and 2000 and 1%
during 2001, and have been included in operating expenses since these taxes are
incidental to the revenue cycle.

                                        80
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In accordance with the provisions of the Securities and Exchange Commission
Staff Accounting Bulletin No. 101, the Company has deferred telecommunication
connection fees and capitalized direct incremental costs related to connection
fees. The deferral of revenue and capitalization of cost of revenue will be
recognized over the estimated life of the customer. The total amount of deferred
revenue was $4.7 million and $5.9 million as of December 31, 2000 and 2001,
respectively. The total amount of deferred cost of revenue was $2.3 million and
$2.7 million as of December 31, 2000 and 2001, respectively.

  ADVERTISING

     The Company expenses the cost of advertising as incurred. Advertising
expenses for the year ended December 31, 1999, 2000 and 2001 were $2.8 million,
$5.0 million and $4.6 million, respectively.

  NET LOSS PER SHARE

     The Company's net loss per share calculation (basic and diluted) is based
upon the weighted average common shares outstanding of the Company. There are no
reconciling items in the numerator or denominator of the Company's net loss per
share calculation. Warrants, stock options and restricted stock grants have been
excluded from the net loss per share calculation because their effect would be
antidilutive.

  GOVERNMENT PENSION FUNDS

     The Company contributes to the Russian and Ukrainian state pension funds
and social funds, on behalf of all its Russian and Ukrainian employees.
Contributions are determined as a percentage of gross payroll and expensed as
incurred.

  FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amounts for cash and cash equivalents, investments held for
sale, accounts receivable, accounts payable, accrued liabilities, and short-term
debt approximate their fair value. The fair value of long-term debt to GTS and a
vendor of telecommunications equipment, as determined on a discounted cash flow
basis, was $12.0 million as of December 31, 2000. The Company paid the debt to
the vendor of telecommunications equipment in May 2001. The fair value of debt
to GTS was $6.5 million at December 31, 2001.

  COMPREHENSIVE INCOME

     Comprehensive income is defined as the change in equity of a business
enterprise during a period from non-owner sources. For the years ended December
31, 1999, 2000 and 2001, comprehensive income for the Company is equal to net
loss.

  OFF BALANCE SHEET RISK AND CONCENTRATION OF CREDIT RISK

     Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of cash, cash equivalents, investments held for
sale and loan receivable. Of the $57.9 million of cash and cash equivalents and
$54.3 million of investments available for sale held at December 31, 2000 and
the $37.4 million of cash and cash equivalents and $9.0 million of investments
available for sale held at December 3, 2001, $92.2 million and $38.3 million was
held in US money market instruments in US financial institutions at December 31,
2000 and 2001, respectively. The balance is being maintained in US-owned and, to
a lesser extent, local financial institutions within the CIS. The Company
extends credit to various customers, principally in Russia and Ukraine, and
establishes an allowance for doubtful accounts for specific customers that it
determines to have significant credit risk. The company generally does not
require collateral to extend credit to its customers. In 2001, the Company
granted an unsecured loan to a party in a lease agreement, as disclosed in Note
6.
                                        81
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  STOCK-BASED COMPENSATION

     Prior to its formation, certain employees of the Company participated in
one or more of the stock option plans of GTS. The Company has now established
its own stock-based compensation plans as detailed in Note 8. The Company
follows the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," for its plans. SFAS No. 123 establishes a fair value method of
accounting for employee stock options and similar equity instruments. The fair
value method requires compensation cost to be measured at the grant date based
on the value of the award and is recognized over the service period. SFAS No.
123 generally allows companies to either account for stock-based compensation
under the new provisions of SFAS No. 123 or under the provisions of Accounting
Principals Board ("APB") No. 25, "Accounting for Stock Issued to Employees." The
Company has elected to account for its stock-based compensation in accordance
with the provisions of APB No. 25 and present pro forma disclosures of results
of operations as if the fair value method had been adopted. The Company
recognizes compensation expense for stock options granted employees of its
equity method investees based on the fair value of options, as determined using
the Black-Sholes valuation model, over the respective option vesting period.

  USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS

     The preparation of these consolidated financial statements, in conformity
with US generally accepted accounting principles, requires management to make
estimates and assumptions that affect amounts in the financial statements and
accompanying notes and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which was amended in June 1999. The Company
adopted the new statement effective January 1, 2001. The statement requires the
Company to recognize all derivatives on the balance sheet at fair value. The
adoption of the new statement did not have a significant effect on the Company's
results of operations or financial position.

  ASSET RETIREMENT OBLIGATIONS

     In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This statement deals with the costs of closing
facilities and removing assets. SFAS No. 143 requires entities to record the
fair value of a legal liability for an asset retirement obligation in the period
it is incurred. This cost is initially capitalized and amortized over the
remaining life of the asset. Once the obligation is ultimately settled, any
difference between the final cost and the recorded liability is recognized as a
gain or loss on disposition. SFAS No. 143 is effective for years beginning after
June 15, 2002. The Company is currently evaluating the impact the pronouncement
will have on future consolidated financial statements.

  COMPARATIVE FIGURES

     Certain 1999 and 2000 amounts have been reclassified to conform to
presentation adopted in the current year.

NOTE 3:  BUSINESS COMBINATIONS AND VENTURE TRANSACTIONS

     The Company has continually increased its ownership interest in several of
its previously existing ventures by either buying all or part of the minority
shareholders' interest in these ventures. These transactions have enabled the
Company to consolidate certain ventures that were previously accounted for
following the equity method of accounting. The Company has executed these
transactions by paying cash and has accounted for these transactions under the
purchase method of accounting, and as such, any purchase price paid over net
                                        82
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

tangible and intangible assets acquired has been reflected as goodwill, which is
being amortized on a straight-line basis for a period of five years. No
adjustments have been made to the assets and liabilities acquired, since their
carrying values approximated their fair market values on the date of the
transactions.

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

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

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

     In February 2000, Golden Telecom Ukraine, a majority owned subsidiary,
acquired 99% of Sovam Teleport Ukraine, including a 51% interest previously held
by third parties. Sovam Teleport Ukraine is a provider of data and Internet
services to Ukraine-based business. In March 2000, the Company acquired the
assets of Referat.ru and Absolute Games, two leading vertical Internet portals
in the education and computer gaming categories of the Russian Internet. In
April 2000, the Company acquired the assets of Fintek, a prominent Moscow-based
Web design studio and 51% of Commercial Information Networks ("KIS"), the
largest Internet service provider in Nizhny Novgorod. In September 2000,
SFMT-Rusnet, Inc., a wholly-owned subsidiary, acquired 25% of SA Telcom LLP, a
telecommunications and data services provider in Kazakhstan, bringing its
ownership interest in this company up to 100%. The combined purchase price was
less than $3.0 million in cash.

     In October 2000, the Company acquired the assets of IT INFOART STARS
("InfoArt"), a leading horizontal Russian and English language Internet portal,
for approximately $8.3 million in cash. InfoArt provides Internet users with a
wide variety of content from leading Russian new agencies and publications.

     In December 2000, the Company acquired Agama Limited ("Agama") that owns
the Agama family of web properties for approximately $13.1 million in cash and
the issuance of 399,872 shares of the Company's common stock valued at $3.8
million, including 79,974 shares that were subject to a holdback and were placed
in escrow relating to personnel retention and payment of potential liability.
These shares were released from escrow in December 2001. The Agama family of
Russian web properties include Aport, Atrus ("@Rus"), and Omen.

     The Company has executed the above transactions by paying cash and issuing
shares of the Company's common stock. These transactions have been accounted
under the purchase method of accounting, and as such, any purchase price paid
over net tangible and intangible assets acquired has been reflected as goodwill,
which is being amortized on a straight-line basis for a period of five years. No
adjustments have been made to the assets and liabilities acquired, since their
carrying values approximated their fair market values on the date of the
transactions.

     The following information provides unaudited pro forma combined results of
operations for the Company to give effect to the InfoArt and Agama business
combinations as if they had occurred at the beginning of 1999. For the years
ended December 31, 2000 and 1999, the impact of InfoArt and Agama on revenues
would
                                        83
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

not have been significant. The pro forma net loss would have been $16.0 million,
or $0.65 loss per common share for the year ended December 31, 2000 and $52.2
million, or $3.69 loss per common share, for the year ended December 31, 1999
These pro forma amounts are provided for informational purposes only and do not
purport to present the results of operations of the Company had the transactions
assumed therein occurred on or as of the date indicated, nor is it necessarily
indicative of the results of operations which may be achieved in the future.

     In December 2000, the Company acquired an ownership interest in MCT in
exchange for the Company's 100% ownership of Vostok Mobile B.V., a Netherlands
registered private limited holding company that owned the Company's Russian
mobile operations. Initially, the Company acquired approximately 24% of the
outstanding common stock of MCT and the Company expects to be diluted to not
less than 18% as a result of equity offerings planned by MCT. As part of the
transaction, the Company also acquired $9.0 million of MCT debt convertible into
equity securities for cash, which was fully repaid in November 2001.

     The Company accounted for the exchange of the subsidiary Vostok Mobile B.V.
for an equity interest of approximately 24% in MCT at book value since the
related fair values were not readily determinable, accordingly, no gain or loss
was recognized on the exchange. Concurrent with the exchange of ownership
interests, certain assets and rights to certain obligations of our Russian
mobile ventures were assigned to MCT. Prior to the transaction, the book value
of the Company's interest was adjusted for the effect of these concurrent
transactions and the remaining portion of the abandonment and restructuring
reserve. At December 31, 2001, the Company's equity interest in MCT was
approximately 23%.

     In June 2001, the Company acquired ISP ZAO Cityline ("Cityline"), 51% of
ISP OOO Uralrelcom ("Uralrelcom") and infrastructure company ZAO First
Telecommunications Company ("PTK") for cash consideration of approximately $29.0
million, including $6.0 million that was held in escrow. At the time of
acquisition, local access capacity to be delivered by a third party to PTK was
not yet operational nor placed in service. The purchase and sale agreement
provided that until such capacity became fully operational, $6.0 million of
purchase consideration would be held in escrow. The Company's interim financial
statements reflected the preliminary purchase price allocation, principally
assigning such costs to intangible assets. In the fourth quarter of 2001, the
Company became aware that such original local access capacity would not become
available. As a result, the Company negotiated a full recovery of the funds held
in escrow and the Company is to receive alternative local access capacity
pursuant to the original terms of the PTK third-party contract. Accordingly, as
of December 31, 2001, the recovery of the funds held in escrow of $6.0 million
was recorded as a reduction in the carrying amount of the acquired intangible
assets. In addition, the Company incurred approximately $0.9 million in
consulting fees related to these investment transactions from an affiliate of
Alfa, a shareholder of the Company.

     The following unaudited pro forma combined results of operations for the
Company gives effect to the Cityline, Uralrelcom and PTK business combinations
as if they had occurred at the beginning of 2000. For the twelve months ended
December 31, 2000 and 2001, pro forma revenue would have been approximately
$118.3 million and $142.9 million, respectively. The pro forma net loss would
have been approximately $11.9 million, or $0.49 per common share for the twelve
months ended December 31, 2000 and approximately $40.9 million, or $1.73 per
common share, for the twelve months ended December 31, 2001. These pro forma
amounts are provided for informational purposes only and do not purport to
present the results of operations of the Company had the transactions assumed
therein occurred on or as of the date indicated, nor is it necessarily
indicative of the results of operations which may be achieved in the future.

     In September 2001, the Company acquired 51% of ADS, a CLEC operating
primarily in Nizhny Novgorod, for cash consideration of approximately $2.9
million. This acquisition strengthens GTI's presence in the Nizhny Novgorod
region. The Company's interim financial statements reflected the preliminary
allocation of the purchase price. In December 2001, the Company reviewed the
allocation of the purchase price and reduced the initial goodwill recorded by
approximately $1.4 million, assigning such costs to contract-

                                        84
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

based and customer relationship intangible assets that will be amortized over a
weighted-average period of approximately seven years. In accordance with the new
rules of SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and
Other Intangible Assets", the Company will not amortize the goodwill recorded in
connection with the acquisition of ADS. The impact of this acquisition on the
operating results of the Company for 2000 and 2001, if presented on a pro-forma
basis, would not have been material.

     The following is a condensed balance sheet of ADS on the date of
acquisition:

<Table>
<Caption>
                                                              SEPTEMBER 1, 2001
                                                              -----------------
                                                               (IN THOUSANDS)
<S>                                                           <C>
                                    ASSETS:

Current assets..............................................       $  572
Property and equipment......................................        3,487
Intangible assets...........................................        3,870
Other assets................................................          117
                                                                   ------
  Total assets..............................................       $8,046
                                                                   ======

                     LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities.........................................       $1,694
Non-current liabilities.....................................          772
Stockholders' equity........................................        5,580
                                                                   ------
  Total liabilities and stockholders' equity................       $8,046
                                                                   ======
</Table>

     The results of operations of Cityline, Uralrelcom and PTK have been
included in the Company's consolidated operations since June 1, 2001. The
results of operations of ADS have been included in the Company's consolidated
operations since September 1, 2001.

NOTE 4:  INVESTMENTS IN AND ADVANCES TO VENTURES

     The Company has various investments in ventures that are accounted for by
the equity method. The Company's ownership percentages in its equity method
investments, in the periods shown, range from approximately 23% to 50%.

     The components of the Company's investments in and advances to ventures are
as follows:

<Table>
<Caption>
                                                                DECEMBER 31,
                                                              -----------------
                                                               2000      2001
                                                              -------   -------
                                                               (IN THOUSANDS)
<S>                                                           <C>       <C>
Equity in net assets acquired...............................  $12,701   $12,348
Excess of equity in net assets acquired over investment cost
  net of amortization of none and $243 at December 31, 2000
  and 2001, respectively....................................   (1,242)     (974)
Accumulated earnings recognized, net of losses..............   31,676    40,139
Dividends...................................................   (2,453)   (4,477)
Cash advances and other.....................................    8,947    (1,055)
                                                              -------   -------
     Total investments in and advances to ventures..........  $49,629   $45,981
                                                              =======   =======
</Table>

     In applying the equity method of accounting, the Company's policy is to
amortize the excess of investment cost over equity in net assets acquired or the
excess of equity in net assets acquired over investment cost based upon an
assignment of the excess to the fair value of the venture's identifiable
tangible and

                                        85
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

intangible assets, with any unassigned amounts designated as goodwill. The
Company then amortizes the allocated costs in accordance with its policies
defined in Note 2, "Summary of Significant Accounting Policies."

     The Company has financed the operating and investing cash flow requirements
of several of the Company's ventures in the form of cash advances. The Company
aggregates all of the receivable and payable balances with the ventures in the
Company's investments in and cash advances to the ventures.

