##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 Form 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 0-27423
 Golden Telecom, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    51-0391303(State of incorporation)
    
    (I.R.S. Employer Identification No.)
 REPRESENTATION OFFICE OF GOLDEN TELESERVICES, INC.
1 Kozhevnichesky Proezd
Moscow, Russia 115114
 (011-7-495) 797-9300
 Title of each class:
    
    Name of each exchange on which registered:Common Stock, $0.01 par value per share
    
    None
 Securities registered pursuant to Section 12(g) of the Act: None
 þ o
 o þ
 þ o
 þ
  Large accelerated filer
þ
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



GOLDEN TELECOM, INC.
FORM 10-K
Year Ended December 31, 2007
 TABLE OF CONTENTS
 PagePART IITEM 1.
    
    Business
    
    3ITEM 1A.
    
    Risk Factors

    24ITEM 1B.
    
    Unresolved Staff Comments

    29ITEM 2.
    
    Properties

    29ITEM 3.
    
    Legal Proceedings

    30ITEM 4.
    
    Submission of Matters to a Vote of Security Holders

    30PART IIITEM 5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

    31ITEM 6.
    
    Selected Financial Data

    33ITEM 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations

    35ITEM 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk

    64ITEM 8.
    
    Financial Statements and Supplementary Data

    66ITEM 9.
    
    Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

    105ITEM 9A.
    
    Control and Procedures

    105ITEM 9B.
    
    Other Information

    109PART IIIITEM 10.
    
    Directors and Executive Officers of the Registrant

    110ITEM 11.
    
    Executive Compensation

    112ITEM 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

    125ITEM 13.
    
    Certain Relationships and Related Transactions

    125ITEM 14.
    
    Principal Accountant Fees and Services

    128PART IVITEM 15.
    
    Exhibits and Financial Statement Schedules

    129SIGNATURES

    132Schedule of Compensation Arrangements with DirectorsShareholders' AgreementList of SubsidiariesCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




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PART I
 
 ITEM 1. Business
 Introduction
   
    
    Business and Corporate Services. Using our fiber optic and satellite-based networks in
and between major metropolitan areas of Russia, Ukraine and other countries of the CIS, we
provide business and corporate services including voice and data services to corporate
clients across all geographical markets and all industry segments, other than
telecommunications operators;
    
    Carrier and Operator Services.Using our fiber optic and satellite-based networks in and
between major metropolitan areas of Russia, Ukraine and other countries of the CIS, we
provide a range of carrier and operator services including voice and data services to
foreign and Russian telecommunications and mobile operators;
    
    Consumer Internet Services.Using our fiber optic and satellite-based networks, we
provide Internet access to the consumer market and web content offered through a family of
Internet portals throughout Russia, Ukraine, Kazakhstan, and Uzbekistan; and
    
    Mobile Services. Using our mobile networks in Moscow and 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
  Business Strategy
  
    
    Increase Market Share by Offering Bundled Data and Voice Services over an Integrated
Network
  3




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
    
    Deepening and widening of our corporate customer base in Moscow and St. Petersburg
  
    
    Acceleration of our regional expansion to become a national market player in both
corporate and retail market segments
  
    
    Becoming a leading provider of broadband access in Russia and the CIS
  Our Position in the Russian and CIS Markets
  
    
    our early market entry and local market experience;
    
    our focus on service, quality and reliability;
    
    our strong infrastructure position in major cities throughout Russia, Ukraine, Kazakhstan
and Uzbekistan;
    
    our extensive customer base; and
    
    our extensive range of integrated voice, data and Internet telecommunications services;
 Corporate History and Development
 Golden Telecom, Inc.,
  4




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5




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Regulatory Environment
 Russia
       Ukraine
  6




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Customer Base
   Corporate Network Customers.
 Corporate End-Users.
 Small and Medium Enterprises.
 Fixed-Line Operators.
 Cellular Operators.
 Mass Market.
  7




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Pricing
  Our Service Groups
  Business and Corporate Services (BCS)
 BCS Services in Russia
  Services and Customers
 Local Access Services.
 International and Domestic Long Distance Services
  Dedicated Internet and Data Services.
 Integrated Voice and Data Services.
 8




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Value-Added Services.
 Equipment Sales.
  Marketing and Pricing
  ,
   Competition
  
    
    Comstar-UTS, a subsidiary of Sistema Telecom, including Moscow City Telephone Network
(MGTS) for all services provided to corporate customers and the SME market in Moscow;
    
    Equant, trading as Orange Business Services, a subsidiary of France Telecom, for
corporate data networking services across Russia;
    
    TransTelecom, currently owned by the Russian Railways, for corporate data networking
services across Russia;
    
    Peterstar, an affiliate of Telecominvest, for services provided in St. Petersburg; and
 9




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
    
    Regional subsidiaries of Svyazinvest, a holding group with a majority government
ownership, for services provided in St. Petersburg and within Russian regional cities.
 BCS Services in Ukraine
      Services and Customers
 Local Access Services .
 International and Domestic Long Distance Services .
 Dedicated Internet and Data Services.
 Voice over Data Services.
 10




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Information Services.
 Call Center Services .
 Residential Telecommunications Services.
 FMC Services.
  Marketing and Pricing
   Competition
     Carrier and Operator Services
 Carrier and Operator Services in Russia
  11




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Services and Customers
 Voice Services:
  12




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Data Services:
   Marketing and Pricing
     13




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Competition
    Carrier and Operator Services in Ukraine
 Services and Customers.
 International and Domestic Long Distance Services.
     Marketing and Pricing
  14




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Competition
  Consumer Services
 Services and Customers
 Broadband Internet Access.
 FTTB Services
  Wireless Internet Access.
   VoIP.
 Dial-up Internet Access.
 15




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Internet Portals.
 Marketing and Pricing
 Dial-up Internet .
 Wireless Internet Access.
 
    
    Sometimes is a rate plan convenient for occasional WiFi users. Sometimes allows
customers to pay only for time spent accessing the wireless network. Customers prepay
for one hour of Internet use and can use it all at once or connect several times until
the time expires;
    
    Day&Night is a rate plan that offers unlimited wireless access with no limits on
traffic or speed for 24 hours; and
    
    Always is an unlimited use rate plan for active Internet users. Customers pay a
fixed monthly fee and unlimited access is granted to the WiFi network.
 FTTB Services
  Competition
  Mobile Services
 Golden Telecom GSM
   16




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Services and Customers
 Mobile Services.
  Marketing and Pricing
    Competition
    Website Access to Our Filings
 http://www.goldentelecom.com http://www.sec.gov
 17




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Employees
   18




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Significant Licenses
  License
    
    License Region (s)
    
    License Number
    
    
    Expiration DateLocal Communications ServicesSovintel
    
    Moscow, St. Petersburg
    
    
    44382
    
    
    September 21, 2011GTU
    
    Kiev, Kiev Region, Odessa Region
    
    
    364688
    
    
    October 12, 2012GTU
    
    Ukraine (excluding Kiev, Kiev Region,
Odessa, Odessa Region)
    
    
    223392
    
    
    January 28, 2009ADS
    
    Nizhny Novgorod Region
    
    
    35438
    
    
    October 5, 2010Buzton
    
    Uzbekistan
    
    
    0000663
    
    
    July 4, 2011Leased Communications CircuitsSovintel
    
    Moscow, Moscow Region, St. Petersburg,
Leningrad Region
    
    
    41506
    
    
    July 5, 2011SA-Telcom
    
    Kazakhstan
    
    
    001672
    
    
    UnlimitedVoice Communication Services in Data Transmission NetworksSovintel
    
    Russian Federation
    
    
    39543
    
    
    March 15, 2011International and National Communications ServicesSovintel
    
    Russian Federation
    
    
    32041
    
    
    May 31, 2012GTU
    
    Kiev, Odessa, Odessa Region, Donetsk,
Donetsk Region, Kharkov, Kharkov Region,
Lvov, Lvov Region, Dnepropetrovsk,
Dnepropetrovsk Region
    