     On November 2, 2001, the Company agreed to extend the due date on the $9.0
million note owed by MCT that was payable to the Company on October 29, 2001.
MCT paid in full, the $9.0 million note plus accrued interest and costs of
approximately $1.4 million on November 6, 2001.

     The changes in the investments in and advances to ventures are as follows:

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                              ------------------
                                                               2000       2001
                                                              -------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>       <C>
Balance, at beginning of period.............................  $45,196   $ 49,629
  Equity in net assets acquired.............................       --        715
  Dividends.................................................   (1,049)    (2,024)
  Effect of exchange of shares in Vostok Mobile B.V. for
     MCT....................................................    2,771         --
  Convertible loan to MCT...................................    9,000     (9,000)
  Cash advances (repayments) and other......................   (6,005)      (768)
  Effect of consolidating equity method investees...........       --     (1,277)
                                                              -------   --------
                                                                4,717    (12,354)
  Equity ownership in earnings..............................    2,355      7,256
  Excess gains (losses) recognized over amount attributable
     to ownership interest..................................   (2,780)       213
  Interest income on advances...............................      453        994
  Amortization of excess of equity in net assets acquired
     over investment cost...................................       --        243
  Amortization of excess investment cost over equity in net
     assets acquired........................................     (312)        --
                                                              -------   --------
Balance, at end of period...................................  $49,629   $ 45,981
                                                              =======   ========
</Table>

     For all periods presented through December 31, 2001, the significant
investments accounted for under the equity method and the percentage interest
owned consist of the following:

<Table>
<Caption>
                                                       EQUITY METHOD ENTITIES
                                                 ----------------------------------
                                                        PERIOD           OWNERSHIP
                                                 ---------------------   ----------
<S>                                              <C>                     <C>
EDN Sovintel...................................           All               50%
Other TeleRoss Ventures........................           All               50%
TeleRoss Nizhny Novgorod.......................   Through August 2001       50%
TeleRoss Arkhangelsk...........................  Through December 2000   50% - 100%
TeleRoss Komi..................................  Through December 2000   50% - 75%
TeleRoss Khabarovsk............................  Through December 2000   50% - 100%
Vostok Mobile Ventures.........................  Through December 2000   50% - 70%
MCT Corp.......................................   From December 2000     22% - 24%
</Table>

                                        86
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     TeleRoss Nizhny Novgorod, TeleRoss Arkhangelsk, TeleRoss Komi, and TeleRoss
Khabarovsk are all accounted for using the consolidation method subsequent to
the dates indicated above.

     The following tables present condensed financial information of the
Company's ventures that are accounted for by the equity method of accounting as
of December 31, 2000 and 2001. The December 31, 2000 information excludes the
results of the abandoned Vostok Mobile ventures. The December 31, 2000
information includes the results of the non-abandoned Vostok Mobile ventures
that were exchanged for an equity interest of approximately 24% in MCT, until
December 28, 2000, the date the exchange was completed. The December 31, 2000
information includes the results of increased ownership in three TeleRoss
ventures that occurred in the second half of 2000. These three ventures were not
material to the financial statements as a whole and therefore, the equity method
of accounting was maintained throughout 2000. From January 2001, these three
TeleRoss ventures were accounted for under the consolidated method of
accounting. The December 31, 2000 balance sheet information includes the
balances of MCT. The December 31, 2001 income statement and balance sheet
information includes the balances of MCT. All equity method ventures were 50% or
less owned during the year ended December 31, 2001.

<Table>
<Caption>
                                 YEAR ENDED DECEMBER 31, 2000              YEAR ENDED DECEMBER 31, 2001
                       -------------------------------------------------   ----------------------------
                       MAJORITY OWNED    50% OR LESS      TOTAL EQUITY             TOTAL EQUITY
                          VENTURES      OWNED VENTURES   METHOD VENTURES         METHOD VENTURES
                       --------------   --------------   ---------------   ----------------------------
                                        (IN THOUSANDS)                            (IN THOUSANDS)
<S>                    <C>              <C>              <C>               <C>
Revenue..............     $ 2,493          $113,846         $116,339                 $154,881
Gross margin.........       1,639            58,313           59,952                   79,984
Net income...........      (1,205)            5,939            4,734                      974
Current assets.......         137            44,113           44,250                   55,677
Total assets.........         808           216,461          217,269                  240,449
Current
  liabilities........         172            93,138           93,310                  102,525
Total liabilities....         922           108,583          109,505                  129,965
Net assets...........        (114)          107,878          107,764                  110,484
</Table>

                                        87
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5:  SUPPLEMENTAL BALANCE SHEET INFORMATION

<Table>
<Caption>
                                                                DECEMBER 31,
                                                              -----------------
                                                               2000      2001
                                                              -------   -------
                                                               (IN THOUSANDS)
<S>                                                           <C>       <C>
Other current assets consists of:
  Inventory.................................................  $ 2,216   $ 1,779
  Notes receivable..........................................      647     1,786
  Other current assets......................................    2,608     4,973
                                                              -------   -------
     Total other current assets.............................  $ 5,471   $ 8,538
                                                              =======   =======
Other intangible assets consists of:
  Internet software and related content.....................  $24,463   $ 1,210
  Licenses..................................................    5,302     2,854
  Other intangible assets...................................    7,269     8,150
                                                              -------   -------
     Total other intangible assets..........................  $37,034   $12,214
                                                              =======   =======
Accounts payable and accrued expenses consists of:
  Accounts payable..........................................  $11,471   $11,743
  Interest payable..........................................    1,358       472
  Accrued compensation......................................    2,151     2,231
  Accrued other taxes.......................................    4,759     4,273
  Abandonment and restructuring charge accrual..............      240        --
  Accrued access and network services.......................    3,020     2,958
  Other accrued expenses....................................    4,440     5,650
                                                              -------   -------
     Total accounts payable and accrued expenses............  $27,439   $27,327
                                                              =======   =======
Other current liabilities consists of:
  Liabilities to GTS........................................  $    --   $ 5,470
  Other current liabilities.................................      704     1,707
                                                              -------   -------
     Total other current liabilities........................  $   704   $ 7,177
                                                              =======   =======
</Table>

                                        88
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6:  DEBT OBLIGATIONS AND CAPITAL LEASES

     Company debt consists of:

<Table>
<Caption>
                                                                DECEMBER 31,
                                                              -----------------
                                                               2000      2001
                                                              -------   -------
                                                               (IN THOUSANDS)
<S>                                                           <C>       <C>
Citibank General Credit Agreement...........................  $    --   $ 2,225
Siemens Equipment Agreement.................................      379        --
Motorola Equipment Agreement................................    4,218     2,181
Vendor Settlement Agreement.................................    4,750        --
Note payable to GTS.........................................    6,250     6,250
Siemens Loan Agreement......................................    3,400     2,550
                                                              -------   -------
                                                               18,997    13,206
Less: debt maturing within one year.........................    3,339     9,869
                                                              -------   -------
  Total long-term debt......................................  $15,658   $ 3,337
                                                              =======   =======
</Table>

     Aggregate maturities of debt, as of December 31, 2001, are as follows:
2002 -- $9.9 million, 2003 -- $1.6 million, 2004 -- $0.9 million, 2005 -- $0.0
million, 2006 -- $0.3 million, and thereafter -- $0.5 million.

     The Company paid interest of $2.4 million, $2.9 million and $2.2 million in
1999, 2000, and 2001, respectively.

     Some of the Company's operating companies have received debt financing
through direct loans from affiliated companies. In addition, certain operating
companies have borrowed funds under a $22.7 million back-to-back, seven-year
credit facility from a Russian subsidiary of Citibank. Under this facility, the
Company provides full cash collateral, held in London and recorded on our
balance sheet as restricted cash, for onshore loans made by the bank to the
Company's Russian registered joint ventures. In a second, similar facility, the
Company provides full cash collateral for a $10.0 million short term
back-to-back, revolving, credit facility from the same bank for two of the
Company's larger Russian operating companies. These two facilities replaced the
previous $30 million back to back facility that expired on September 30, 2000.
The funding level as of December 31, 2001 for all these facilities totaled $3.0
million, of which $2.2 million was funded to the Company's consolidated
subsidiaries and $0.8 million was funded to the Company's affiliates. The loan
facilities carry interest at a rate equal to the six-month London Inter-Bank
Offering Rate ("LIBOR") plus 1.0 percent per annum (equivalent to approximately
3.10%, on average for loans outstanding, at December 31, 2001) and mature
partially in 2002 and between December 2006 and January 2007.

     In November 1996, Golden Telecom (Ukraine) entered into an agreement with
Siemens GmbH, which was amended to include MKM Telekom (a subsidiary of Siemens)
(collectively referred to as the "Siemens equipment agreement") whereby Golden
Telecom (Ukraine) could purchase up to 8.6 million Deutsche Marks (DM) of
certain equipment from Siemens. The terms allowed Golden Telecom (Ukraine) to
finance up to 70% of this amount. Golden Telecom (Ukraine) was required to make
semiannual principal payments plus accrued interest for three years beginning
six months after completion of installation of such equipment. Golden Telecom
(Ukraine) repaid in full the principal outstanding under this agreement on March
02, 2001 and the interest outstanding was repaid on April 11, 2001. The
agreement carried interest at a rate equal to the DM LIBOR rate plus 4.5 percent
per annum (equivalent to 9.34% at March 02, 2001).

     In June 1996, Golden Telecom (Ukraine) entered into an agreement with
Motorola Corporation (the "Motorola equipment agreement") whereby Golden Telecom
(Ukraine) could purchase up to $20.0 million of certain equipment from Motorola.
Through December 31, 2001, the Company had purchased $13.7 million of equipment
under this agreement. Golden Telecom (Ukraine) is required to make 15 semiannual
payments

                                        89
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

plus accrued interest beginning six months after completion of installation of
such equipment, starting on June 25, 1997. Amounts outstanding under this
agreement totaled $2.2 million at December 31, 2001. The agreement carries
interest at a rate equal to the USD LIBOR rate plus 3.0 percent per annum
(equivalent to 5.90% at December 31, 2001). Amounts outstanding under the
agreement have been covered by the GTS Parent Guarantee. At present, the GTS
Parent Guarantee is being transferred to GTI.

     In October 2000, Golden Telecom (Ukraine) entered into a 4 year supplier
loan agreement with Siemens AG (the "Siemens Loan Agreement") whereby Siemens AG
provided to Golden Telecom (Ukraine) a loan of $3.4 million for the purchase
from Siemens AG of network equipment and services for use in the GSM 1800
network in Odessa, Ukraine, deployed in the third quarter of 2000. In accordance
with the terms of the Siemens Loan Agreement, Golden Telecom (Ukraine) is
required to make eight semi-annual payments plus accrued interest beginning May
15, 2001. Principal outstanding under this agreement totaled $2.6 million at
December 31, 2001. The agreement carries interest at a rate equal to the six
month USD LIBOR plus 4.9% (equivalent to 6.87% at December 31, 2001). The
Siemens Loan Agreement became effective with the execution of a payment
guarantee by Golden Telecom, Inc.

     The sale by GTS of approximately 12.2 million, or approximately 50%, of the
Company's common stock, in May 2001, triggered an acceleration of $6.0 million,
including accrued interest, of our long-term debt, under change of control
provisions in promissory notes. In July 2001, this long-term debt was paid to
the vendor of telecommunications equipment in full and final settlement of the
Vendor Settlement Agreement. As part of the GTS transaction, an additional $6.3
million of pre-existing long-term debt due from GTI to GTS is now payable on May
11, 2002. For other third party debt agreements, held at the subsidiary level,
the lenders have agreed that this transaction will not affect the terms of those
agreements, other than transfer of guarantees.

     In the first quarter of 2000, the Company entered into a lease for fiber
capacity, including facilities and maintenance, from Moscow to Stockholm. The
lease has a term of ten years with an option to renew for an additional five
years. Prepayments were made to the lessor in April 2000, August 2000 and
February 2001. These prepayments have been offset in the balance sheet against
the capital lease obligation.

     In September 2001, the Company entered into a five year lease for the right
to use up to VC-3 fiber optic capacity on major routes within Russia to support
the increase in the Company's interregional traffic and regional expansion
strategy. The lease is classified as a capital lease in the balance sheet. In
December 2001, GTI issued a $9.1 million loan to the same company that has
provided the capital lease. The loan has payment terms of 56 months, starting in
January 2002, and carries interest at the rate of 7 percent per annum. The
following table presents minimum lease payments under the capital lease:

<Table>
<Caption>
                                                              LEASE PAYMENTS
                                                              --------------
                                                              (IN THOUSANDS)
<S>                                                           <C>
2002........................................................     $ 2,388
2003........................................................       2,388
2004........................................................       2,388
2005........................................................       2,388
2006........................................................       1,592
                                                                 -------
                                                                  11,144
Less: interest..............................................       2,130
                                                                 -------
  Total principal payments..................................     $ 9,014
                                                                 =======
</Table>

  DEBT RESTRUCTURING

     On September 10, 1999, the Company, GTS and a vendor of telecommunications
equipment executed a Settlement Agreement in regard to a credit facility under
which, certain equity method cellular investees had

                                        90
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

outstanding loans. Under the terms of the Settlement Agreement, on the date of
the closing of the Company's initial public offering, GTS and the vendor prepaid
the amounts outstanding under the credit facility totaling $14.4 million plus
$0.3 million of accounts payable to the vendor, and GTS paid directly or funded
the settlement of certain outstanding accounts receivable from the cellular
investees to the vendor for $2.5 million. The Company received the rights to
collect from the cellular investees the amounts owed by such investees in regard
to the credit facility and the accounts receivable, which have subsequently been
assigned to MCT, and issued promissory notes to GTS in a total amount of $6.3
million and the vendor in a total amount of $4.8 million. In addition, the
Company issued certain warrants to the vendor described in Note 7.

     The promissory note issued to the vendor bore interest at 14% per annum.
The note was subordinated to accounts payable and senior loans and had a
maturity of seven years. The Company was required to make any payments under the
note for the first thirty-months. At its election, the vendor had the option of
selling the note to GTS at 60% of its face value, $2.9 million, during the first
year after which such option expires. The two promissory notes issued to GTS,
for $4.8 million and $1.5 million, had the same ranking, maturity, interest rate
and payment terms as the $4.8 million promissory note issued to the vendor, as
described above.