    
    223393
    
    
    December 31, 2013GTU
    
    Ukraine (excluding Kiev, Odessa, Odessa
Region, Donetsk, Donetsk Region, Kharkov,
Kharkov Region, Lvov, Lvov Region,
Dnepropetrovsk, Dnepropetrovsk Region)
    
    
    223394
    
    
    January 28, 2014Buzton
    
    Uzbekistan
    
    
    0000661
    
    
    January 14, 2010Buzton
    
    Uzbekistan
    
    
    0000819
    
    
    January 14, 2010Mobile Communications ServicesGTU
    
    Kiev Region
    
    
    364703
    
    
    July 7, 2014GTU
    
    Kiev,
    
    
    364704
    
    
    May 18, 2021GTU
    
    Ukraine (excluding Kiev, Kiev Region)
    
    
    223390
    
    
    January 28, 2009GTU
    
    Kiev Region
    
    
    364703
    
    
    July 7, 2014Telematic ServicesSovintel
    
    Moscow, Moscow Region, St. Petersburg,
Leningrad Region
    
    
    27309
    
    
    August 18, 2008ADS
    
    Nizhny Novgorod Region
    
    
    37603
    
    
    December 23, 2010Dicom
    
    Moscow, Moscow Region
    
    
    40966
    
    
    July 5, 2011SA-Telcom
    
    Kazakhstan
    
    
    001817
    
    
    UnlimitedIntra-zonal Communications ServicesSovintel
    
    Moscow, St. Petersburg
    
    
    45074
    
    
    October 24, 2011ADS
    
    Nizhny Novgorod Region
    
    
    35439
    
    
    October 5, 2010Data Transmission ServicesSovintel
    
    Moscow, Moscow Region, St. Petersburg,
Leningrad Region
    
    
    27310
    
    
    August 18, 2008Buzton
    
    Uzbekistan
    
    
    0000664
    
    
    August 29, 2011SA-Telcom
    
    Kazakhstan
    
    
    0000032
    
    
    UnlimitedRadio FrequenciesS-Line
    
    Kiev, Sevastopol, Dnepropetrovsk Region,
Donetsk Region, Kharkov Region, Odessa
Region,
    
    
    364700
    
    
    April 20, 2016
 19




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License
    
    License Region (s)
    
    License Number
    
    
    Expiration DateZaporozhye Region, Kiev Region, Lugansk Region, Lvov Region, Poltava
Region, Vinnitsa Region, Zhitomir Region,
Suma Region, Kherson Region, Khmelnitsk
Region, Ivano-Frankovsk Region, Volyn
Region, Zakarpatye Region, Kirovograd
Region, Rovno Region, Ternopol Region,
Cherskassk Region, Chernigov Region,
Chernovets Region, CrimeaCommunications Services for the Purposes of Cable BroadcastingSovintel
    
    Russian Federation
    
    
    55387
    
    
    Being issuedInvestelectrosvyaz
    
    Moscow, Moscow Region
    
    
    44053
    
    
    September 21, 2011GTU
    
    Kiev
    
    
    0206-II
    
    
    May 18, 2017Communications Services for the Purposes of TV BroadcastingKolangon-Optim
    
    Moscow, Moscow Region
    
    
    42006
    
    
    June19, 2011Kolangon-Optim
    
    St.-Petersburg, Leningrad Region
    
    
    43265
    
    
    July 28, 2011
 The Environment in Which We Operate
  
    
    An overview of the telecommunications markets;
    
    An overview of the political environment; and
    
    An overview of the legal and regulatory regimes.
 Overview of Telecommunications Markets in Russia and Ukraine
 The Telecommunications Market in Russia
    The Telecommunications Market in Ukraine.
 20




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Overview of the Political Environments in Russia and Ukraine
 Russias Political Environment.
 Ukraines Political Environment.
   21




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Overview of the Legal and Regulatory Regimes in Russia and Ukraine
 Russias Legal and Regulatory Regime.
    Ukraines Legal and Regulatory Regime
     22




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23




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ITEM 1A . Risk Factors
 Factors That May Adversely Affect Future Results
 We may encounter difficulties expanding and operating our business, including the integration of
acquired companies
   §
    
    The consolidation of the operations and personnel of the acquired companies;§
    
    The potential disruption of our ongoing business and distraction of management;§
    
    The introduction of acquired technology content or rights into our products and
unanticipated expenses related to such integration;§
    
    The potential negative impact on reported earnings;§
    
    The possibility that revenues from acquired businesses and other synergies may not
materialize as anticipated;§
    
    The deterioration of relationships with employees and customers as a result of any
integration of new management personnel; and§
    
    Contingent liabilities associated with acquired businesses, especially in the markets
where we operate.
   §
    
    Delivering services that are technically and economically feasible;§
    
    Financing increases in the regional network construction and development area;§
    
    Obtaining in a timely manner and maintaining licenses, permissions to operate
telecommunications equipment, frequency allocations and other governmental permissions
sufficient to provide services to our customers;§
    
    Marketing our services in a large geographic area to new potential customers;§
    
    Obtaining sufficient interconnect arrangements;§
    
    Meeting demands of local special interest groups;§
    
    Obtaining compliance certificates for our telecommunications equipment in a timely and
cost-efficient manner; and§
    
    Obtaining adequate supplies of network equipment.
 Reorganizations in the Ukrainian telecommunications sector may have strengthened the position of
the monopoly incumbent and may encourage unfair competition
   
    
    We may 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 cannot be relied upon to protect and enforce unfair competition;
 24




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
    
    A single Ukrainian self-regulating monopoly is able to create favorable market conditions
for itself and cause unfavorable conditions for us; and
    
    Any subsequent privatization of Ukrtelecom may bring in strong management and resources
from a major telecommunications operator, increasing its competitive strengths.
 Failure to obtain sufficient and reliable transmission capacity at reasonable costs could cause us
to incur losses
    Our ability to provide our services is dependent on securing and maintaining interconnection
agreements with Svyazinvest, Ukrtelecom and other facilities providers
    Our network may not be able to support the growing demands of our customers
  25




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Russian companies may be required to adopt a plan of liquidation when their net assets are negative
  We may have difficulty scaling and adapting our existing infrastructure to accommodate increased
traffic and technology advances
  We are in a competitive industry and our competitors may be more successful in attracting and
retaining customers
     §
    
    Greater resources, market presence and network coverage;§
    
    Greater brand name recognition, customer loyalty and goodwill;§
    
    Control over domestic transmission lines and over access to these lines by other
participants; and§
    
    Close ties to national and local regulatory authorities which may be reluctant to adopt
policies which may increase competition for Svyazinvest or Ukrtelecom.
  26




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Our current billing and management information systems may not be able to meet our future needs
     Our ability to integrate and further develop certain acquired businesses will determine our ability
to develop our broadband strategy
    Failure to install our transmitter on Ostankino television tower in Moscow could disrupt our
television and media business plans
  27




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Any unforeseen changes in the tax laws in Russia or Ukraine could have a material adverse effect on
our business
  We may encounter difficulties in fully complying with applicable laws due to confusion and
contradictions in the laws and legal structures of the countries where we operate
      Our telecommunications licenses may not be extended or may be suspended or revoked
  28




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We may fail to obtain renewals or extensions of our frequency allocations for our earth stations
and other radio frequency equipment that we use in our operations
   Certain of our loan agreements contain restrictive covenants
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   Russia(excludingMoscow
    
    Moscow)
    
    Ukraine
    
    Kazakhstan
    
    Uzbekistan
    
    Total(in square meters)Lease facilities:Office space
    
    
    29,282
    
    
    
    12,799
    
    
    
    8,628
    
    
    
    758
    
    
    
    1,072
    
    
    
    52,540Technical premises
    
    
    15,753
    
    
    
    6,810
    
    
    
    1,864
    
    
    
    204
    
    
    
    400
    
    
    
    25,032Total
    
    
    45,035
    
    
    
    19,609
    
    
    
    10,492
    
    
    
    962
    
    
    
    1,472
    
    
    
    77,572Owned facilities:Office space
    
    
    6,181
    
    
    
    3,512
    
    
    
    771
    
    
    
    
    
    
    
    201
    
    
    
    10,665Technical premises
    
    
    
    
    
    
    1,834
    
    
    
    
    
    
    
    
    
    
    
    400
    
    
    
    1,834Total
    
    
    6,181
    
    
    
    5,346
    
    
    
    771
    
    
    
    
    
    
    
    601
    
    
    
    12,499
 29




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Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  30




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PART II
 
 Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
 a) Market Information
  High
    
    Low2006:First quarter
    
    $
    31.60
    
    
    $
    26.13Second quarter
    
    
    32.66
    
    
    
    21.16Third quarter
    
    
    32.45
    
    
    
    22.05Fourth quarter
    
    
    48.62
    
    
    
    29.662007:First quarter
    
    $
    60.26
    
    
    $
    44.22Second quarter
    
    
    61.94
    
    
    
    47.20Third quarter
    
    
    81.15
    
    
    
    55.00Fourth quarter
    
    
    114.85
    
    
    
    80.00
 Performance Graph
  COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
 
 
 *
    
    $100 invested on 12/31/02 in stock or index-including reinvestment of dividends.
Fiscal year ending December 31. 31




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Holders
  b) Dividends
  c) Recent Sales of Unregistered Securities
   32




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Item 6. Selected Financial Data
   For the Years Ended December 31,2003
    
    2004
    
    2005
    
    2006
    
    2007Statement of Operations Data:Revenues
    
    $
    360,534
    
    
    $
    583,978
    
    
    $
    667,379
    
    
    $
    854,617
    
    
    $
    1,292,899Cost of revenues (excluding
depreciation and amortization)
    
    
    181,085
    
    
    
    300,588
    
    
    
    347,532
    
    
    
    474,389
    
    
    
    741,361Gross margin
    
    
    179,449
    
    
    
    283,390
    
    
    
    319,847
    
    
    
    380,228
    
    
    
    551,538Selling, general and administrative
(excluding depreciation and
amortization)
    
    
    64,384
    
    
    
    112,855
    
    
    
    119,890
    
    
    
    152,808
    
    
    
    241,916Depreciation and amortization
    
    
    45,334
    
    
    
    74,999
    
    
    
    84,015
    
    
    
    100,209
    
    
    
    140,258Income from operations
    
    
    69,731
    
    
    
    95,536
    
    
    
    115,942
    
    
    
    127,211
    
    
    
    169,364Equity in earnings of ventures
    
    
    4,687
    
    
    
    278
    
    
    
    460
    
    
    
    1,867
    
    
    
    1,010Gain on sale of MCT Corp.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,283Interest income (expense), net
    
    
    (872
    )
    
    
    559
    
    
    
    1,677
    
    
    
    631
    
    
    
    (8,789
    )Foreign currency gain (loss)
    
    
    (232
    )
    
    
    660
    
    
    
    (1,212
    )
    
    
    1,697
    
    
    
    15,652Minority interest
    
    
    480
    
    
    
    1,506
    
    
    
    2,978
    
    
    
    4,808
    
    
    
    7,610Provision for income taxes
    
    
    17,399
    
    
    
    30,744
    
    
    
    37,816
    
    
    
    40,417
    
    
    
    58,311Net income before
cumulative effect of change
in accounting principle
    
    
    55,435
    
    
    
    64,783
    
    
    
    76,073
    
    
    
    86,181
    
    
    
    152,599Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    681
    
    
    
    Net income
    
    
    55,435
    
    
    
    64,783
    
    
    
    76,073
    
    
    
    85,500
    
    
    
    152,599Net income per share before
cumulative effect of change in
accounting principle  basic
    
    
    1.95
    
    
    
    1.79
    
    
    
    2.09
    
    
    
    2.36
    
    
    
    3.93Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.02
    
    
    
    Net income per share  basic
    
    
    1.95
    
    
    
    1.79
    
    
    
    2.09
    
    
    
    2.34
    
    
    
    3.93Weighted average shares  basic
    
    
    28,468
    
    
    
    36,226
    
    
    
    36,378
    
    
    
    36,591
    
    
    
    38,798Net income per share before
cumulative effect of change in
accounting principle  diluted
    
    
    1.90
    
    
    
    1.77
    
    
    
    2.08
    
    
    
    2.35
    
    
    
    3.91Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.02
    
    
    
    Net income per share  diluted
    
    
    1.90
    
    
    
    1.77
    
    
    
    2.08
    
    
    
    2.33
    
    
    
    3.91Weighted average shares  diluted
    
    
    29,107
    
    
    
    36,553
    
    
    
    36,605
    
    
    
    36,717
    
    
    
    39,034Cash dividends per common share
    
    
    
    
    
    
    0.80
    
    
    
    0.80
    
    
    
    0.60
    
    
    
    
 33




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At December 31,2003
    
    2004
    
    2005
    
    2006
    
    2007(in thousands)Balance Sheet Data:Cash and cash equivalents
    
    $
    65,180
    
    
    $
    53,699
    
    
    $
    67,176
    
    
    $
    18,413
    
    
    $
    74,799Property and equipment, net
    
    
    283,110
    
    
    
    347,891
    
    
    
    407,907
    
    
    
    552,341
    
    
    
    979,498Investments in and advances to ventures
    
    
    251
    
    
    
    742
    
    
    
    10,889
    
    
    
    11,886
    
    
    
    15,430Goodwill and intangible assets, net
    
    
    248,843
    
    
    
    247,570
    
    
    
    243,129
    
    
    
    297,084
    
    
    
    561,067Total assets
    
    
    729,226
    
    
    
    805,768
    
    
    
    882,211
    
    
    
    1,107,190
    
    
    
    1,998,891Long-term debt, including long-term
capital lease obligations
    
    
    3,963
    
    
    
    1,738
    
    
    
    2,367
    
    
    
    1,620
    
    
    
    233,288Minority interest
    
    
    2,722
    
    
    
    11,738
    
    
    
    19,693
    
    
    
    31,263
    
    
    
    94,177Shareholders equity
    
    
    584,279
    
    
    
    626,381
    
    
    
    675,103
    
    
    
    817,176
    
    
    
    1,215,062
      34




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##### Table of Contents



ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction
  Overview
   
    
    Business and Corporate Services (BCS)Using our fiber optic and satellite-based
networks in and between major metropolitan areas of Russia, Ukraine and other countries of
the CIS, we provide business and corporate services including voice and data services to
corporate clients across all geographical markets and all industry segments, other than
telecommunications operators;
    
    Carrier and Operator Services.Using our fiber optic and satellite-based networks in and
between major metropolitan areas of Russia, Ukraine and other countries of the CIS, we
provide a range of carrier and operator services including voice and data services to
foreign and Russian telecommunications and mobile operators;
    
    Consumer Internet Services.Using our fiber optic and satellite-based networks, we
provide Internet access to the consumer market and web content offered through a family of
Internet portals throughout Russia, Ukraine, Kazakhstan, and Uzbekistan; and
    
    Mobile Services. Using our mobile networks in Moscow and 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.
     35




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##### Table of Contents



Acquisitions
  Ownership
    
    PurchaseDate of
    
    interest
    
    priceCompany
    
    Location
    
    Activity
    
    acquisition
    
    acquired
    
    (in millions)(1)2005Dicom LLC
    
    Moscow
    
    Early-stage
wireless broadband
enterprise
    
    March 2005
    
    
    75
    %
    
    $
    0.5Sakhalin Telecom LLC
    
    Far East region of
Russia
    
    Fixed line
alternative
operator
    
    September 2005
    
    
    60
    %
    
    
    5.0Antel Rascom Ltd.
    
    North West region
of Russia
    
    Telecommunications
company
    
    October 2005
    
    
    49
    %
    
    
    10.0ZAO Sochitelecom
    
    Krasnodar region of
Russia
    
    Fixed line
alternative
operator
    
    October 2005
    
    
    100
    %
    
    
    2.1Antel Rascom Ltd.
    