NOTE 7:  SHAREHOLDERS' EQUITY

  COMMON STOCK

     On June 10, 1999, the Company issued one hundred shares of $0.01 par common
stock to GTS. In anticipation of the Initial Public Offering of our stock and in
consideration of the contribution of the assets that constitute Golden Telecom,
Inc., on September 29, 1999, the Company issued an additional 10,599,900 shares
of common stock to GTS. The accompanying financial statements have been prepared
with the assumption that 10,600,000 shares of common stock have been issued and
outstanding for all of the periods prior to September 30, 1999. On September 30,
1999, the Company issued 4,456,328 shares of $0.01 par common stock to GTS and
2,673,797 shares of $0.01 par common stock to a group of strategic investors.
Additionally, the Company issued 420,000 shares of $0.01 par common stock to an
affiliate of ING Barings as partial consideration for its ownership interest in
GTS-Ukrainian TeleSystems LLC. Also, on September 30, 1999, the Company signed
an Underwriting Agreement with Deutsche Bank AG London to issue 4,650,000 shares
of $0.01 par common stock as part of the Company's initial public offering.

     In December 1999, the Company issued privately 1,250,000 shares of $0.01
par common stock to Capital International Global Emerging Markets Private Equity
Fund, L.P. Capital International has received certain registration rights from
the Company, and in accordance with a shareholders agreement with GTS, GTS has
agreed, subject to certain terms and conditions to appoint one individual
nominated by Capital International to GTI's Board of Directors.

     In accordance with the subscription agreement filed with the SEC at the
time of the Company's Initial Public Offering, an additional 30,000 shares of
the Company's common stock were issued on March 1, 2000 to an affiliate of ING
Baring's in full and final settlement for its ownership interest in Golden
Telecom Ukraine.

     On May 17, 2000, the Company's shareholders approved an increased Company's
authorized common stock from 50 million to 100 million shares.

     On June 30, 2000, the Company filed a Registration Statement on Form S-1
with the SEC to register 2,145,633 shares of Common Stock held by Capital
International Global Emerging Markets Private Equity Fund, L.P. and affiliates
of ING Barings.

     In May 2001, GTS completed the transaction contemplated by the Share
Purchase Agreement (the "Share Purchase Agreement"), entered into in April 2001
with Alfa, Capital, and Baring Vostok, (collectively, the "Purchasers") with
respect to the sale to the Purchasers by GTS of approximately 12.2 million
shares of common stock, par value $0.01 per share of GTI. The aggregate purchase
price paid by the Purchasers for the common stock was $125.0 million. In
addition, as specified in the Share Purchase
                                        91
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Agreement, at the time of the consummation of the sale and purchase, the
Purchasers entered into separate stock option agreements with GTS which gave the
Purchasers an option to purchase up to approximately 2.3 million of the
remaining approximately 2.9 million shares of common stock beneficially owned by
GTS at the purchase price of $11.00 per share during the 60-day period after the
closing of the transaction. In addition, if certain other conditions are met,
during the twelve-month period after the closing, the Purchasers have an option
to purchase the remaining shares of common stock beneficially owned by GTS at a
purchase price equal to the greater of $11.00 per share or 120% of the average
closing share price for the 60-day period preceding the purchase date. As part
of the transaction, the Purchasers and the Company entered into a Standstill
Agreement and a Shareholders Agreement. Generally, the Standstill Agreement
provides that for a period of two years from the date of closing the
transaction, neither Alfa nor GTS may acquire over 49% of GTI's outstanding
stock. The Shareholder Agreement includes a voting arrangement between the
Purchasers for the election of certain nominees to the Company's Board of
Directors, among other provisions.

     In July 2001, the Company completed a buy-back of $25.0 million, or
approximately 2.3 million shares, of the Company's common stock at $11.00 per
share, from a subsidiary of GTS. After this sale, GTS continued to own
approximately 0.6 million shares, or approximately 2.6 percent, of GTI's
outstanding common stock. To effect the buy-back, GTI acted as designated
purchaser and exercised the options held by Alfa, Capital, and Baring Vostok to
acquire GTI common stock for $11.00 per share from GTS. Alfa, Capital, and
Baring Vostok acquired these options in conjunction with their acquisition of
$125.0 million in GTI shares from GTS in May 2001. In October 2001, GTS sold the
remaining approximately 0.6 million shares of GTI's common stock. Accordingly,
GTS is no longer an affiliate of the Company.

     In September 1999, the Company issued certain warrants to a vendor of
telecommunications equipment as part of a Settlement Agreement to debt
restructuring. The terms of the warrants allowed the vendor to purchase 126,050
shares of the GTI's common stock at an exercise price of $0.10 per share. The
warrants were exercisable for five years, but were not exercisable during the
first two -- years. During this period, the vendor was required to transfer
one-half of the warrants to GTS if GTS or its subsidiaries place orders in
Western and Central Europe with the vendor in an amount equal to or exceeding
$50 million, as invoiced by the vendor. If GTS or its subsidiaries place such
orders in an amount equal to or exceeding $75 million, the vendor would have
been required to transfer all of the warrants to GTS. In December 2001, the
vendor exercised the warrants in a cashless transaction and received 125,040
shares of GTI's common stock.

     In March 2001, 141,961 restricted shares of the Company's common stock were
issued to senior management and employees to be held in escrow by the Company.
The restricted shares were issued in accordance with restricted stock agreements
dated October 1, 1999 concluded as part of the Company's IPO and were held in
escrow by the Company until such restriction lapsed on October 1, 2001.

     The Company has reserved 3,241,906 shares of common stock for issuance to
certain employees and directors in connection with the 1999 Equity Participation
Plan.

  PREFERRED STOCK

     On May 17, 2000, the Company's shareholders authorized the creation of 10
million shares of preferred stock, none of which have been issued.

NOTE 8:  STOCK OPTION PLANS

     Prior to the formation of the Company, certain employees participated in
one or more of the stock option plans of GTS. At the time of the IPO certain
employees that had been granted GTS options that would vest during the year
2000, surrendered those options and received restricted shares in Golden
Telecom, Inc., which vested on the second anniversary of the IPO. The maximum
number of restricted shares to be issued under this arrangement was 141,961. The
total cost of this restricted share program to the company was $1.7 million

                                        92
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(grant date fair value) of which $0.2 million, $0.9 million, and $0.6 million
was recorded in the years ended December 31, 1999, 2000 and 2001, respectively.

     The Company has established the 1999 Equity Participation Plan of Golden
Telecom, Inc., ("the GTI Option Plan") a stock option plan similar to the
principal option plan of GTS. The Company has granted and intends to offer
options to key employees, members of the Board of Directors of the Company, and
employees of its equity method investees. No charge to operations is expected to
result from options issued under this plan except for options issued to the
employees of equity method investees. The Company recognized $0.5 million
compensation expense in 2001 in connection with options granted to employees of
the Company's equity investees. The Company's sole shareholder, at that time,
and the board of directors approved the GTI Option Plan on September 30, 1999.
The plan was ratified at the annual meeting of shareholders May 17, 2000. Under
the equity plan not more than 4,023,551 shares of common stock (subject to
anti-dilution and other adjustment provisions) were authorized for issuance upon
exercise of options or upon vesting of restricted or deferred stock awards. On
July 17, 2000, the Company filed with the SEC a registration Statement on Form
S-8 to register the 4,023,551 Common Shares available under the 1999 Equity
Participation Plan. Options granted under the GTI Option Plan vest over a
three-year term from the date of grant with one-third vesting after one year and
one thirty-sixth vesting each month thereafter and expire ten years from the
date of grant.

     When the 1999 GTI Equity Participation Plan (the "Equity Plan") was
adopted, the number of shares available for issuance under the Equity Plan was
calculated as 15% of the issued and outstanding shares on a fully diluted basis.
Since the adoption of the Equity Plan, the Company has issued an additional
1,679,872 shares of common stock in connection with fund raising activities and
acquisitions. In March 2001, the Compensation Committee of the Board of
Directors approved an increase in shares available for issuance under the Equity
Plan from 4,023,551 to 4,320,000 in order to preserve the 15% ratio referenced
above. The decision of the Compensation Committee of the Board of Directors was
ratified by GTI shareholders on June 26, 2001.

     In March 2001, in connection with the finalization of the MCT Corp. ("MCT")
transaction, the Compensation Committee of the Board of Directors adopted a
resolution providing that the Stock Option Award Agreements executed by the
Company and certain terminated employees shall be amended to provide that the
term of the options held by the employees that transferred from GTI to MCT shall
be extended from ninety days after the employees termination date to one year
after the termination date of the employees or until their termination date with
MCT, whichever occurs earlier. In April 2001, in accordance with the Equity
Plan, the Compensation Committee of the Board of Directors adopted a resolution
whereby the Stock Option Award Agreements issued by the Company to employees
were amended to provide that the term of the options held by the employees shall
be extended from ninety days after the employees termination date to eighteen
months after the termination date. No expense was recognized as a result of
these modifications since the intrinsic value of the outstanding options was
zero on the measurement date.

     The Company applies the provisions of APB No. 25 in accounting for its
stock options incentive plans. The effect of applying SFAS No. 123 on the net
loss as reported is not representative of the effects on reported net loss in
future years due to the vesting period of the stock options and the fair value
of additional stock options in future years. Had compensation expense been
determined in accordance with the methodology of SFAS No. 123, the Company's net
loss for the year ended December 31, 2000 would have been approximately $18.7
million and, $0.78 net loss per common share and $47.3 million and $2.00 net
loss per common share for the year ended December 31, 2001.

     The fair value of options granted under the GTI Option Plan in 2000 and
2001 are estimated to be between $12.61 and $29.04, and between $7.31 and $8.89
per common share, respectively, on the date of grant using the Black Scholes
option pricing model with the following assumptions: expected dividend yield of
0%

                                        93
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

for the periods presented, risk free interest rate of 5.20% for 2000 and 4.84%
for 2001, an expected life of three years for the periods presented, and an
expected volatility of 1.45 for 2000 and 1.25 for 2001. The weighted-average
fair value of options granted during 2001 was $8.87.

     Additional information with respect to stock options activity is summarized
as follows:

<Table>
<Caption>
                                                        YEAR ENDED DECEMBER 31,
                                              -------------------------------------------
                                                      2000                   2001
                                              --------------------   --------------------
                                                          WEIGHTED               WEIGHTED
                                                          AVERAGE                AVERAGE
                                                          EXERCISE               EXERCISE
                                               SHARES      PRICE      SHARES      PRICE
                                              ---------   --------   ---------   --------
<S>                                           <C>         <C>        <C>         <C>
Outstanding at beginning of year............  2,767,000    $12.00    3,371,694    $13.06
Options granted.............................    616,000     18.20      321,000     11.97
Options exercised...........................         --        --      (43,100)    12.00
Options expired.............................         --        --      (38,536)    12.85
Options forfeited...........................    (11,306)    30.80     (369,152)    14.95
                                              ---------              ---------
Outstanding at end of Year..................  3,371,694     13.06    3,241,906     12.75
                                              =========              =========
Options exercisable at year End.............  1,076,211    $12.00    2,113,509    $12.52
</Table>

     The following table summarizes information about stock options outstanding:

<Table>
<Caption>
                                          OPTIONS OUTSTANDING             OPTIONS EXERCISABLE
                                  ------------------------------------   ----------------------
                                                 WEIGHTED
                                                  AVERAGE
                                                 REMAINING    WEIGHTED                 WEIGHTED
EXERCISE PRICES                                 CONTRACTUAL   AVERAGE                  AVERAGE
AT DECEMBER 31,                     NUMBER         LIFE       EXERCISE     NUMBER      EXERCISE
2001                              OUTSTANDING   (IN YEARS)     PRICE     EXERCISABLE    PRICE
---------------                   -----------   -----------   --------   -----------   --------
<S>                               <C>           <C>           <C>        <C>           <C>
$ 9.88..........................       2,500        9.2        $ 9.88            --         --
 12.00..........................   2,708,241        5.6         12.00     1,893,199     $12.00
 15.63..........................     496,165        7.6         15.63       200,312      15.63
 19.88..........................      10,000        8.1         19.88         6,388      19.88
 33.25 to 36.00.................      25,000        4.3         34.90        13,610      34.93
</Table>

NOTE 9:  EMPLOYEE BENEFIT PLAN

     Prior to the formation of the Company, certain employees participated in
the GTS 401(k) retirement savings plan (the "GTS Savings Plan") covering all US
citizen employees. The GTS Savings Plan qualified under section 401(k) of the
Internal Revenue Code and, as such, participants were able to defer pretax
income in accordance with federal income tax limitations. GTS provided a 50%
matching contribution on the first 5% contributed by the employee. GTS may have
also, at its discretion, made non-matching contributions. Both matching and
non-matching contributions by GTS vest 100% after three years of service. The
Company's expense under the GTS Savings Plan for the Company's employees was
approximately $37,000 and $39,710 for the years ended December 31, 1999 and
2000, respectively. Neither GTS nor the Company made any discretionary
(non-matching) contributions for the years ended December 31, 1999 or 2000.

     In November 2001, The Company implemented a 401(k) retirement savings plan
(the "GTI Savings Plan") covering all U.S. citizen employees. The Savings Plan
qualifies under section 401(k) of the Internal Revenue Code and as such,
participants may defer pretax income in accordance with federal income tax
limitations. The Company provides a 50% matching contribution on the amount
contributed by the employees. Both the matching and non-matching contributions
by the Company vest after three years of service. The Company's expense under
the GTI Savings Plan was approximately $5,000 for the year ended December 31,

                                        94
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2001. The Company made approximately $93,000 discretionary (non-matching)
contributions for the year ended December 31, 2001.

NOTE 10:  INCOME TAXES

     The Company accounts for income taxes using the liability method required
by FASB Statement No. 109 "Accounting for Income Taxes".

     The components of loss before income taxes and minority interest were as
follows:

<Table>
<Caption>
                                                           YEAR ENDED DECEMBER 31,
                                                        -----------------------------
                                                          1999      2000       2001
                                                        --------   -------   --------
                                                               (IN THOUSANDS)
<S>                                                     <C>        <C>       <C>
Pretax loss:
  Domestic............................................  $(23,449)  $(2,853)  $(16,121)
  Foreign.............................................   (14,705)   (5,980)   (20,865)
                                                        --------   -------   --------
                                                        $(38,154)  $(8,833)  $(36,986)
                                                        ========   =======   ========
</Table>

     The following is the Company's significant components of the provision for
income taxes attributable to continuing operations:

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                              -----------------------
                                                               1999    2000    2001
                                                              ------   ----   -------
                                                                  (IN THOUSANDS)
<S>                                                           <C>      <C>    <C>
Domestic -- current.........................................  $   --   $142   $   193
  Foreign -- current........................................   6,823    848     3,365
  Foreign -- deferred.......................................      --     --    (1,656)
                                                              ------   ----   -------
                                                              $6,823   $990   $ 1,902
                                                              ======   ====   =======
</Table>

     The Company paid income taxes of $7.1 million, $1.1 million and $2.7
million 1999, 2000 and 2001, respectively.