    North West
region of
Russia
    
    Telecommunications
company
    
    December 2005
    
    
    5
    %
    
    
    1.1$
    18.72006ZAO Tatar 
Intellectual 
Communications
    
    Republic of
Tatarstan
    
    Internet service
provider
    
    March 2006
    
    
    70
    %
    
    $
    4.0TTK LLC
    
    Ivano-Frankovsk
region of Ukraine
    
    Fixed line
alternative
operator
    
    April 2006
    
    
    100
    %
    
    
    3.8Kubtelecom LLC
    
    Krasnodar region of
Russia
    
    Fixed line
alternative
operator
    
    June 2006
    
    
    74
    %
    
    
    14.0Telcom LLC
    
    Nizhny Novgorod
    
    Fixed line
alternative
operator
    
    August 2006
    
    
    100
    %
    
    
    1.7ZAO Corus ISP
    
    Ekaterinburg
    
    Internet Services
Provider
    
    October 2006
    
    
    100
    %
    
    
    1.2S-Line LLC
    
    Kiev
    
    Early-stage
wireless broadband
enterprise
    
    October 2006
    
    
    75
    %
    
    
    7.5$
    32.22007Fortland Limited
    
    Moscow
    
    Early-stage digital
video broadcast
enterprise
    
    February 2007
    
    
    65
    %
    
    $
    51.7ZAO Telecommunication 
Agency
    
    Perm
    
    Fixed line
alternative
telecommunications
operator
    
    April 2007
    
    
    100
    %
    
    
    4.5ICA Center of
Commercial Real Estate
LLC
    
    Moscow
    
    Real estate
    
    May 2007
    
    
    100
    %
    
    
    9.8ZAO Cortec
    
    Moscow
    
    Telecommunications
company
    
    May 2007
    
    
    51
    %
    
    
    196.9ZAO DirectNet
    
    Moscow
    
    Fixed line
alternative
telecommunications
operator
    
    June 2007
    
    
    100
    %
    
    
    1.9ZAO Satcom Tel
    
    Moscow
    
    Fixed line
alternative
telecommunications
operator
    
    June 2007
    
    
    100
    %
    
    
    0.3Alcar LLC
    
    Moscow region
    
    WiFi enterprise
    
    June 2007
    
    
    75
    %
    
    
    1.9
 36




---



##### Table of Contents



Ownership
    
    PurchaseDate of
    
    interest
    
    priceCompany
    
    Location
    
    Activity
    
    acquisition
    
    acquired
    
    (in millions)Satel Tsentr LLC
    
    Moscow region
    
    Early stage WiFi
enterprise
    
    August 2007
    
    
    75
    %
    
    
    1.9TeleRoss joint ventures
    
    Different regions of
Russia
    
    Fixed line
alternative
telecommunications
operators
    
    August-September
2007
    
    
    50
    %
    
    
    2.5ZAO Bryansktel
    
    Bryansk
    
    Fixed line
alternative
telecommunications
operator
    
    December 2007
    
    
    100
    %
    
    
    2.2BryanskIntel LLC
    
    Bryansk
    
    Cable TV and local
telephony service
provider
    
    December 2007
    
    
    100
    %
    
    
    3.4New Telecom 
Technologies LLC
    
    Krasnodar
    
    Provider of
integrated
telecommunications
and Internet
services
    
    December 2007
    
    
    100
    %
    
    
    1.3Skat-7 LLC
    
    Cherepovets
    
    Fixed line
alternative
telecommunications
operator
    
    December 2007
    
    
    100
    %
    
    
    7.5$
    285.8
   Regulatory Developments
    37




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##### Table of Contents



Other Developments
   38




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##### Table of Contents



39




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##### Table of Contents



40




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##### Table of Contents



Highlights and Outlook
        41




---



##### Table of Contents



42




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##### Table of Contents



43




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##### Table of Contents



Critical Accounting Estimates
  44




---



##### Table of Contents



Revenue recognition.
 Allowance for doubtful accounts.
 Long-lived asset cost recovery
 Goodwill and assessment of impairment Goodwill and Other Intangible Assets
 Valuation allowance for deferred tax asset
 Tax provisions. Accounting for Contingencies Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109 Accounting for Income Taxes
 45




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##### Table of Contents



Business combinations. Business Combinations
 Stock-based compensation.
 Recent Accounting Pronouncements
 Fair Value Measurements
 Fair Value Measurements" Application of FASB Statement No. 157 to FASB Statement No. 13 and
Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease
Classification or Measurement under Statement 13 Effective Date of FASB Statement
No 157"
 Income Statement Presentation of Taxes Collected from Customers and Remitted to Government
Authorities
 How Taxes Collected from Customers and Remitted to Governmental Authorities
Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation).
 Fair Value Option
 The Fair Value Option for Financial Assets
and Financials Liabilities  Including an Amendment of FASB Statement No. 115"
 Business Combinations
 Business Combinations
 46




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##### Table of Contents



Noncontrolling Interests in Consolidated Financial Statements
 Noncontrolling Interests in Consolidated
Financial Statementsan amendment of Accounting Research Bulletin No. 51
 Results of Operations
  The discussion of our results of operations is organized as follows:
 
    
    Consolidated Results.Consolidated Results of Operations for the Year Ended December 31,
2007, compared to the Consolidated Results of Operations for the Year Ended December 31, 2006
    
    Consolidated Financial Position.Consolidated Financial Position at December 31, 2007,
compared to Consolidated Financial Position at December 31, 2006
    
    Consolidated Results.Consolidated Results of Operations for the Year Ended December 31,
2006, compared to the Consolidated Results of Operations for the Year Ended December 31, 2005
    
    Consolidated Financial Position. Consolidated Financial Position at December 31, 2006,
compared to Consolidated Financial Position at December 31, 2005
 Consolidated Results  Consolidated Results of Operations for the Year Ended December 31, 2007,
Compared to the Consolidated Results of Operations for the Year Ended December 31, 2006
 Revenue
   Consolidated Revenue
    
    
    Consolidated RevenueFor the Year
    
    
    For the YearEnded December 31, 2006
    
    
    Ended December 31, 2007(in millions)REVENUEBusiness and Corporate Services
    
    $
    487.2
    
    
    $
    718.1Carrier and Operator Services
    
    
    309.1
    
    
    
    479.6Consumer Internet Services
    
    
    48.7
    
    
    
    77.1Mobile Services
    
    
    9.6
    
    
    
    18.1TOTAL REVENUE
    
    $
    854.6
    
    
    $
    1,292.9
 47




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##### Table of Contents



Consolidated Revenue
    
    
    Consolidated RevenueFor the Year
    
    
    For the YearEnded December 31, 2006
    
    
    Ended December 31, 2007(in millions)REVENUEMoscow
    
    $
    535.6
    
    
    $
    863.2Northwest region of Russia
    
    
    79.6
    
    
    
    113.8Other regions of Russia and CIS
    
    
    185.9
    
    
    
    269.7Ukraine
    
    
    82.3
    
    
    
    105.3Eliminations
    
    
    (28.8
    )
    
    
    (59.1
    )TOTAL REVENUE
    
    $
    854.6
    
    
    $
    1,292.9
 Business and Corporate Services.
   (in whole numbers)BCS Moscow customer statistics on December 31:
    
    2006
    
    2007
    
    % ChangeTotal clients
    
    
    23,456
    
    
    
    25,202
    
    
    
    7
    %Business centers
    
    
    920
    
    
    
    1,041
    
    
    
    13
    %Trade centers
    
    
    94
    
    
    
    133
    
    
    
    41
    %Hotels
    
    
    53
    
    
    
    58
    
    
    
    9
    %Direct inward dialing lines
    
    
    138,000
    
    
    
    146,230
    
    
    
    6
    %Ethernet / Metropolitan Ethernet Network connections
    
    
    2,652
    
    
    
    2,810
    
    
    
    6
    %High speed Internet active contracts
    
    
    976
    
    
    
    1,742
    
    
    
    78
    %
    48




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##### Table of Contents



Carrier and Operator Services.
    Consumer Internet Services.
 Mobile
Services.
 49




---



##### Table of Contents



Expenses
  Consolidated Expenses
    
    Consolidated ExpensesFor the Year Ended
    
    For the Year EndedDecember 31, 2006
    
    December 31, 2007(in millions)COST OF REVENUEBusiness and Corporate Services
    
    $
    213.4
    
    
    $
    318.9Carrier and Operator Services
    
    
    218.4
    
    
    
    356.6Consumer Internet Services
    
    
    37.4
    
    
    
    55.1Mobile Services
    
    
    5.2
    
    
    
    9.6Corporate
    
    
    
    
    
    
    1.2TOTAL COST OF REVENUE
    
    
    474.4
    
    
    
    741.4Selling, general and administrative
    
    
    152.8
    
    
    
    241.9Depreciation and amortization
    
    
    100.2
    
    
    
    140.3Equity in earnings of ventures
    
    
    (1.9
    )
    
    
    (1.0
    )Gain on sale of MCT Corp.
    