     The Company did not record a domestic provision for income taxes prior to
2000 as, prior to its formation, the Company was functioning as operating units
of GTS. The US based subsidiaries of the Company (the "US subsidiaries") were
wholly-owned subsidiaries of GTS and accordingly, were included in GTS' US
consolidated income tax returns. Under the previous structure, had the US
subsidiaries filed a consolidated US income tax return, the Company would have
incurred no income taxes for the year ended December 31, 1999. In connection
with the formation of the Company, certain elections and transactions have been
made that eliminated any US income tax liabilities incurred under the previous
structure. The Company's future effective tax rate will depend largely on its
structure and tax strategies.

     Upon the formation of the Company, taxable income or losses recorded are
reported on the Company's consolidated income tax return. The Company was
allocated its proportionate share, $23.6 million, of GTS' US net operating loss
carry-forwards in 1999. A valuation allowance has been established by the
Company for the associated deferred tax asset, due to management's estimate of
the future benefits of these amounts that are not likely to be realized.
Accordingly, there was no impact in the accompanying financial statements.

     As of December 31, 2001, the Company had net operating loss carry-forwards
for US federal income tax purposes of approximately $12.7 million expiring in
fiscal years 2010 through 2019. Because of the "change in ownership" provisions
of the Tax Reform Act of 1986, the utilization of the Company's net operating
loss

                                        95
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

carry-forwards are limited to a maximum of $7.5 million per year on a cumulative
basis. As a result, $12.7 million of cumulative net operating losses are
available for use during 2002.

     The reconciliation of the US statutory federal tax rate of 35.0% to the
Company's effective tax rate is as follows:

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                               1999     2000     2001
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Tax benefit at US statutory rates...........................   35.0%    35.0%    35.0%
Non-deductible expenses:
  Amortization..............................................  (13.7)   (59.8)   (11.4)
  Abandonment charge........................................  (17.0)      --       --
  Equity in (losses) earnings...............................   (6.1)    (1.1)     7.7
Foreign exchange differences................................   (2.1)    (1.6)    (0.6)
Different foreign tax rates.................................    1.0      1.7    (15.6)
Change in valuation allowance...............................  (13.8)    35.4     (2.2)
Other permanent differences.................................   (1.2)   (20.8)   (18.1)
                                                              -----    -----    -----
Tax expense.................................................  (17.9)%  (11.2)%   (5.2)%
                                                              =====    =====    =====
</Table>

     Deferred tax assets and liabilities are recorded based on temporary
differences between book bases of assets and liabilities and their bases for
income tax purposes. The following table summarizes major components of the
Company's deferred tax assets and liabilities:

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       2001
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Deferred Tax Assets:
  Net operating loss carry-forwards.........................  $ 10,336   $  8,775
  Accrued expenses..........................................     2,299      2,145
  Deferred revenue..........................................     1,254      2,110
  Fixed assets..............................................     2,751      6,732
  Other deferred tax assets.................................       891        521
  Valuation allowance.......................................   (13,689)   (14,495)
                                                              --------   --------
Total deferred tax asset....................................  $  3,842   $  5,788
                                                              ========   ========
Deferred Tax Liabilities:
  Accrued revenue...........................................  $  1,683   $    816
  Deferred expenses.........................................       754        788
  Intangible assets.........................................        --      6,527
  Other deferred tax liabilities............................     1,405      2,599
                                                              --------   --------
Total deferred tax liability................................  $  3,842   $ 10,730
                                                              ========   ========
     Net deferred tax asset/liability.......................  $     --   $ (4,942)
                                                              ========   ========
</Table>

                                        96
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table presents the Company's deferred tax assets and
liabilities as of December 31, 2000 and 2001 attributable to different tax
paying components in different tax jurisdictions:

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       2001
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Deferred Tax Assets:
  US tax component..........................................  $  5,734   $  7,754
  Foreign tax component.....................................    11,797     12,529
  Valuation allowance.......................................   (13,689)   (14,495)
                                                              --------   --------
Total deferred tax asset....................................  $  3,842   $  5,788
                                                              ========   ========
Deferred Tax Liability:
  US tax component..........................................  $     --   $     --
  Foreign tax component.....................................     3,842     10,730
                                                              --------   --------
Total deferred tax liability................................  $  3,842   $ 10,730
                                                              ========   ========
     Net deferred tax asset/liability.......................  $     --   $ (4,942)
                                                              ========   ========
</Table>

     Certain of the Company's consolidated foreign ventures have foreign tax
loss carry-forwards in excess of $16.0 million. These tax loss carry-forwards
are typically denominated in the local currency, subject to annual limitations
and expire in fiscal years 2002 through 2009. In 2001, the Company has recorded
a deferred tax benefit in the amount of $1.6 million associated with the tax
loss carry-forwards.

     GTS' investment in EDN Sovintel has historically been treated for US tax
purposes as a partnership and, therefore, GTS' share of EDN Sovintel's income
had flowed through to the GTS consolidated federal income tax return on a
current basis. However, as part of the formation of the Company and the transfer
of ownership rights in EDN Sovintel to the Company, the Company elected to treat
its ownership in EDN Sovintel as a corporation for US tax purposes. The Company
does not provide for deferred taxes on the undistributed earnings of its foreign
companies, as such earnings are generally intended to be reinvested in those
operations permanently. In the case of non-consolidated entities where the
Company's partner requests that a dividend be paid, the amounts are not expected
to have a material impact on the Company's income tax liability.

NOTE 11:  COMMITMENTS AND CONTINGENCIES

  LEASES

     The Company has various cancelable and non-cancelable operating lease
agreements for equipment and office space with terms ranging from one to five
years. Rental expense for operating leases aggregated $0.6 million, $3.3
million, and $4.2 million for the years ended December 31, 1999, 2000 and 2001,
respectively.

     Future minimum lease payments under non-cancelable operating leases with
terms of one year or more, as of December 31, 2001, are as follows: 2002 -- $2.0
million, 2003 -- $1.0 million, 2004 -- $0.6 million, 2005 -- $0.4 million,
2006 -- $0.1 million, and thereafter -- none.

  OTHER COMMITMENTS AND CONTINGENCIES

     The Company's non-consolidated ventures have future purchase commitments
amounting to $1.6 million and none as of December 31, 2000 and 2001,
respectively. The Company's consolidated ventures have future purchase
commitments of none and $1.1 million as of December 31, 2000 and 2001,
respectively.

                                        97
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In the ordinary course of business, the Company has issued financial
guarantees on debt for the benefit of certain of its non-consolidated ventures,
which is all collateralized by cash as described in Note 6. The total amounts
guaranteed at December 31, 2000 and 2001 were approximately $1.9 million and
$0.8 million, respectively. The Company expects that all the collateralized debt
will be repaid by the ventures.

  MAJOR CUSTOMERS

     The Company had one major customer in the CLEC reporting segment,
representing $21.0 million, or 21%, of total revenues in 1999, $18.4 million, or
16%, of total revenues in 2000 and $18.9 million, or 14%, of total revenue in
2001.

  TAX MATTERS

     The Company's policy is to accrue for contingencies in the accounting
period in which a liability is deemed probable and the amount is reasonably
determinable. In this regard, because of the uncertainties associated with the
Commonwealth of Independent States Taxes ("CIS Taxes"), the Company's final CIS
Taxes may be in excess of the estimated amount expensed to date and accrued at
December 31, 1999, 2000, and 2001. It is the opinion of management that the
ultimate resolution of the Company's CIS Tax liability, to the extent not
previously provided for, will not have a material effect on the financial
condition of the Company. However, depending on the amount and timing of an
unfavorable resolution of any contingencies associated with CIS Taxes, it is
possible that the Company's future results of operations or cash flows could be
materially affected in a particular period.

  OTHER MATTERS

     Golden Telecom (Ukraine) is involved in a number of commercial disputes
with Ukrtelecom. The most significant disputes include alleged improprieties in
the manner in which Golden Telecom (Ukraine) routed certain traffic through the
state-owned monopoly carrier, Ukrtelecom, and Golden Telecom (Ukraine)'s lease
rights of Ukrtelecom's technical premises. If these disputes are not resolved
amicably in the near term, they may have an adverse impact on the financial
condition, results of operations and liquidity of the Company. It is not
currently possible to predict the outcome of these disputes with Ukrtelecom. The
risks of an adverse impact are assessed as possible but not quantifiable.

     In the ordinary course of business, the Company may be party to various
legal and tax proceedings, and subject to claims, certain of which relate to the
developing markets and evolving fiscal and regulatory environments in which the
Company operates. In the opinion of management, the Company's liability, if any,
in all pending litigation, other legal proceeding or matters other than what is
discussed above, will not have a material effect upon the financial condition,
results of operations or liquidity of the Company.

NOTE 12:  RELATED PARTY TRANSACTIONS

     The Company entered into an administrative services agreement with GTS.
Pursuant to this agreement, GTS had provided the Company with certain
accounting, tax and financial management and budgeting services, legal and
regulatory services and human resources services. The amount paid under this
agreement in 2000 was $0.1 million. In 2000, this agreement was amended to
include only the legal and regulatory services and human resources services and
in 2001, this agreement was cancelled.

                                        98
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Transactions with the Company's equity investees and GTS and Alfa
affiliates were as follows, for the years ended December 31:

<Table>
<Caption>
                                                           1999      2000      2001
                                                          -------   -------   -------
                                                                (IN THOUSANDS)
<S>                                                       <C>       <C>       <C>
Revenue from equity investees...........................  $10,475   $ 9,960   $ 9,029
Revenue from GTS affiliates.............................      649       637     2,475
Revenue from Alfa affiliates............................       --        --       127
                                                          -------   -------   -------
                                                          $11,124   $10,597   $11,631
                                                          =======   =======   =======
Cost of revenue from equity investees...................    6,340     9,001    10,056
Cost of revenue from GTS affiliates.....................      349     1,551       850
                                                          -------   -------   -------
                                                          $ 6,689   $10,552   $10,906
                                                          =======   =======   =======
</Table>

     The revenue and cost of revenue from GTS affiliates included in the income
statement represents revenue and cost of revenue through October 2001. GTS
ceased to be a shareholder of GTI after this date.

     Included in Other Current Assets at December 31, 2000 is $0.6 million of
intercompany accounts receivable from GTS affiliates. Included in Other Current
Assets at December 31, 2001 is $0.1 million of intercompany accounts receivable
from Alfa affiliates.

     The Company maintains bank accounts with Alfa, which act as a clearing
agent for the payroll of the local Russian staff of the Company. The balances at
these bank accounts were minimal at December 31, 2001. In addition, the Company
incurred approximately $0.9 million in consulting fees from an affiliate of Alfa
in relation to investment transactions in Cityline, Uralrelcom, and PTK, of
which $0.2 million was payable at December 31, 2001.

NOTE 13:  SEGMENT INFORMATION

  LINE OF BUSINESS DATA

     The Company operates in four segments within the telecommunications
industry. Previously, the Company reported three segments, but commencing from
the beginning of 2000, the Company has operationally and financially separated
its Data and Internet business from the Long Distance business. This separation
is in line with the Company's strategy to develop the Data and Internet segment
of its business. The four segments are: CLEC Services using our local access
overlay networks in Moscow, Kiev, and St. Petersburg; Long Distance Services
using our fiber optic and satellite-based network throughout the CIS; Data and
Internet Services using our fiber optic and satellite-based network; and Mobile
Services consisting of mobile networks in Kiev and Odessa, Ukraine. The
following table presents financial information for both consolidated ventures
and equity investee ventures, segmented by the Company's lines of businesses for
the periods ended December 31, 1999, 2000, and 2001. Transfers between lines of
businesses are included in the

                                        99
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

adjustments to reconcile segment to consolidated results. The Company evaluates
performance based on the operating income (loss) of each strategic business
unit.
<Table>
<Caption>

                                           DATA &                                         BUSINESS
                                          INTERNET     LONG      MOBILE    CORPORATE &    SEGMENTS   CONSOLIDATED
                                 CLEC     SERVICES   DISTANCE   SERVICES   ELIMINATIONS    TOTAL       RESULTS
                               --------   --------   --------   --------   ------------   --------   ------------
                                                                 (IN THOUSANDS)
<S>                            <C>        <C>        <C>        <C>        <C>            <C>        <C>
YEAR ENDED DECEMBER 31, 1999
Revenue......................  $128,086   $ 27,166   $12,135    $ 35,108     $(10,292)    $192,203     $ 97,931
Depreciation and
  amortization...............    10,318      1,923     5,466      16,607       12,397       46,711       28,143
Operating income (loss)......    37,901        424    (8,667)     (5,769)     (43,412)     (19,523)     (31,552)
Identifiable assets..........   121,461     17,653    31,474      62,213      247,481      480,282      366,624
Capital expenditures.........    13,246      3,398     7,221      10,080        1,038       34,983       22,110

<Caption>
                                   ADJUSTMENTS TO
                                      RECONCILE
                                 BUSINESS SEGMENT TO
                                CONSOLIDATED RESULTS
                               -----------------------
                                EQUITY
                                METHOD      AFFILIATE
                               VENTURES    ADJUSTMENTS
                               ---------   -----------
                                   (IN THOUSANDS)
<S>                            <C>         <C>
YEAR ENDED DECEMBER 31, 1999
Revenue......................  $(112,912)    $18,640
Depreciation and
  amortization...............    (18,568)         --
Operating income (loss)......    (12,078)         49
Identifiable assets..........   (113,658)         --
Capital expenditures.........    (12,873)         --
</Table>
<Table>
<Caption>

                                           DATA &                                         BUSINESS
                                          INTERNET     LONG      MOBILE    CORPORATE &    SEGMENTS   CONSOLIDATED
                                 CLEC     SERVICES   DISTANCE   SERVICES   ELIMINATIONS    TOTAL       RESULTS
                               --------   --------   --------   --------   ------------   --------   ------------
                                                                 (IN THOUSANDS)
<S>                            <C>        <C>        <C>        <C>        <C>            <C>        <C>
YEAR ENDED DECEMBER 31, 2000
Revenue......................  $125,962   $ 41,144   $15,484    $ 35,365     $ (7,174)    $210,781     $113,089
Depreciation and
  amortization...............    11,836      3,475     5,415      14,065       15,815       50,606       31,851
Operating income (loss)......    36,194       (404)   (5,105)     (3,523)     (26,174)         988      (15,136)
Identifiable assets..........   122,175     43,511    25,109      24,984      216,846      432,625      348,456
Capital expenditures.........    18,755     19,428     3,109      10,726          565       52,583       40,515