    
    
    
    
    
    (41.3
    )Interest income
    
    
    (1.2
    )
    
    
    (4.3
    )Interest expense
    
    
    0.6
    
    
    
    13.1Foreign currency (gain)/ loss
    
    
    (1.7
    )
    
    
    (15.7
    )Minority interest
    
    
    4.8
    
    
    
    7.6Provision for income taxes
    
    
    40.4
    
    
    
    58.3Cumulative effect of a change in
accounting principle, net of tax
    
    $
    0.7
    
    
    $
    
 Cost of Revenue
  Business
and Corporate Services.
     Carrier and Operator Services.
  50




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##### Table of Contents



Consumer
Internet Services.
 Mobile
Services.
 Gross Margin
  Business
and Corporate Services.
 Carrier
and Operator Services.
 Consumer
Internet Services.
 Mobile
Services.
 Selling, General and Administrative
  Depreciation and Amortization
  51




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##### Table of Contents



Income from Operations
  Business
and Corporate Services.
 Carrier and Operator Services.
 Consumer
Internet Services.
 Mobile
Services.
 Gain on Sale of MCT Corp.
  Interest Expense
  Foreign Currency Gain
  Minority Interest
  Provision for Income Taxes
  Net Income and Net Income per Share
  52




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##### Table of Contents



Consolidated Financial Position  Significant Changes in Consolidated Financial Position at
December 31, 2007, compared to Consolidated Financial Position at December 31, 2006
 Cash and Cash Equivalents
  Accounts Receivable
  Property and Equipment
  Goodwill
  Intangible Assets
  Long-Term Debt
  Minority Interest
  Stockholders Equity
  53




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##### Table of Contents



Consolidated Results  Consolidated Results of Operations for the Year Ended December 31, 2006,
Compared to the Consolidated Results of Operations for the Year Ended December 31, 2005
 Revenue
  Consolidated Revenue
    
    
    Consolidated RevenueFor the Year
    
    
    For the YearEnded December 31, 2005
    
    
    Ended December 31, 2006(in millions)REVENUEBusiness and Corporate Services
    
    $
    387.4
    
    
    $
    487.2Carrier and Operator Services
    
    
    221.4
    
    
    
    309.1Consumer Internet Services
    
    
    44.5
    
    
    
    48.7Mobile Services
    
    
    14.1
    
    
    
    9.6TOTAL REVENUE
    
    $
    667.4
    
    
    $
    854.6
  Consolidated Revenue
    
    
    Consolidated RevenueFor the Year
    
    
    For the YearEnded December 31, 2005
    
    
    Ended December 31, 2006(in millions)REVENUEMoscow
    
    $
    436.6
    
    
    $
    535.6Northwest region of Russia
    
    
    59.9
    
    
    
    79.6Other regions of Russia and CIS
    
    
    122.9
    
    
    
    185.9Ukraine
    
    
    73.8
    
    
    
    82.3Eliminations
    
    
    (25.8
    )
    
    
    (28.8
    )TOTAL REVENUE
    
    $
    667.4
    
    
    $
    854.6
 Business and Corporate Services.
  54




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##### Table of Contents



(in whole numbers)BCS Moscow customer statistics on December 31:
    
    2005
    
    2006
    
    % ChangeTotal clients
    
    
    23,013
    
    
    
    23,456
    
    
    
    2
    %Business centers
    
    
    791
    
    
    
    920
    
    
    
    16
    %Trade centers
    
    
    68
    
    
    
    94
    
    
    
    38
    %Hotels
    
    
    48
    
    
    
    53
    
    
    
    10
    %Direct inward dialing lines
    
    
    127,000
    
    
    
    138,000
    
    
    
    9
    %Ethernet / Metropolitan Ethernet Network connections
    
    
    1,708
    
    
    
    2,652
    
    
    
    55
    %High speed Internet active contracts
    
    
    485
    
    
    
    976
    
    
    
    101
    %
    Carrier and Operator Services.
    Consumer Internet Services.
 55




---



##### Table of Contents



Mobile Services.
 Expenses
  Consolidated Expenses
    
    
    Consolidated ExpensesFor the Year Ended
    
    
    For the Year EndedDecember 31, 2005
    
    
    December 31, 2006(in millions)COST OF REVENUEBusiness and Corporate Services
    
    $
    165.7
    
    
    $
    213.4Carrier and Operator Services
    
    
    145.7
    
    
    
    218.4Consumer Internet Services
    
    
    29.9
    
    
    
    37.4Mobile Services
    
    
    6.2
    
    
    
    5.2TOTAL COST OF REVENUE
    
    
    347.5
    
    
    
    474.4Selling, general and administrative
    
    
    119.9
    
    
    
    152.8Depreciation and amortization
    
    
    84.0
    
    
    
    100.2Equity in earnings of ventures
    
    
    (0.4
    )
    
    
    (1.9
    )Interest income
    
    
    (2.3
    )
    
    
    (1.2
    )Interest expense
    
    
    0.6
    
    
    
    0.6Foreign currency (gain) loss
    
    
    1.2
    
    
    
    (1.7
    )Minority interest
    
    
    3.0
    
    
    
    4.8Provision for income taxes
    
    
    37.8
    
    
    
    40.4Cumulative effect of a change in
accounting principle, net of tax
    
    $
    
    
    
    $
    0.7
 Cost of Revenue
  Business and Corporate Services.
   56




---



##### Table of Contents



Carrier and Operator Services.
    Consumer Internet Services.
  Mobile Services.
 Selling, General and Administrative
  57




---



##### Table of Contents



Depreciation and Amortization
  Equity in Earnings of Ventures
  Interest Income
  Interest Expense
  Foreign Currency Gain (Loss)
  Minority Interest
  Provision for Income Taxes
  Net Income and Net Income per Share
    58




---



##### Table of Contents



Consolidated Financial Position  Significant Changes in Consolidated Financial Position at
December 31, 2006, compared to Consolidated Financial Position at December 31, 2005
 Accounts Receivable
  Intangible Assets
  Other Non-Current Liabilities
  Minority Interest
  Stockholders Equity
  Income Taxes
  59




---



##### Table of Contents



Liquidity and Capital Resources
  Consolidated Cash Flows
    
    Consolidated Cash FlowsFor the Year
    
    For the YearEnded December 31, 2006
    
    Ended December 31,2007(in millions)CASH FLOWSProvided by operating activities
    
    $
    160.7
    
    
    $
    196.7Used in investing activities
    
    
    (201.1
    )
    
    
    (373.9
    )Provided by (used in) financing activities
    
    
    (9.8
    )
    
    
    232.0Effect of exchange rate changes
    
    
    1.4
    
    
    
    1.6Net increase (decrease) in cash and cash equivalents
    
    $
    (48.8
    )
    
    $
    56.4
             60




---



##### Table of Contents



Credit Rating Agency
    
    Rating
    
    OutlookStandard & Poors
    
    BB+
    
    StableMoodys
    
    Ba3
    
    Stable
    61




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##### Table of Contents



Inflation
   Contractual Obligations
  Payments Due by Period (3)(in thousands)Lessthan 1
    
    
    1  3
    
    
    4 - 5Total
    
    
    year
    
    
    years
    
    
    years
    
    
    ThereafterLong-term debt
    
    $
    262,071
    
    
    $
    14,804
    
    
    $
    231,827
    
    
    $
    15,440
    
    
    $
    Capital lease obligations
    
    
    13,296
    
    
    