<Caption>
                                   ADJUSTMENTS TO
                                      RECONCILE
                                 BUSINESS SEGMENT TO
                                CONSOLIDATED RESULTS
                               -----------------------
                                EQUITY
                                METHOD      AFFILIATE
                               VENTURES    ADJUSTMENTS
                               ---------   -----------
                                   (IN THOUSANDS)
<S>                            <C>         <C>
YEAR ENDED DECEMBER 31, 2000
Revenue......................  $(116,339)    $18,647
Depreciation and
  amortization...............    (18,755)         --
Operating income (loss)......    (16,222)         98
Identifiable assets..........    (84,169)         --
Capital expenditures.........    (12,068)         --
</Table>
<Table>
<Caption>

                                           DATA &                                         BUSINESS
                                          INTERNET     LONG      MOBILE    CORPORATE &    SEGMENTS   CONSOLIDATED
                                 CLEC     SERVICES   DISTANCE   SERVICES   ELIMINATIONS    TOTAL       RESULTS
                               --------   --------   --------   --------   ------------   --------   ------------
                                                                 (IN THOUSANDS)
<S>                            <C>        <C>        <C>        <C>        <C>            <C>        <C>
YEAR ENDED DECEMBER 31, 2001
Revenue......................  $149,945   $ 63,192   $18,819    $ 14,361     $ (5,295)    $241,022     $140,038
Depreciation and
  amortization...............    13,576     13,216     6,199       5,217       12,900       51,108       41,398
Impairment charge............        --     20,886        --       9,931          474       31,291       31,291
Operating income (loss)......    46,755    (23,344)   (3,683)    (10,915)     (23,177)     (14,364)     (45,271)
Identifiable assets..........   184,081     93,051    27,661      10,264       97,585      412,642      300,384
Capital expenditures.........    24,400     24,415     4,778       1,278          133       55,004       37,359

<Caption>
                                   ADJUSTMENTS TO
                                      RECONCILE
                                 BUSINESS SEGMENT TO
                                CONSOLIDATED RESULTS
                               -----------------------
                                EQUITY
                                METHOD      AFFILIATE
                               VENTURES    ADJUSTMENTS
                               ---------   -----------
                                   (IN THOUSANDS)
<S>                            <C>         <C>
YEAR ENDED DECEMBER 31, 2001
Revenue......................  $(119,958)    $18,974
Depreciation and
  amortization...............     (9,710)         --
Impairment charge............         --          --
Operating income (loss)......    (30,907)         --
Identifiable assets..........   (112,258)         --
Capital expenditures.........    (17,645)         --
</Table>

  GEOGRAPHIC DATA

     Revenues from external customers are based on the location of the operating
company providing the service.

                                       100
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Company operated within two main geographic regions of the CIS-Russia
and Ukraine. Geographic information as of December 31, 2000 and 2001 is as
follows:

<Table>
<Caption>
                                                                CORPORATE,
                                                                   OTHER
                                                               COUNTRIES AND   CONSOLIDATED
                                           RUSSIA    UKRAINE   ELIMINATIONS      RESULTS
                                          --------   -------   -------------   ------------
                                                           (IN THOUSANDS)
<S>                                       <C>        <C>       <C>             <C>
YEAR ENDED DECEMBER 31, 2000
  Revenue...............................  $ 77,943   $36,101      $  (955)       $113,089
  Long-lived assets.....................   160,508    41,034          566         202,108
YEAR ENDED DECEMBER 31, 2001
  Revenue...............................  $104,461   $37,954      $(2,377)       $140,038
  Long-lived assets.....................   177,757    26,318          783         204,858
</Table>

NOTE 14:  SUPPLEMENTAL CASH FLOW INFORMATION

     The following table summarizes significant non-cash investing and financing
activities for the Company.

<Table>
<Caption>
                                                               TWELVE MONTHS
                                                                   ENDED
                                                               DECEMBER 31,
                                                              ---------------
                                                               2000     2001
                                                              ------   ------
                                                              (IN THOUSANDS)
<S>                                                           <C>      <C>
Issuance of common stock to affiliate of ING Barings........  $  360   $   --
Business acquisitions.......................................   2,617      200
Acquisition of Agama Limited................................   3,796       --
Acquisition of MCT Corp. in exchange for shares in Vostok
  Mobile B.V. and certain assets and rights to certain
  obligations...............................................   7,872       --
Other business acquisitions.................................     319       --
Siemens loan agreement......................................   3,400       --
Capitalized lease obligations...............................      --    9,500
Consulting fee to Alfa......................................      --      180
</Table>

NOTE 15:  OTHER TRANSACTIONS

  ABANDONMENT AND RESTRUCTURING

     In December 2000, the Company acquired an ownership interest in MCT in
exchange for the Company's 100% ownership of Vostok Mobile B.V., a Netherlands
registered private limited holding company that owns the Company's Russian
mobile operations, including the abandoned ventures. Initially, the Company
acquired approximately 24% of the outstanding common stock of MCT and the
Company expects to be diluted to not less than 18% as a result of equity
offerings planned by MCT. At December 31, 2001 the Company owned approximately
23% of MCT.

     The acquisition of the equity interest in MCT effectively completes a major
part of the Company's formal plan of restructuring, initiated when it abandoned
certain mobile business operations in Russia, as approved by the Board of
Directors of GTS in the third quarter of 1999. As part of this plan of
restructuring, the Company had been seeking to dispose of the ownership
interests in these operations and the intended not to provide any additional
financial assistance to such businesses, other than debts assumed.

     The Company took a charge to earnings of $18.5 million in the third quarter
of 1999, of which approximately $8.3 million was recorded as a liability.
Additionally, in the third quarter of 1999, the Company

                                       101
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

recorded a charge and liability of $1.3 million relating to the cancellation of
certain network capacity. There were no amounts charged against these
liabilities in the year ended December 31, 1999. In the year ended December 31,
2000, $5.6 million was charged against these liabilities including $4.0 million
in relation to collateral attached by a third-party lender, $1.1 million in
cancellation of certain network capacity and $0.5 million in disposition related
costs.

     The Company accounted for the exchange of the subsidiary Vostok Mobile B.V.
for an equity interest of approximately 24% in MCT at book value since the fair
values were not readily determinable, accordingly, no gain or loss was
recognized. Concurrent with the exchange of ownership interests certain assets,
which were comprised of restricted cash held as collateral on a back-to-back
loan facility and intercompany debt and interest receivable, and rights to
certain obligations of the Russian mobile ventures owed by such ventures in
regard to a credit facility, were assigned to MCT. Prior to the transaction the
book value of the Company's interest was adjusted for the effect of the
concurrent transactions and the remaining portion of the abandonment and
restructuring reserve.

  IMPAIRMENT

     In the fourth quarter of 2001, the Company recorded an impairment charge in
the amount of $10.4 million in association with the Company's mobile operations
in Ukraine. In 2001, the mobile operation in Ukraine became subject to strong
competitive and regulatory pressures, the Company's average revenue per user
("ARPU") declined significantly and the mobile operations business segment
recorded an operating loss for the first time. The undiscounted cash flow
analysis performed by the Company indicated that carrying value of the mobile
long-lived assets was not recoverable. The Company recognized the loss as an
impairment charge, calculated as the difference between the carrying amount and
the fair value of the assets. Fair value was assessed by discounting the future
cash flows associated with the assets. The components of the impairment charge
includes a write-down of net property, plant and equipment by $8.4 million, net
licenses by $1.5 million and net goodwill associated with the mobile operations
of $0.5 million.

     In addition to the traditional voice and data service provision, GTI has
been actively pursuing a strategy of developing non-traditional telecom service
offerings including those related to the Internet, such as web hosting, web
design, and vertical and horizontal Internet portal development. To this end,
GTI acquired InfoArt Stars and the Agama family of Web properties to add to the
Russia-On-Line Internet portal, which also incorporates some of the other
acquisitions made in the year ended December 31, 2000, referat.ru, Absolute
Games and Fintek. In line with experience outside of Russia, the Company has not
seen the rapid development of Internet based services that was expected. During
2001, Internet based advertising and e-commerce revenues have not developed to
significant levels. The undiscounted cash flow analysis, based on the 5-year
business plan approved in the fourth quarter of 2001, performed by the Company
indicated that carrying value of the long-lived portal assets was impaired. The
Company recognized the loss as an impairment charge, calculated as the
difference between the carrying amount and the fair value of the assets. Fair
value was assessed by discounting the future cash flows associated with the
assets. As a result, GTI recorded an impairment charge of $20.9 million. The
impairment charge represents a write-down of Internet Content and Related
Software, which was classified as Other Intangible Assets in the balance sheet
and was included in the operating results of the Company's Data and Internet
business segment.

                                       102
<PAGE>
                              GOLDEN TELECOM, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 16:  QUARTERLY FINANCIAL DATA (UNAUDITED)

     Summarized quarterly financial data is as follows:

<Table>
<Caption>
                                                                ACTUAL
                                                      FOR THE THREE MONTHS ENDED
                                          ---------------------------------------------------
                                          MARCH 31,   JUNE 30,   SEPTEMBER 30,   DECEMBER 31,
                                            2000        2000         2000            2000
                                          ---------   --------   -------------   ------------
                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                       <C>         <C>        <C>             <C>
Revenues................................   $24,309    $26,872       $29,381        $32,527
Cost of Revenues........................    10,294     11,847        13,276         15,537
Gross Margin............................    14,015     15,025        16,105         16,990
Selling, general and administrative.....    10,254     10,707        12,017         12,442
Net loss................................    (3,334)    (1,911)       (2,877)        (2,132)
Net loss per share(1)...................   $ (0.14)   $ (0.08)      $ (0.12)       $ (0.09)
</Table>

<Table>
<Caption>
                                                                ACTUAL
                                                      FOR THE THREE MONTHS ENDED
                                          ---------------------------------------------------
                                          MARCH 31,   JUNE 30,   SEPTEMBER 30,   DECEMBER 31,
                                            2001        2001         2001            2001
                                          ---------   --------   -------------   ------------
                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                       <C>         <C>        <C>             <C>
Revenues................................   $32,320    $33,891       $37,067        $ 36,760
Cost of Revenues........................    14,686     15,980        16,923          16,096
Gross Margin............................    17,634     17,911        20,144          20,664
Selling, general and administrative.....    12,707     12,799        12,787          10,642
Impairment charge.......................        --         --            --          31,291
Net loss................................    (3,910)    (3,534)       (1,873)        (29,688)
Net loss per share(1)...................   $ (0.16)   $ (0.14)      $ (0.08)       $  (1.33)
</Table>

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

(1) The sum of the earnings per share for the four quarters will generally not
    equal earnings per share for the total year due to changes in the average
    number of common shares outstanding.

NOTE 17:  SUBSEQUENT EVENTS

     In November 2001, the Company announced the signing of a Memorandum of
Understanding ("MOU") with Rostelecom, to acquire Rostelecom's 50% ownership in
Sovintel. In March 2002, GTI executed a Sale and Purchase agreement finalizing
the terms of the acquisition. The closure of the transaction is dependent upon
the performance or fulfillment of a number of conditions precedent, including
the receipt of necessary regulatory approvals from currency control and
anti-trust agencies in Russia and the United States. GTI expects closure of the
transaction to be by the end of the second quarter of 2002.

     In March 2002, GTI became aware that the Kiev City Prosecutor's Office has
initiated an investigation into the activities of the Company's 69 percent owned
subsidiary in Ukraine, Golden Telecom (Ukraine). Although all of the facts
concerning the allegations are not known to GTI at this time, the investigation
appears to concern alleged improprieties in the manner in which Golden Telecom
(Ukraine) routed certain traffic through the state-owned monopoly carrier,
Ukrtelecom. At present, the Company is unable to predict the outcome of this
investigation and its potential effect on GTI's financial position and future
operating results.

                                       103
<PAGE>

                          AUDITED FINANCIAL STATEMENTS

                                EDN SOVINTEL LLC
                  YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001
                      WITH REPORT OF INDEPENDENT AUDITORS

                                       104
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Members
EDN Sovintel LLC

     We have audited the accompanying balance sheets of EDN Sovintel LLC as of
December 31, 2001 and 2000, and the related statements of income, members'
equity, and cash flows for each of the three years in the period ended December
31, 2001. Our audits also included the financial statement schedule listed in
the Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.

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

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of EDN Sovintel LLC at December
31, 2001 and 2000, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.

     We also reported separately on the financial statements of the Company as
of December 31, 2000 and 1999 and for the years then ended, prepared in
compliance with the regulations for bookkeeping and accounting for income tax
and statutory reporting purposes in the Russian Federation and expect to report
separately on the financial statements as of December 31, 2001 and for the year
then ended. The significant differences between the accounting principles
applied in preparing the statutory financial statements and accounting
principles generally accepted in the United States of America so far as concerns
the financial statements referred to above are summarized in Note 2.

                                          /s/ ERNST & YOUNG (CIS) LIMITED

Moscow, Russia
March 5, 2002

                                       105
<PAGE>

                                EDN SOVINTEL LLC

                                 BALANCE SHEETS

<Table>
<Caption>
                                                                   DECEMBER 31,
                                                              ----------------------
                                                                2000         2001
                                                              ---------   ----------
                                                              (IN THOUSANDS OF US$)
<S>                                                           <C>         <C>
                                       ASSETS

CURRENT ASSETS:
  Cash......................................................   $ 4,013     $ 16,793
  Accounts receivable, net of allowance for doubtful
     accounts of $4,981 and $4,951, respectively............    13,138       14,518
  Due from affiliated companies.............................       524        1,912
  Due from employees........................................       578          721
  Inventories...............................................     3,592        7,519
  Inventory consigned to others.............................        --        1,063
  VAT receivable, net.......................................     2,325          207
  Prepaid expenses and other current assets.................     1,763        2,586
                                                               -------     --------
TOTAL CURRENT ASSETS........................................    25,933       45,319
Property and equipment, net.................................    51,340       60,125
Deferred expenses...........................................       540           --
Other non-current assets....................................     1,615        3,069
                                                               -------     --------
TOTAL ASSETS................................................   $79,428     $108,513
                                                               =======     ========

                          LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
  Trade payables............................................   $ 6,922     $ 12,058
  Accrued expenses..........................................     2,192        4,926
  Due to affiliated companies...............................     2,117        3,048
  Amount due to partner in commercial arrangement...........       659           --
  Deferred income taxes.....................................       686        1,861
                                                               -------     --------
TOTAL CURRENT LIABILITIES...................................    12,576       21,893
  Non-current liabilities...................................     1,615        3,172
                                                               -------     --------
TOTAL LIABILITIES...........................................    14,191       25,065
MEMBERS' EQUITY.............................................    65,237       83,448
                                                               -------     --------
TOTAL LIABILITIES AND MEMBERS' EQUITY.......................   $79,428     $108,513
                                                               =======     ========
</Table>

   The accompanying notes are an integral part of these financial statements.
                                       106
<PAGE>

                                EDN SOVINTEL LLC

                              STATEMENTS OF INCOME

<Table>
<Caption>
                                                                YEARS ENDED DECEMBER 31,
                                                              ----------------------------
                                                               1999      2000       2001
                                                              -------   -------   --------
                                                                 (IN THOUSANDS OF US$)
<S>                                                           <C>       <C>       <C>
REVENUES:
  Telecommunication services................................  $87,934   $87,823   $108,363
  Revenue from affiliates...................................    3,746     6,066      7,343
                                                              -------   -------   --------
                                                               91,680    93,889    115,706
OPERATING COSTS AND EXPENSES:
  Service costs.............................................   51,091    49,713     63,909
  Selling, general and administrative.......................   17,537    16,768     13,025
  Depreciation..............................................    7,736     8,615      9,025
                                                              -------   -------   --------
TOTAL OPERATING COSTS AND EXPENSES..........................   76,364    75,096     85,959
                                                              -------   -------   --------
INCOME FROM OPERATIONS......................................   15,316    18,793     29,747
OTHER INCOME (EXPENSE):
  Interest income...........................................      125       115        321
  Interest expense..........................................     (423)     (141)       (12)
  Foreign currency losses...................................   (1,853)   (1,308)      (355)
                                                              -------   -------   --------
TOTAL OTHER INCOME (EXPENSE)................................   (2,151)   (1,334)       (46)
                                                              -------   -------   --------
Net income before taxes.....................................   13,165    17,459     29,701
Income taxes................................................    7,607     7,277      7,490
                                                              -------   -------   --------
NET INCOME..................................................  $ 5,558   $10,182   $ 22,211
                                                              =======   =======   ========
</Table>

   The accompanying notes are an integral part of these financial statements.
                                       107
<PAGE>

                                EDN SOVINTEL LLC

                            STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                YEARS ENDED DECEMBER 31
                                                              ----------------------------
                                                               1999      2000       2001
                                                              -------   -------   --------
                                                                 (IN THOUSANDS OF US$)
<S>                                                           <C>       <C>       <C>
OPERATING ACTIVITIES
Net income..................................................  $ 5,558   $10,182   $ 22,211
Adjustments to reconcile net income to net cash provided by
  operating activities:
  Depreciation..............................................    7,736     8,615      9,025
  Deferred income taxes.....................................   (1,504)       --      1,175
  Provision for doubtful accounts...........................    1,900     1,908        708
  Foreign exchange loss.....................................    1,853     1,308        355
Changes in operating assets and liabilities:
  Accounts receivable.......................................   (2,458)    1,410     (2,175)
  Inventories...............................................      392    (2,596)    (4,020)
  Inventory consigned to others.............................       --        --     (1,063)
  Prepaid expenses and other assets.........................    3,850      (557)      (843)
  VAT receivable, net.......................................    2,269      (569)     2,185
  Trade payables............................................   (1,644)   (2,870)     4,532
  Accrued liabilities and other payables....................   (2,233)    1,874      2,645
  Increase (decrease) amounts due affiliated companies,
     net....................................................   (9,382)   (1,454)      (607)
                                                              -------   -------   --------
NET CASH PROVIDED BY OPERATING ACTIVITIES...................    6,337    17,251     34,128
INVESTING ACTIVITIES -- Purchases of property and
  Equipment.................................................   (7,021)   (9,344)   (17,059)
FINANCING ACTIVITIES
  Proceeds from debt........................................    1,560        --         --
  Payment of debt...........................................   (2,008)   (3,322)       (22)
  Payment of dividends......................................   (1,011)   (3,021)    (4,000)
                                                              -------   -------   --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES.........   (1,459)   (6,343)    (4,022)
Effect of exchange rate changes on cash.....................     (329)     (195)      (267)
                                                              -------   -------   --------
Net (decrease) increase in cash.............................   (2,472)    1,369     12,780
Cash at beginning of period.................................    5,116     2,644      4,013
                                                              -------   -------   --------
CASH AT END OF PERIOD.......................................  $ 2,644   $ 4,013   $ 16,793
                                                              =======   =======   ========
</Table>

   The accompanying notes are an integral part of these financial statements.
                                       108
<PAGE>

                                EDN SOVINTEL LLC

                         STATEMENTS OF MEMBERS' EQUITY
             FOR THE YEARS ENDED DECEMBER 31, 1999, 2000, AND 2001

<Table>
<Caption>
                                                                                      TOTAL
                                                              GOLDEN       OJSC      MEMBERS'
                                                              TELECOM   ROSTELECOM    EQUITY
                                                              -------   ----------   --------
                                                                   (IN THOUSANDS OF US$)
<S>                                                           <C>       <C>          <C>
Balance at December 31, 1998................................  $26,765    $26,764     $53,529
  Dividends.................................................   (1,011)    (1,011)     (2,022)
  Net income................................................    2,779      2,779       5,558
                                                              -------    -------     -------
Balance at December 31, 1999................................  $28,533    $28,532     $57,065
  Dividends.................................................   (1,005)    (1,005)     (2,010)
  Net income................................................    5,091      5,091      10,182
                                                              -------    -------     -------
Balance at December 31, 2000................................  $32,619    $32,618     $65,237
  Dividends.................................................   (2,000)    (2,000)     (4,000)
  Net income................................................   11,105     11,106      22,211
                                                              -------    -------     -------
Balance at December 31, 2001................................  $41,724    $41,724     $83,448
                                                              =======    =======     =======
</Table>

   The accompanying notes are an integral part of these financial statements.
                                       109
<PAGE>

                                EDN SOVINTEL LLC

                         NOTES TO FINANCIAL STATEMENTS
                      (US$ AMOUNTS EXPRESSED IN THOUSANDS)

NOTE 1.  DESCRIPTION OF BUSINESS

     EDN Sovintel LLC (the "Company", "Sovintel") is a joint venture between
Sovinet, which is a wholly owned subsidiary of Golden Telecom, Inc. ("GTI") and
Open Joint Stock Company Rostelecom. Sovintel was created in 1990 to design,
construct, and operate a telecommunications network in Moscow and later expanded
its operations to other regions of Russia, including St. Petersburg, Pskov and
Kaliningrad. This network provides worldwide communications services,
principally to major hotels, business offices and mobile communication
companies.

NOTE 2.  BASIS OF PRESENTATION

     The Company maintains its records and prepares its financial statements in
Russian rubles in accordance with the requirements of Russian accounting and tax
legislation. The accompanying financial statements differ from the financial
statements used for statutory purposes in Russia in that they reflect certain
adjustments, not recorded on the Company's books, which are appropriate to
present the financial position, results of operations and cash flows in
accordance with generally accepted accounting principles in the United States of
America ("US GAAP"). The principal adjustments are related to revenue
recognition, certain accrued expenses, foreign currency translation, deferred
taxation, and depreciation and valuation of property and equipment.

NOTE 3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  USE OF ESTIMATES

     The preparation of financial statements, in conformity with US GAAP,
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.

  FOREIGN CURRENCY TRANSLATION

     The Company's functional currency is the US dollar because the majority of
its revenues, costs, property and equipment purchased, and debt and trade
liabilities are either priced, incurred, payable or otherwise measured in US
dollars. Accordingly, transactions and balances not already measured in US
dollars (primarily Russian rubles) have been re-measured into US dollars in
accordance with the relevant provisions of Statement on Financial Accounting
Standards ("SFAS") No. 52, "Foreign Currency Translation".

     Under SFAS No. 52, revenues, costs, capital and non-monetary assets and
liabilities are translated at historical exchange rates prevailing on the
transaction dates. Monetary assets and liabilities are translated at exchange
rates prevailing on the balance sheet date. Exchange gains and losses arising
from re-measurement of monetary assets and liabilities that are not denominated
in US dollars are credited or charged to operations.

     The ruble is not a convertible currency outside the territory of Russia.
Official exchange rates are determined daily by the Central Bank of Russia
("CBR") and were considered to be a reasonable approximation of market rates
until mid-August 1998. Since that date, liquidity in the CBR currency trading
and inter-bank trading has varied as have bid and offer exchange rates. As a
result, the market rates have fluctuated significantly and have diverged from
the CBR rate. Nonetheless, the various market-related rates are based on the CBR
rate. Accordingly, CBR rates have been used for translation purposes in these
financial statements. The translation of ruble denominated assets and
liabilities into US dollars for the purpose of these financial statements does
not indicate that the Company could realize or settle in US dollars the reported
values of the assets and liabilities. Likewise, it does not indicate that the
Company could return or distribute the reported US dollar values of capital and
retained earnings to its shareholders.

                                       110
<PAGE>
                                EDN SOVINTEL LLC

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     The official exchange rate as of December 31, 2000 and December 31, 2001
was 28.16 rubles and 30.14 per US dollar, respectively.

  ACCOUNTS RECEIVABLE

     Accounts receivable are shown at their estimated net realizable value which
approximates fair value. The Company generally does not require collateral to
extend credits to its customers.

  INVENTORIES

     Inventories consist of telecommunication equipment held for resale and are
stated at the lower of cost or market. Cost is computed on a weighted average
basis. At December 31, 2001, the Company held no legal title to the $1,063
inventory consigned to others, recorded as such on the balance sheet.

  PROPERTY AND EQUIPMENT

     Property and equipment are recorded at their historical cost. Depreciation
is provided on the straight-line method over the following estimated useful
lives:

<Table>
<S>                                                            <C>
Network equipment...........................................    10 years
Other property and equipment................................   3-5 years
</Table>

     There is no depreciation charge for construction-in-progress. Depreciation
commences upon completion of the related project.

  REVENUE RECOGNITION

     The Company records as revenue the amount of telecommunications rendered,
as measured primarily by the minutes of traffic processed, after deducting an
estimate of the traffic that are partial minutes and test traffic which will be
neither billed nor collected. Revenue from service contracts is accounted for
when the services are provided. Billings received in advance of service being
performed are deferred and recognized as revenue as the service is performed.
Revenues are stated net of any value-added-taxes ("VAT") charged to customers.
Certain other taxes that are based on revenues earned were incurred at rates
ranging from 1.0% to 4.0% during 1999, 2000 and 2001, and amounted to $3,666,
$3,972 and $1,131, respectively, and are charged to selling general and
administrative expenses since these are incidental to the revenue cycle.

     In accordance with the provisions of the Securities and Exchange Commission
Staff Accounting Bulletin No. 101, the Company has deferred telecommunication
connection fees and capitalized direct incremental costs related to connection
fees. The deferral of revenue and capitalization of cost of revenue will be
recognized over the estimated life of the customer. The total amount of deferred
revenue was $2,423 and $4,758 as of December 31, 2000 and 2001, respectively.
The total amount of deferred cost of revenue was $2,423 and $4,604 as of
December 31, 2000 and 2001, respectively.

     The Company recognizes revenue from equipment sales when title to the
equipment passes to the customer. The Company defers the revenue of installed
equipment until installation and testing are completed and accepted by the
customer.

  ADVERTISING

     The Company expenses the cost of advertising as incurred. Advertising
expenses for the years ended December 31, 1999, 2000 and 2001 were $1,067, $870
and $934, respectively, and are included in selling, general and administrative
expenses.

                                       111
<PAGE>
                                EDN SOVINTEL LLC

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  INCOME TAXES

     The Company computes and records income taxes in accordance with SFAS No.
109, "Accounting for Income Taxes."

  INVESTMENT INCENTIVE DEDUCTIONS

     Russian legislation allows for certain additional tax deductions related to
new asset investments. These deductions are accounted for as a reduction to
current income taxes in the year in which they arise.

  GOVERNMENT PENSION FUNDS

     The Company contributes to the Russian Federation state pension fund,
social fund, medical insurance fund, unemployment fund and transport fund on
behalf of all its Russian employees. Contributions were 38.5% and 38.8% from
base payroll for 1999 and 2000, respectively and were ranging from 35.6% to 5%
regressive to the respective individual employee's base payroll in 2001.

  FAIR VALUE OF FINANCIAL INSTRUMENTS

     The fair value of financial instruments included in current assets and
liabilities approximates the carrying value.

  COMPREHENSIVE INCOME

     Comprehensive income is defined as the change in equity of a business
enterprise during a period from non-owner sources. For the years ended December
31, 1999, 2000 and 2001, comprehensive income for the Company is equal to net
income.

  BUSINESS SEGMENTS

     Effective January 1, 1998, the Company adopted the SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information". SFAS No.
131 changes the way public companies report segment information in annual
financial statements and also requires those companies to report selected
segment information in interim financial reports to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. Management believes the Company's
operations comprise only one segment and as such adoption of SFAS No. 131 did
not impact the disclosures made in the Company's financial statements.

  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
was amended in June 1999. The Company adopted the new statement effective
January 1, 2001. The statement requires the Company to recognize all derivatives
on the balance sheet at fair value. The adoption of this new statement did not
have an effect on the Company's results of operations or financial position.

  GOODWILL AND INTANGIBLE ASSETS

     In July 2001, the FASB issued SFAS's No. 141, "Business Combinations", and
No. 142, "Goodwill and Other Intangible Assets", effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the Statements. Other
intangible assets will continue to be amortized over their useful lives. The
Company will apply the new rules on accounting for goodwill and other

                                       112
<PAGE>
                                EDN SOVINTEL LLC

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

intangible assets beginning in the first quarter of 2002. The Company does not
anticipate that the adoption of the new statements will have an effect on the
Company's results of operations or financial position.

  ASSET RETIREMENT OBLIGATIONS

     In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This statement deals with the costs of closing
facilities and removing assets. SFAS No. 143 requires entities to record the
fair value of a legal liability for an asset retirement obligation in the period
it is incurred. This cost is initially capitalized and amortized over the
remaining life of the asset. Once the obligation is ultimately settled, any
difference between the final cost and the recorded liability is recognized as a
gain or loss on disposition. SFAS No. 143 is effective for years beginning after
June 15, 2002. The Company is currently evaluating the impact the pronouncement
will have on future financial statements.