    4,050
    
    
    
    8,518
    
    
    
    728
    
    
    
    Non-cancelable lease
obligations
    
    
    58,637
    
    
    
    23,649
    
    
    
    29,246
    
    
    
    5,524
    
    
    
    218Purchase obligations (1)
    
    
    138,757
    
    
    
    109,319
    
    
    
    24,077
    
    
    
    5,109
    
    
    
    252Other long-term liabilities (2)
    
    
    3,673
    
    
    
    
    
    
    
    3,673
    
    
    
    
    
    
    
    Total
    
    $
    476,434
    
    
    $
    151,822
    
    
    $
    297,341
    
    
    $
    26,801
    
    
    $
    470
 
 (1)
    
    Purchase obligations primarily include our contractual legal obligations for the future
purchase of equipment, interconnect, and satellite transponder capacity.(2)
    
    Other long-term liabilities primarily include obligations related to the SARs we have
granted.(3)
    
    Amounts include interest.(4)
    
    FIN No. 48 liabilities of $18.9 million are excluded from the Contractual Obligations
table because we are not able to make a reasonable reliable estimate of the period of cash
settlement with the respective taxing authority.
 62




---



##### Table of Contents



Special Note Regarding Forward Looking
     63




---



##### Table of Contents



ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk
         64




---



##### Table of Contents



2007
    
    2006
    
    Fair2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    Thereafter
    
    Total
    
    Total
    
    ValueCash equivalents
    
    $
    74,799
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    74,799
    
    
    $
    18,413
    
    
    $
    Note receivable
    
    $
    22,458
    
    
    $
    21,140
    
    
    $
    19,699
    
    
    $
    3,504
    
    
    $
    
    
    
    $
    
    
    
    $
    23,629
    
    
    $
    2,879
    
    
    $
    Average interest rate
    
    
    8.6
    %
    
    
    8.5
    %
    
    
    8.5
    %
    
    
    9.0
    %
    
    
    
    
    
    
    
    
    
    
    8.6
    %
    
    
    9.8
    %
    
    
    Long-term debt, including current
portionVariable rate
    
    $
    225,000
    
    
    $
    155,790
    
    
    $
    86,580
    
    
    $
    17,370
    
    
    $
    
    
    
    $
    
    
    
    $
    242,839
    
    
    $
    12,305
    
    
    $
    Average interest rate
    
    
    5.69
    %
    
    
    5.03
    %
    
    
    6.04
    %
    
    
    6.02
    %
    
    
    
    
    
    
    
    
    
    
    6.85
    %
    
    
    10.5
    %
    
    
    Interest Rate Swaps:Variable to Fixed
    
    $
    225,000
    
    
    $
    155,790
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    225,000
    
    
    
    
    
    
    $
    (3,060
    )Average pay rate
    
    
    4.4
    %
    
    
    4.4
    %
    
    
    4.4
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.4
    %
    
    
    
    
    
    
    Average receive rate
    
    
    4.5
    %
    
    
    3.8
    %
    
    
    4.0
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.1
    %
    
    
    
    
    
    
    
  2007
    
    20062008
    
    2009
    
    20010
    
    2011
    
    2012
    
    Thereafter
    
    Total
    
    TotalAssetsCurrent assetsRussian rubles
    
    $
    278,917
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    278,917
    
    
    $
    122,644Closing foreign
currency exchange rate
    
    
    24.55
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ukrainian Hryvna
    
    $
    21,544
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    21,544
    
    
    $
    11,068Closing foreign
currency exchange rate
    
    
    5.05
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Kazakhstan Tenge
    
    $
    2,597
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,597
    
    
    $
    1,652Closing foreign
currency exchange rate
    
    
    120.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Uzbekistan Soom
    
    $
    3,060
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,060
    
    
    $
    1,948Closing foreign
currency exchange rate
    
    
    1,290
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    LiabilitiesCurrent liabilitiesRussian rubles
    
    $
    102,047
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    102,047
    
    
    $
    27,961Closing foreign
currency exchange rate
    
    
    24.55
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ukrainian Hryvna
    
    $
    20,026
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    20,026
    
    
    $
    15,192Closing foreign
currency exchange rate
    
    
    5.05
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Kazakhstan Tenge
    
    $
    418
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    418
    
    
    $
    35Closing foreign
currency exchange rate
    
    
    120.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Uzbekistan Soom
    
    $
    484
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    484
    
    
    $
    184Closing foreign
currency exchange rate
    
    
    1,290
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  65




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##### Table of Contents



ITEM 8. Financial Statements and Supplementary Data
 INDEX TO FINANCIAL STATEMENTS
 GOLDEN TELECOM, INC.
 PageFinancial Statements
    
    
    67Report of Independent Registered Public Accounting Firm
    
    
    68Consolidated Balance Sheets as of December 31, 2006 and 2007
    
    
    69Consolidated Statements of Operations for the years ended December 31, 2005, 2006 and 2007
    
    
    71Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2006 and 2007
    
    
    72Consolidated Statements of Shareholders Equity for the years ended December 31, 2005, 2006 and 2007
    
    
    73Notes to Consolidated Financial Statements
    
    
    74
 66




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##### Table of Contents



AUDITED CONSOLIDATED FINANCIAL STATEMENTS
 GOLDEN TELECOM, INC.
Years Ended December 31, 2005, 2006 and 2007
With Report of Independent Registered Public Accounting Firm
 67




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
        
 68




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##### Table of Contents



GOLDEN TELECOM, INC.
 
 CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
 December 31,2006
    
    
    2007ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    18,413
    
    
    $
    74,799Accounts receivable, net of allowance for doubtful accounts of
$25,224 and $26,952 at December 31, 2006 and 2007, respectively
    
    
    147,719
    
    
    
    203,875VAT receivable
    
    
    21,486
    
    
    
    43,099Prepaid expenses
    
    
    11,371
    
    
    
    18,112Taxes receivable, excluding VAT
    
    
    6,466
    
    
    
    2,820Notes receivable
    
    
    379
    
    
    
    1,171Deferred tax asset
    
    
    11,098
    
    
    
    31,627Inventory
    
    
    7,682
    
    
    
    13,109Due from affiliates and related parties
    
    
    1,227
    
    
    
    1,591Other current assets
    
    
    5,564
    
    
    
    10,233TOTAL CURRENT ASSETS
    
    
    231,405
    
    
    
    400,436Property and equipment:Telecommunications equipment
    
    
    707,431
    
    
    
    1,083,862Telecommunications network held under capital leases
    
    
    23,867
    
    
    
    53,795Furniture, fixtures and equipment
    
    
    50,217
    
    
    
    75,566Construction in progress
    
    
    103,190
    
    
    
    209,656Other property
    
    
    20,401
    
    
    
    45,175905,106
    
    
    
    1,468,054Accumulated depreciation
    
    
    (352,765
    )
    
    
    (488,556
    )Net property and equipment
    
    
    552,341
    
    
    
    979,498Goodwill and intangible assets:Goodwill
    
    
    180,539
    
    
    
    311,482Telecommunications service contracts
    
    
    69,983
    
    
    
    69,802Contract-based customer relationships
    
    
    13,526
    
    
    
    27,543Licenses
    
    
    22,653
    
    
    
    108,509Brand name
    
    
    
    
    
    
    32,296Other intangible assets
    
    
    10,383
    
    
    
    11,435Net goodwill and intangible assets
    
    
    297,084
    
    
    
    561,067Investments in and advances to ventures
    
    
    11,886
    
    
    
    15,430Notes receivable
    
    
    2,500
    
    
    
    22,458Restricted cash
    
    
    233
    
    
    
    Other non-current assets
    
    
    11,741
    
    
    
    20,002TOTAL ASSETS
    
    $
    1,107,190
    
    
    $
    1,998,891
  69




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##### Table of Contents



GOLDEN TELECOM, INC.
 CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
 December 31,2006
    
    
    2007LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    146,058
    
    
    $
    256,617VAT Payable
    
    
    2,725
    
    
    
    7,872Current capital lease obligations
    
    
    753
    
    
    
    3,180Debt maturing within one year
    
    
    12,305
    
    
    
    17,680Deferred revenue
    
    
    21,634
    
    
    
    30,502Due to related parties
    
    
    4,505
    
    
    
    6,771Liability for acquisition
    
    
    378
    
    
    
    Other current liabilities
    
    
    233
    
    
    
    95TOTAL CURRENT LIABILITIES
    
    
    188,591
    
    
    
    322,717Long-term debt, less current portion
    
    
    29
    
    
    
    225,159Long-term deferred tax liability
    
    
    29,268
    
    
    
    77,468Long-term deferred revenue
    
    
    36,951
    
    
    
    52,506Long-term capital lease obligations
    
    
    1,591
    
    
    
    8,129Other non-current liabilities
    
    
    2,321
    
    
    
    3,673TOTAL LIABILITIES
    
    
    258,751
    
    
    
    689,652Minority interest
    
    
    31,263
    
    
    
    94,177SHAREHOLDERS EQUITYPreferred stock, $0.01 par value (10,000,000 shares
authorized; none issued and outstanding at December 31, 2006 and 2007)
    
    
    
    
    
    
    Common stock, $0.01 par value (100,000,000 shares authorized;
36,673,015 and 40,373,891 shares issued and outstanding at December 31,
2006 and 2007, respectively)
    
    
    367
    
    
    
    404Additional paid-in capital
    
    
    674,993
    
    
    
    857,989Retained earnings
    
    
    66,744
    
    
    
    210,855Accumulated other comprehensive income
    
    
    75,072
    
    
    
    145,814TOTAL SHAREHOLDERS EQUITY
    
    
    817,176
    
    
    
    1,215,062TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    1,107,190
    
    
    $
    1,998,891
  70




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##### Table of Contents



GOLDEN TELECOM, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
 Year Ended December 31,2005
    
    
    2006
    
    
    2007REVENUE:Telecommunication services
    
    $
    662,742
    
    
    $
    846,740
    
    
    $
    1,281,572Revenue from related parties
    
    
    4,637
    
    
    
    7,877
    
    
    
    11,327TOTAL REVENUE
    
    
    667,379
    
    
    
    854,617
    
    
    
    1,292,899OPERATING COSTS AND EXPENSES:Access and network services (excluding depreciation
and amortization)
    
    
    347,532
    
    
    
    474,389
    
    
    
    741,361Selling, general and administrative (excluding
depreciation and amortization)
    
    
    119,890
    
    
    
    152,808
    
    
    
    241,916Depreciation and amortization
    
    
    84,015
    
    
    
    100,209
    
    
    
    140,258TOTAL OPERATING EXPENSES
    
    
    551,437
    
    
    
    727,406
    
    
    
    1,123,535INCOME FROM OPERATIONS
    
    
    115,942
    
    
    
    127,211
    
    
    
    169,364OTHER INCOME (EXPENSE):Equity in earnings of ventures
    
    
    460
    
    
    
    1,867
    
    
    
    1,010Gain on sale of MCT Corp.
    
    
    
    
    
    
    
    
    
    
    41,283Interest income
    
    
    2,295
    
    
    
    1,211
    
    
    
    4,349Interest expense
    
    
    (618
    )
    
    
    (580
    )
    
    
    (13,138
    )Foreign currency gain (loss)
    
    
    (1,212
    )
    
    
    1,697
    
    
    
    15,652TOTAL OTHER INCOME
    
    
    925
    
    
    
    4,195
    
    
    
    49,156Income before minority interest and income taxes
    
    
    116,867
    
    
    
    131,406
    
    
    
    218,520Minority interest
    
    
    2,978
    
    
    
    4,808
    
    
    
    7,610Income taxes
    
    
    37,816
    
    
    
    40,417
    
    
    
    58,311Income before cumulative effect of a change in
accounting principle
    
    
    76,073
    
    
    
    86,181
    
    
    
    152,599Cumulative effect of a change in accounting
principle,
net of tax of $52
    
    
    
    
    
    
    681
    
    
    
    NET INCOME
    
    $
    76,073
    
    
    $
    85,500
    
    
    $
    152,599Basic earnings per share of common stock:Income before cumulative effect of a change in
accounting principle
    
    $
    2.09
    
    
    $
    2.36
    
    
    $
    3.93Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    0.02
    
    
    
    Net income per share  basic
    
    $
    2.09
    
    
    $
    2.34
    
    
    $
    3.93Weighted average common shares
outstanding  basic
    
    
    36,378
    
    
    
    36,591
    
    
    
    38,798Diluted earnings per share of common stock:Income before cumulative effect of a change in
accounting principle
    
    $
    2.08
    
    
    $
    2.35
    
    
    $
    3.91Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    0.02
    
    
    
    Net income per share  diluted
    
    $
    2.08
    
    
    $
    2.33
    
    
    $
    3.91Weighted average common shares
outstanding  diluted
    
    
    36,605
    
    
    
    36,717
    
    
    
    39,034Cash dividends per share
    
    $
    0.80
    
    
    $
    0.60
    
    
    $
    
  71




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##### Table of Contents



GOLDEN TELECOM, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
 Year Ended December 31,2005
    
    
    2006
    
    
    2007OPERATING ACTIVITIESNet income
    
    $
    76,073
    
    
    $
    85,500
    
    
    $
    152,599Adjustments to reconcile net income to Net Cash Provided by
Operating Activities:Depreciation
    
    
    65,329
    
    
    
    79,219
    
    
    
    113,528Amortization
    
    
    18,686
    
    
    
    20,990
    
    
    
    26,730Equity in earnings of ventures
    
    
    (460
    )
    
    
    (1,867
    )
    
    
    (1,010
    )Minority interest
    
    
    2,978
    
    
    
    4,808
    
    
    
    7,610Gain on sale of MCT Corp.
    
    
    
    
    
    
    
    
    
    
    (41,283
    )Foreign currency (gain) loss
    
    
    1,212
    
    
    
    (1,697
    )
    
    
    (15,652
    )Deferred tax benefit
    
    
    (3,815
    )
    
    
    (3,825
    )
    
    
    (18,038
    )Bad debt expense
    
    
    7,967
    
    
    
    4,128
    
    
    
    5,277Stock based compensation expense
    
    
    
    
    
    
    19,475
    
    
    
    29,048Cumulative effect of a change in accounting principle, net of tax of $52
    
    
    
    
    
    
    681
    
    
    
    Other
    
    
    1,223
    
    
    
    52
    
    
    
    4,349Changes in assets and liabilities:Accounts receivable
    
    
    (10,316
    )
    
    
    (55,960
    )
    
    
    (35,339
    )Accounts payable and accrued expenses
    
    
    4,295
    
    
    
    27,730
    
    
    
    (27,749
    )VAT, net
    
    
    (88
    )
    
    
    (13,800
    )
    
    
    (8,001
    )Other assets and liabilities
    
    
    11,222
    
    
    
    (4,665
    )
    
    
    4,616NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    174,306
    
    
    
    160,769
    
    
    
    196,685INVESTING ACTIVITIESPurchases of property and equipment and intangible assets
    
    
    (118,170
    )
    
    
    (175,598
    )
    
    
    (268,581
    )Acquisitions, net of cash acquired
    
    
    (18,085
    )
    
    
    (26,778
    )
    
    
    (132,074
    )Restricted cash
    
    
    446
    
    
    
    333
    
    
    
    233Proceeds from sale of MCT Corp.
    