  LONG-LIVED ASSETS

     In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of," long-lived
assets to be held and used by the Company are reviewed to determine whether an
event or change in circumstances indicates that the carrying amount of the asset
may not be recoverable. For long-lived assets to be held and used, the Company
bases its evaluation on such impairment indicators as the nature of the assets,
the future economic benefit of the assets, any historical or future
profitability measurements, as well as other external market conditions or
factors that may be present. If such impairment indicators are present or other
factors exist that indicate that the carrying amount of the asset may not be
recoverable, the Company determines whether an impairment has occurred through
the use of an undiscounted cash flows analysis of assets at the lowest level for
which identifiable cash flows exist. During the years ended December 31, 1999,
2000 and 2001, no impairment expense was recognized.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement addresses financial
accounting and reporting for the impairment of disposal of long-lived assets and
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," and the accounting and reporting
provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results
of Operations -- Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,"
for the disposal of a segment of a business (as previously defined in that
opinion). This statement also amends Accounting Research Bulletin No. 41,
"Consolidated Financial Statements", to eliminate the exception to consolidation
for a subsidiary for which control is likely to be temporary. The provisions of
the statement will be effective for financial statements issued for fiscal years
beginning after December 15, 2001. The Company plans to adopt this new standard
from January 1, 2002 and is currently evaluating the impact the pronouncement
will have on future consolidated financial statements.

  COMPARATIVE FIGURES

     Certain the 1999 and 2000 amounts have been reclassified to conform to the
presentation adopted in the current year.

                                       113
<PAGE>
                                EDN SOVINTEL LLC

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4.  PROPERTY AND EQUIPMENT

     Property and equipment consists of the following at December 31:

<Table>
<Caption>
                                                                2000       2001
                                                              --------   --------
<S>                                                           <C>        <C>
Network equipment...........................................  $ 73,338   $ 81,686
Other property and equipment................................     8,743     10,019
                                                              --------   --------
                                                                82,081     91,705
Accumulated depreciation....................................   (35,870)   (40,003)
Construction-in-progress....................................     5,129      8,423
                                                              --------   --------
Net book value..............................................  $ 51,340   $ 60,125
                                                              ========   ========
</Table>

NOTE 5.  INCOME TAXES

     The Russian Federation was the only tax jurisdiction in which the Company's
income was taxed. The income tax expense reported in the accompanying statements
of income, for the years ended December 31, 1999, 2000 and 2001 represents the
provision for current and deferred taxes.

     Significant components of the provision for income taxes for the years
ended December 31 are as follows:

<Table>
<Caption>
                                                             1999      2000     2001
                                                            -------   ------   ------
<S>                                                         <C>       <C>      <C>
Current tax expense.......................................  $ 9,111   $7,277   $6,315
Deferred tax expense (benefit)............................   (1,504)      --    1,175
                                                            -------   ------   ------
Provision for income taxes................................  $ 7,607   $7,277   $7,490
                                                            =======   ======   ======
</Table>

     A reconciliation between the statutory rate and the effective income tax
rate is as follows for the years ended December 31:

<Table>
<Caption>
                                                            1999     2000      2001
                                                           ------   -------   -------
<S>                                                        <C>      <C>       <C>
Income tax expense at statutory tax rate of 35%; 30% from
  April 1, 1999 through December 31, 2000................  $3,950   $ 5,238   $10,395
Tax effect of permanent differences:
  Effect of change in tax rate...........................      91      (431)      304
  Investment incentive deductions........................    (879)   (1,814)   (4,563)
  Depreciation differences due to revaluation of fixed
     assets..............................................     997     1,074     1,010
  Taxes on local currency exchange gains.................   1,204        --       596
  Other permanent differences............................   2,526       334       928
Increase (decrease) in the valuation allowance for
  deferred tax assets....................................    (282)    2,876    (1,180)
                                                           ------   -------   -------
Income tax expense reported in the financial
  statements.............................................  $7,607   $ 7,277   $ 7,490
                                                           ======   =======   =======
</Table>

     In the third quarter of 2001, the change in the tax rate from 35% to 24%
was enacted and will become effective January 1, 2002.

                                       114
<PAGE>
                                EDN SOVINTEL LLC

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     The deferred tax balances are calculated by applying the statutory tax
rates in effect at the respective balance sheet dates to the temporary
differences between the tax basis of assets and liabilities and the amount
reported in the accompanying financial statements, and consist of the following
at December 31:

<Table>
<Caption>
                                                           1999      2000      2001
                                                          -------   -------   -------
<S>                                                       <C>       <C>       <C>
Deferred tax assets (liabilities):
  Deferred revenue......................................  $    --   $ 1,095   $ 1,400
  Depreciation..........................................      492       931       785
  Inventory write-downs and allowances..................      150       248        96
  Accrual of expenses...................................      749       641       717
  Reserve for bad debt..................................      186       951     1,033
                                                          -------   -------   -------
Gross tax assets........................................    1,577     3,866     4,031
  Accrual of revenue....................................     (515)       --    (2,158)
  Taxes on unrealized local currency exchange gains.....     (920)       --        --
  Deferred cost of revenue..............................       --      (848)   (1,210)
                                                          -------   -------   -------
Gross tax liabilities...................................   (1,435)     (848)   (3,368)
                                                          -------   -------   -------
Net deferred tax assets.................................      142     3,018       663
Valuation allowance for deferred tax assets.............     (828)   (3,704)   (2,524)
                                                          -------   -------   -------
Net deferred tax liabilities............................  $  (686)  $  (686)  $(1,861)
                                                          =======   =======   =======
</Table>

     For financial reporting purposes, a valuation allowance has been recognized
to reflect management's estimate of the deferred tax assets that are less likely
than not to be realized.

     The Company paid Russian profits tax of $7,889, $7,231 and $4,572 in 1999,
2000 and 2001, respectively.

NOTE 6.  SHORT-TERM LOAN

     In September 2000, the Company entered into a credit facility with
Citibank. This loan replaces a previous three-year credit facility that expired
on September 30, 2000. The new facility provides funds up to a combined maximum
amount of $10,000 for the Company and one other related entity. The facility is
structured as an extendable 180 day note that may be extended indefinitely at
the discretion of Citibank provided that the Security Agreement between GTS
Finance, Inc. (a related entity) and Citibank is in place and continues to be
valid. The loan carries interest at an annual rate equal to the 180 day LIBOR
plus 1%. Drawings under this agreement by the Company were zero at December 31,
2000 and 2001.

     The Company paid interest relating to notes due to affiliates and
short-term loans of $388, $141, and $0 in 1999, 2000 and 2001, respectively.

                                       115
<PAGE>
                                EDN SOVINTEL LLC

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7.  MEMBERS' EQUITY

     The Company's capital structure as specified in the charter capital
document is as follows as of December 31:

<Table>
<Caption>
                                                               2000     2001
                                                              ------   ------
<S>                                                           <C>      <C>
Registered capital in Russian rubles:
  Rostelecom................................................     600      600
  Golden Telecom, Inc. .....................................     600      600
                                                              ------   ------
                                                               1,200    1,200
                                                              ======   ======
Historical value of the Company's capital in US dollars.....  $2,000   $2,000
                                                              ======   ======
</Table>

     As a Russian limited liability company, the Company has no capital stock;
rather, it has only contributed and locally registered capital in accordance
with its charter. As such, no earnings per share data are presented in these
financial statements.

     Retained earnings available for distribution at December 31, 2001 amounted
to 948 million rubles or approximately $31,453 at applicable year-end exchange
rate.

NOTE 8.  RELATED PARTY TRANSACTIONS

     Transactions and balances with Rostelecom (one of the Company's members)
and its affiliates were as follows, as of and for the years ended December 31:

<Table>
<Caption>
                                                             1999     2000     2001
                                                            ------   ------   -------
<S>                                                         <C>      <C>      <C>
Sales.....................................................  $  412   $  719   $   854
Telecommunication lease and traffic costs.................   7,932    9,470    11,723
Amounts due to member and affiliates......................   1,092    1,581     1,552
</Table>

     Transactions and balances with GTI and its affiliates were as follows, as
of and for the years ended December 31:

<Table>
<Caption>
                                                              1999     2000     2001
                                                             ------   ------   ------
<S>                                                          <C>      <C>      <C>
Sales......................................................  $3,334   $5,347   $6,489
Telecommunication services.................................   9,246    8,456    8,902
Management service fees and reimbursements of expenses of
  expatriate staff.........................................     976      468      468
Amounts due from affiliates................................     646      507    1,912
Amounts due to member and affiliates.......................   2,600      536    1,496
</Table>

     Transactions with MTU Inform, an entity with which the Company entered into
a commercial agreement to co-develop and operate phone exchange operations,
include $11,549 of telecommunication settlement and rent expense for the year
ended December 31, 1999.

     The Company also has an investment in the cost of the related network
equipment owned by MTU Inform, which is reflected in the balance sheet, net of
related amortization, as deferred expenses. In 1999, Golden Telecom, Inc.
acquired the remaining 5% of TCM, which had been held by MTU-Inform.

     The Company held its cash and cash equivalents in Alfa Bank, which is a
major shareholder of GTI. The related amount of cash and cash equivalents held
at Alfa Bank at December 31, 2001 was $6,460.

                                       116
<PAGE>
                                EDN SOVINTEL LLC

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9.  CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

     Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of temporary cash deposits and trade accounts
receivable. The Company deposits the majority of its available cash with two
foreign-owned financial institutions in Russia and maintains certain balances
with several Russian financial institutions. The Company's sales and accounts
receivable are made to and due from a variety of international and Russian
business customers within Russia. As of December 31, 1999, one customer
accounted for 10% of revenues and 5% of accounts receivable. The same customer
accounted for 11% of revenues and 5% of accounts receivable at December 31, 2000
and that same customer accounted for 10% of revenue and 6% of accounts
receivable at December 31, 2001. The Company has no other significant
concentrations of credit risk except for transactions with related parties as
discussed in Note 8.

NOTE 10.  COMMITMENTS

     The Company has several cancelable operating leases for office and
warehouse space and telecommunications lines with terms ranging from one to five
years.

     Total rent expense for 1999, 2000 and 2001 was $4,019, $3,958 and $2,860,
respectively.

NOTE 11.  CONTINGENCIES

     The tax, legal and banking regulatory system continues to evolve in the
Russian Federation as the Russian government manages the transformation from a
command to a market-oriented economy. There were many new tax and foreign
currency laws and related regulations introduced during 2000, 2001 and previous
years which were not always clearly written and were, at times, conflicting. In
addition, their interpretation is subject to the opinions of a variety of local,
regional and federal tax inspectors, the Central Bank of Russia officials and
the Ministry of Finance. Instances of inconsistent opinions among and between
these authorities are not unusual.

     The Company's policy is to accrue contingencies in the accounting period in
which a loss is deemed probable and the amount is reasonably determinable. In
this regard, because of the uncertainties associated with the Russian tax and
legal systems, the ultimate taxes as well as penalties and interest, if any,
assessed may be in excess of the amounts paid to date and accrued as of December
31, 2001. Management believes, based upon its best estimates, that the Company
has paid or accrued all taxes that are applicable for the current and prior
years, and complied with all essential provisions of laws and regulations of the
Russian Federation. In management's opinion, the ultimate determination of the
Company's overall tax liability and potential loss contingencies, to the extent
not previously provided for, will not have a material effect on the financial
position of the Company.

     The Company's operations and financial position will continue to be
affected by Russian political developments including the application of existing
and future legislation and tax regulations, which significantly impact the
Russian economy. The likelihood of such occurrences and their effect on the
Company could have a significant impact on the Company's current activity and
its overall ability to continue operations. The Company does not believe that
these contingencies, as related to its operations, are any more significant than
those of similar enterprises in Russia.

     In the ordinary course of business, the Company may be party to various
legal and tax proceedings, and subject to claims, certain of which relate to the
developing markets and evolving fiscal and regulatory environments in which the
Company operates. In the opinion of the management, the Company's liability, if
any, in all pending litigation, other legal proceeding or other matter other
than what is discussed above, will not have a material effect upon the financial
condition, results of operations or liquidity of the Company.

                                       117
<PAGE>
                                EDN SOVINTEL LLC

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 12.  SUBSEQUENT EVENTS

     In November 2001, the Company's 50% owners, GTI and Rostelecom, announced
the signing of a Memorandum of Understanding ("MOU") for GTI to acquire
Rostelecom's 50% ownership in the Company. In March 2002, GTI and Rostelecom
executed a Sale and Purchase agreement finalizing the terms of the acquisition.
The closure of the transaction is dependent upon the performance or fulfillment
of a number of conditions precedent, including the receipt of necessary
regulatory approvals from currency control and anti-trust agencies in Russia and
the United States. The Company expects closure of the transaction to be by the
end of the second quarter of 2002.

                                       118
<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

     None

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

     The information required by Item 10 is incorporated herein by reference to
the section entitled "Directors and Executive Officers of the Company" of our
proxy statement for our 2002 Annual Meeting of Shareholders that we will file by
April 30, 2002.

ITEM 11.  EXECUTIVE COMPENSATION

     The information required by Item 11 is incorporated herein by reference to
the section entitled "Executive Compensation" of our proxy statement for our
2002 Annual Meeting of Shareholders that we will file by April 30, 2002.

ITEM 12.  SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by Item 12 is incorporated herein by reference to
the section entitled "Security Ownership and Certain Beneficial Owners and
Management" of our proxy statement for our 2002 Annual Meeting of Shareholders
that we will file by April 30, 2002.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by Item 13 is incorporated herein by reference to
the section entitled "Certain Relationships and Related Transactions" of our
proxy statement for our 2002 Annual Meeting of Shareholders that we will file by
April 30, 2002.

                                    PART IV

ITEM 14.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     (a) The following documents are filed as part of this report:

          1. Financial Statements

             The following consolidated financial statements of the Company are
        included as part of this document:

           - Report of Independent Auditors

           - Consolidated Balance Sheets as of December 31, 2000 and 2001

           - Consolidated Statements of Operations for the years ended December
             31, 1999, 2000 and 2001

           - Consolidated Statements of Cash Flows for the years ended December
             31, 1999, 2000 and 2001

           - Consolidated Statements of Changes in Shareholders' Equity for the
             years ended December 31, 1999, 2000 and 2001

           - Notes to Consolidated Financial Statements

                                       119
<PAGE>

             The following financial statements of our significant equity
        investee, EDN Sovintel LLC, are included as part of this document:

           - Report of Independent Auditors

           - Balance Sheets as of December 31, 2000 and 2001

           - Statements of Income for the years ended December 31, 1999, 2000
             and 2001

           - Statements of Cash Flows for the years ended December 31, 1999,
             2000 and 2001

           - Statements of Members' Equity for the years Ended December 31,
             1999, 2000 and 2001

           - Notes to Financial Statements

          2. Consolidated Financial Statement Schedules

             We have furnished Schedule II -- Valuation and Qualifying Accounts
        on Page 101.

             All other schedules are omitted because they are not applicable or
        not required, or because the required information is either incorporated
        herein by reference or included in the financial statements or notes
        thereto included in this report.

     (b) Reports on Form 8-K

          No such reports were filed in the fourth quarter of 2001.

     (c) Exhibits

<Table>
<Caption>
 DESIGNATION                            DESCRIPTION
 -----------                            -----------
<C>             <S>
 3.1**          Amended and Restated Certificate of Incorporation of Golden
                Telecom, Inc.
 3.2**          Amended and Restated By-laws of Golden Telecom, Inc.
10.1**          Specimen certificate representing shares of Common Stock
10.2**          Form of Registration Rights Agreement between Global
                TeleSystems Group, Inc. and Golden Telecom, Inc.
10.3**          Form of Registration Rights Agreement among Baring Vostok
                Private Equity Fund LP, Guernsey, First NIS Regional Fund
                SICAV and Golden Telecom, Inc.
10.4*******     Amendment to the Shareholders and Registration Rights
                Agreement between Golden Telecom, Inc., Global TeleSystems
                Europe Holdings B.V., and Capital International Global
                Emerging Markets Private Equity Fund, L.P.
10.5***         Form of Shareholders and Registration Rights Agreement
                between Capital International Global Emerging Markets
                Private Equity Fund L.P., Global TeleSystems Group, Inc.,
                and Golden Telecom, Inc.
10.6(a)*****    Golden Telecom, Inc. 1999 Equity Participation Plan.
10.6(b)******   Amendment to the Golden Telecom, Inc. 1999 Equity
                Participation Plan.
10.7**          Agreement No. 26-12/97, dated December 26, 1997, among TCM,
                MTU-Inform and VimpelCom.
10.8**          Agreement No. 08-04/98, dated April 8, 1998, among TCM,
                MTU-Inform and VimpelCom.
10.9**          Agreement No. 01-08/98, dated August 1, 1998, among TCM,
                MTU-Inform and KB-Impulse.
10.10****       Agreement No. 311299-TP, dated December 31, 1999, among
                TeleRoss, KB-Impulse and VimpelCom.
10.11****       Form of Employment Agreement for the officers of Golden
                Telecom, Inc.
10.12*          List of officers of Golden Telecom, Inc. as of December 31,
                2001, re Exhibit 10.11 above.
</Table>

                                       120
<PAGE>

<Table>
<Caption>
 DESIGNATION                            DESCRIPTION
 -----------                            -----------
<C>             <S>
10.13*******    Share Purchase Agreement between Global TeleSystems, Inc.,
                Alfa Bank Holdings Limited, Capital International Global
                Emerging Markets Private Equity Fund, L.P., Cavendish
                Nominees Limited and First NIS Regional Fund SICAV.
10.14*******    Standstill Agreement between Alfa Telecom Limited, Global
                TeleSystems, Inc., Capital International Global Emerging
                Markets Private Equity Fund, L.P., Cavendish Nominees
                Limited, First NIS Regional Fund SICAV and Golden Telecom,
                Inc.
10.15*******    Shareholders Agreement between Golden Telecom, Inc., Global
                TeleSystems Europe Holdings B.V., Alfa Telecom Limited,
                Capital International Global Emerging Markets Private Equity
                Fund, L.P., Cavendish Nominees Limited, and First NIS
                Regional Fund SICAV.
10.16*******    Assignment and Amendment Agreement between Golden Telecom,
                Inc., Baring Vostok Private Equity Fund, First NIS Regional
                Fund SICAV and Cavendish Nominees Limited.
10.17*******    Termination and Release Agreement between Global
                TeleSystems, Inc. and Golden Telecom, Inc.
21.1*           List of subsidiaries of Golden Telecom, Inc.
23.1*           Consent of Ernst & Young (CIS) Limited, Independent Auditors
                (Golden Telecom, Inc.).
23.2*           Consent of Ernst & Young (CIS) Limited, Independent Auditors
                (EDN Sovintel LLC).
24*             Powers of Attorney (included on signature page).
99.1***         Subscription Agreement between Capital International Global
                Emerging Markets Private Equity Fund L.P., and Golden
                Telecom, Inc.
</Table>

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

       * Filed herewith.

      ** Incorporated by reference to the correspondingly numbered Exhibit to
         the Company's registration statement on Form S-1 dated July 14, 1999
         and amendments (Commission File No. 333-82791).

     *** Incorporated by reference to the correspondingly numbered Exhibits to
         Schedule 13D of Capital International Global Emerging Markets Private
         Equity Fund L.P., dated December 27, 1999 (Commission File No.
         005-56995).

   **** Incorporated by reference to the correspondingly numbered Exhibit to the
        Company's annual report on Form 10-K dated March 21, 2000 (Commission
        File No. 0-27423).

  ***** Incorporated by reference to the Company's definitive proxy statement on
        Form DEF-14A dated April 25, 2000 (Commission File No. 0-27423).

 ****** Incorporated by reference to the Company's definitive proxy statement on
        Form DEF-14A dated May 23, 2001 (Commission File No. 0-27423).

******* Incorporated by reference to the Company's current report on Form 8-K
        dated May 11, 2001 (Commission File 0-27423).

                                       121
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act 1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Moscow, Russian Federation, on this 25th day of March, 2002.

                                          GOLDEN TELECOM, INC.

                                          By:       /s/ DAVID STEWART
                                            ------------------------------------
                                            Name: David Stewart
                                            Title:   Chief Financial Officer and
                                                     Treasurer
                                                (Principal Financial Officer)

                                          By:        /s/ MARK BURDEN
                                            ------------------------------------
                                            Name: Mark Burden
                                            Title:   Corporate Controller
                                                (Principal Accounting Officer)

     We, the undersigned officers and directors of Golden Telecom, Inc. hereby
severally constitute and appoint, Jeffrey A. Riddell, and David Stewart and each
of them singly, as his true and lawful attorney-in-fact and agents with full
power of substitution and resubstitution, for him, and in his name, place and
stead, in any and all capacities to sign any and all amendments and supplements
to this annual report on Form 10-K and all amendments thereto, and to file the
same, with all exhibits thereto, and all other documents in connection
therewith, in each case, with our names and on our behalf in our capacities as
officers and directors to enable Golden Telecom, Inc. to comply with the
provisions of the Securities Exchange Act of 1934, as amended, and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorney to said
annual report on Form 10-K and any and all amendments thereto.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities
indicated on the 25th day of March, 2002.

<Table>
<Caption>
                    SIGNATURE                                      TITLE                       DATE
                    ---------                                      -----                       ----
<S>     <C>                                          <C>                                  <C>

             /s/ ALEXANDER VINOGRADOV                President, Chief Executive Officer   March 25, 2002
 ------------------------------------------------    and Director (Principal Executive
               Alexander Vinogradov                               Officer)


                /s/ DAVID STEWART                       Chief Financial Officer and       March 25, 2002
 ------------------------------------------------                Treasurer
                  David Stewart


                /s/ STAN ABBELOOS                                 Director                March 25, 2002
 ------------------------------------------------
                  Stan Abbeloos


                  /s/ PETER AVEN                     Chairman of the Board of Directors   March 25, 2002
 ------------------------------------------------
                    Peter Aven
</Table>

                                       122
<PAGE>

<Table>
<Caption>
                    SIGNATURE                                      TITLE                       DATE
                    ---------                                      -----                       ----

<S>     <C>                                          <C>                                  <C>

              /s/ TIGRAN AGADZHANOV                               Director                March 25, 2002
 ------------------------------------------------
                Tigran Agadzhanov


                /s/ MICHAEL CALVEY                                Director                March 25, 2002
 ------------------------------------------------
                  Michael Calvey


                /s/ ASHLEY DUNSTER                                Director                March 25, 2002
 ------------------------------------------------
                  Ashley Dunster


                 /s/ IZZET GUNEY                                  Director                March 25, 2002
 ------------------------------------------------
                   Izzet Guney


                /s/ ANDREY KOSOGOV                                Director                March 25, 2002
 ------------------------------------------------
                  Andrey Kosogov
</Table>

                                       123
<PAGE>

                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

                              GOLDEN TELECOM, INC.

<Table>
<Caption>
                COL. A                     COL. B              COL. C               COL. D       COL. E
                ------                   ----------   -------------------------   ----------   ----------
                                                              ADDITIONS
                                                      -------------------------
                                         BALANCE AT   CHARGED TO     RESERVES                  BALANCE AT
                                         BEGINNING    COSTS AND        FROM                      END OF
DESCRIPTION                              OF PERIOD     EXPENSES    ACQUISITIONS   DEDUCTIONS     PERIOD
-----------                              ----------   ----------   ------------   ----------   ----------
<S>                                      <C>          <C>          <C>            <C>          <C>
Allowance for doubtful accounts at
  12/31/01.............................    3,124        2,548           52          (1,924)      3,800
Allowance for doubtful accounts at
  12/31/00.............................    4,010          807           --          (1,693)      3,124
Allowance for doubtful accounts at
  12/31/99.............................    4,208        1,288           --          (1,486)      4,010
</Table>

                                EDN SOVINTEL LLC

<Table>
<Caption>
                COL. A                     COL. B              COL. C               COL. D       COL. E
                ------                   ----------   -------------------------   ----------   ----------
                                                              ADDITIONS
                                                      -------------------------
                                         BALANCE AT   CHARGED TO     RESERVES                  BALANCE AT
                                         BEGINNING    COSTS AND        FROM                      END OF
DESCRIPTION                              OF PERIOD     EXPENSES    ACQUISITIONS   DEDUCTIONS     PERIOD
-----------                              ----------   ----------   ------------   ----------   ----------
<S>                                      <C>          <C>          <C>            <C>          <C>
Allowance for doubtful accounts at
  12/31/01.............................    4,981          708           --            (738)      4,951
Allowance for doubtful accounts at
  12/31/00.............................    3,364        1,908           --            (291)      4,981
Allowance for doubtful accounts at
  12/31/99.............................    2,427        1,900           --            (963)      3,364
</Table>

                                       124
<PAGE>

                                 EXHIBIT INDEX

<Table>
<Caption>
 DESIGNATION                            DESCRIPTION
 -----------                            -----------
<C>             <S>
 3.1**          Amended and Restated Certificate of Incorporation of Golden
                Telecom, Inc.
 3.2**          Amended and Restated By-laws of Golden Telecom, Inc.
10.1**          Specimen certificate representing shares of Common Stock
10.2**          Form of Registration Rights Agreement between Global
                TeleSystems Group, Inc. and Golden Telecom, Inc.
10.3**          Form of Registration Rights Agreement among Baring Vostok
                Private Equity Fund LP, Guernsey, First NIS Regional Fund
                SICAV and Golden Telecom, Inc.
10.4*******     Amendment to the Shareholders and Registration Rights
                Agreement between Golden Telecom, Inc., Global TeleSystems
                Europe Holdings B.V., and Capital International Global
                Emerging Markets Private Equity Fund, L.P.
10.5***         Form of Shareholders and Registration Rights Agreement
                between Capital International Global Emerging Markets
                Private Equity Fund L.P., Global TeleSystems Group, Inc.,
                and Golden Telecom, Inc.
10.6(a)*****    Golden Telecom, Inc. 1999 Equity Participation Plan.
10.6(b)******   Amendment to the Golden Telecom, Inc. 1999 Equity
                Participation Plan.
10.7**          Agreement No. 26-12/97, dated December 26, 1997, among TCM,
                MTU-Inform and VimpelCom.
10.8**          Agreement No. 08-04/98, dated April 8, 1998, among TCM,
                MTU-Inform and VimpelCom.
10.9**          Agreement No. 01-08/98, dated August 1, 1998, among TCM,
                MTU-Inform and KB-Impulse.
10.10****       Agreement No. 311299-TP, dated December 31, 1999, among
                TeleRoss, KB-Impulse and VimpelCom.
10.11****       Form of Employment Agreement for the officers of Golden
                Telecom, Inc.
10.12*          List of officers of Golden Telecom, Inc. as of December 31,
                2001, re Exhibit 10.11 above.
10.13*******    Share Purchase Agreement between Global TeleSystems, Inc.,
                Alfa Bank Holdings Limited, Capital International Global
                Emerging Markets Private Equity Fund, L.P., Cavendish
                Nominees Limited and First NIS Regional Fund SICAV.
10.14*******    Standstill Agreement between Alfa Telecom Limited, Global
                TeleSystems, Inc., Capital International Global Emerging
                Markets Private Equity Fund, L.P., Cavendish Nominees
                Limited, First NIS Regional Fund SICAV and Golden Telecom,
                Inc.
10.15*******    Shareholders Agreement between Golden Telecom, Inc., Global
                TeleSystems Europe Holdings B.V., Alfa Telecom Limited,
                Capital International Global Emerging Markets Private Equity
                Fund, L.P., Cavendish Nominees Limited, and First NIS
                Regional Fund SICAV.
10.16*******    Assignment and Amendment Agreement between Golden Telecom,
                Inc., Baring Vostok Private Equity Fund, First NIS Regional
                Fund SICAV and Cavendish Nominees Limited.
10.17*******    Termination and Release Agreement between Global
                TeleSystems, Inc. and Golden Telecom, Inc.
21.1*           List of subsidiaries of Golden Telecom, Inc.
23.1*           Consent of Ernst & Young (CIS) Limited, Independent Auditors
                (Golden Telecom, Inc.).
23.2*           Consent of Ernst & Young (CIS) Limited, Independent Auditors
                (EDN Sovintel LLC).
24*             Powers of Attorney (included on signature page).
99.1***         Subscription Agreement between Capital International Global
                Emerging Markets Private Equity Fund L.P., and Golden
                Telecom, Inc.
</Table>
<PAGE>

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

       * Filed herewith.

      ** Incorporated by reference to the correspondingly numbered Exhibit to
         the Company's registration statement on Form S-1 dated July 14, 1999
         and amendments (Commission File No. 333-82791).

     *** Incorporated by reference to the correspondingly numbered Exhibits to
         Schedule 13D of Capital International Global Emerging Markets Private
         Equity Fund L.P., dated December 27, 1999 (Commission File No.
         005-56995).

   **** Incorporated by reference to the correspondingly numbered Exhibit to the
        Company's annual report on Form 10-K dated March 21, 2000 (Commission
        File No. 0-27423).

  ***** Incorporated by reference to the Company's definitive proxy statement on
        Form DEF-14A dated April 25, 2000 (Commission File No. 0-27423).

 ****** Incorporated by reference to the Company's definitive proxy statement on
        Form DEF-14A dated May 23, 2001 (Commission File No. 0-27423).

******* Incorporated by reference to the Company's current report on Form 8-K
        dated May 11, 2001 (Commission File 0-27423).