    
    
    
    
    
    
    
    
    
    41,283Loans made
    
    
    
    
    
    
    (5,906
    )
    
    
    (21,962
    )Other investing
    
    
    2,743
    
    
    
    6,830
    
    
    
    7,183NET CASH USED IN INVESTING ACTIVITIES
    
    
    (133,066
    )
    
    
    (201,119
    )
    
    
    (373,918
    )FINANCING ACTIVITIESRepayments of debt
    
    
    (253
    )
    
    
    (643
    )
    
    
    (86,888
    )Proceeds from debt
    
    
    
    
    
    
    11,621
    
    
    
    305,360Contribution from minority partner
    
    
    3,840
    
    
    
    
    
    
    
    Net proceeds from exercise of employee stock options
    
    
    1,435
    
    
    
    3,154
    
    
    
    3,282Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    20,416Cash dividends paid
    
    
    (29,119
    )
    
    
    (21,951
    )
    
    
    Capital lease obligations
    
    
    (3,210
    )
    
    
    (1,954
    )
    
    
    (10,173
    )NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    (27,307
    )
    
    
    (9,773
    )
    
    
    231,997Effect of exchange rate changes on cash and cash equivalents
    
    
    (456
    )
    
    
    1,360
    
    
    
    1,622Net increase (decrease) in cash and cash equivalents
    
    
    13,477
    
    
    
    (48,763
    )
    
    
    56,386Cash and cash equivalents at beginning of year
    
    
    53,699
    
    
    
    67,176
    
    
    
    18,413CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    67,176
    
    
    $
    18,413
    
    
    $
    74,799
  72




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##### Table of Contents



GOLDEN TELECOM, INC.
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
For the Years Ended December 31, 2005, 2006, and 2007
(In Thousands)
 Retained
    
    
    AccumulatedAdditional
    
    
    Deferred
    
    
    Earnings
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Equity
    
    
    (Accumulated
    
    
    Comprehensive
    
    
    TotalShares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Deficit)
    
    
    Income
    
    
    EquityBalance at December 31, 2004
    
    
    36,322
    
    
    $
    363
    
    
    $
    669,777
    
    
    $
    
    
    
    $
    (43,759
    )
    
    $
    
    
    
    $
    626,381Issuance of restricted shares
    
    
    27
    
    
    
    1
    
    
    
    771
    
    
    
    (772
    )
    
    
    
    
    
    
    
    
    
    
    Compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    317
    
    
    
    
    
    
    
    
    
    
    
    317Exercise of employee stock options
    
    
    109
    
    
    
    1
    
    
    
    1,450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,451Cash dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,119)
    
    
    
    
    
    
    
    (29,119
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,073
    
    
    
    
    
    
    
    76,073Balance at December 31, 2005
    
    
    36,458
    
    
    $
    365
    
    
    $
    671,998
    
    
    $
    (455
    )
    
    $
    3,195
    
    
    $
    
    
    
    $
    675,103Adoption of SFAS 123R  adjustment
to remove unearned compensation
    
    
    
    
    
    
    
    
    
    
    (455
    )
    
    
    455
    
    
    
    
    
    
    
    
    
    
    
    Cancellation of restricted shares
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of restricted shares
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Compensation expense
    
    
    
    
    
    
    
    
    
    
    298
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    298Exercise of employee stock options
    
    
    215
    
    
    
    2
    
    
    
    3,152
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,154Cash dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,951
    )
    
    
    
    
    
    
    (21,951
    )Comprehensive income:Foreign currency translation
adjustment, net of tax of $2,181
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,072
    
    
    
    75,072Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,500
    
    
    
    
    
    
    
    85,500Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160,572Balance at December 31, 2006
    
    
    36,673
    
    
    $
    367
    
    
    $
    674,993
    
    
    $
    
    
    
    $
    66,744
    
    
    $
    75,072
    
    
    $
    817,176Issuance of restricted shares
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Compensation expense
    
    
    
    
    
    
    
    
    
    
    17,205
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,205Exercise of employee stock options
    
    
    107
    
    
    
    1
    
    
    
    3,281
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,282Issuance of shares to Inure
    
    
    3,193
    
    
    
    32
    
    
    
    142,098
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142,130Issuance of shares to Rostelecom
    
    
    393
    
    
    
    4
    
    
    
    20,412
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,416Adoption of
FIN No. 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,488
    )
    
    
    
    
    
    
    (8,488
    )Comprehensive income:Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,742
    
    
    
    70,742Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    152,599
    
    
    
    
    
    
    
    152,599Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    223,341Balance at December 31, 2007
    
    
    40,374
    
    
    $
    404
    
    
    $
    857,989
    
    
    $
    
    
    
    $
    210,855
    
    
    $
    145,814
    
    
    $
    1,215,062
  73




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##### Table of Contents



GOLDEN TELECOM, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1: Nature of Business Operations
  Note 2: Summary of Significant Accounting Policies and Recent Accounting Pronouncements
 Summary of Significant Accounting Policies
 Principles of Consolidation
   Income Taxes
 Accounting for Income Taxes.
 Accounting from Uncertainty in Income Taxes
 Accounting for Uncertainty in Income Taxes  an
interpretation of SFAS No. 109
  74




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (in thousands)Balance at January 1, 2007, excluding interest and penalties
    
    $
    5,270Additions based on tax positions related to the current
year (including additions related to the acquisition of ZAO
Cortec in May 2007 of $2,450)
    
    
    7,951Additions of tax positions of prior years (including
additions related to the acquisition of ZAO Cortec in May
2007 of
$6,136)
    
    
    6,328Reductions of tax positions of prior years
    
    
    (4,506
    )Settlements
    
    
    (1,412
    )Balance at December 31, 2007, excluding interest and penalties
    
    $
    13,631
    Sale of Subsidiary Stock
  Foreign Currency Translation
 Foreign Currency
Translation .
  75




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Cash and Cash Equivalents and Restricted Cash
  Accounts Receivable
  Inventories
  Property and Equipment
   Goodwill and Intangible Assets
 Goodwill and Other Intangible Assets Intangible Assets Goodwill and Other Intangible Assets
 Goodwill Impairment Assessment
 Goodwill and Other Intangible Assets
 76




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Long-Lived Assets Impairment
  Revenue Recognition
   Advertising
  Government Pension Funds
  Off Balance Sheet Risk and Concentration of Credit Risk
  77




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Stock-Based Compensation
 Accounting for
Stock-Based Compensation, Accounting for Stock Issued to Employees.
  (in thousandsexcept pershare date)Net income, as reported
    
    $
    76,073Deduct: total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects
    
    
    620Pro forma net income
    
    $
    75,453Net income per share:Basic  as reported
    
    $
    2.09Basic  pro forma
    
    
    2.07Diluted  as reported
    
    
    2.08Diluted  pro forma
    
    
    2.06
 Share Based Payment Statement of Cash Flows
    78




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Consolidation of Variable Interest Entities
 Consolidation of Variable
Interest Entities
 Fair Value of Financial Instruments
  Derivative Financial Instruments
 Accounting for Derivative Instruments and Hedging Activities,
     79




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Changes in Accounting Estimates
   Use of Estimates in Preparation of Financial Statements
  Comparative Figures
  80




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Recent Accounting Pronouncements
 Fair Value Measurements
 Fair Value Measurements Application of FASB Statement No. 157 to FASB Statement No. 13 and
Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease
Classification or Measurement under Statement 13 Effective Date of FASB Statement
No.157
 Income Statement Presentation of Taxes Collected from Customers and Remitted to Government
Authorities
 How Taxes Collected from Customers and Remitted to Governmental Authorities
Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation).
 Fair Value Option
 The Fair Value Option for Financial Assets
and Financials Liabilities  Including an Amendment of FASB Statement No. 115
 Business Combinations
 Business Combinations
 81




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Noncontrolling Interests in Consolidated Financial Statements
 Noncontrolling Interests in Consolidated
Financial Statementsan amendment of Accounting Research Bulletin No. 51
 Note 3: Net Income Per Share
   Year Ended December 31,2005
    
    
    2006
    
    
    2007(in thousands, except per share data)Net Income
    
    $
    76,073
    
    
    $
    85,500
    
    
    $
    152,599Weighted average shares outstanding of:Common stock
    
    
    36,378
    
    
    
    36,591
    
    
    
    38,798Dilutive effect of:Employee stock options
    
    
    227
    
    
    
    126
    
    
    
    236Common stock and common stock equivalents
    
    
    36,605
    
    
    
    36,717
    
    
    
    39,034Net Income per share:Basic
    
    $
    2.09
    
    
    $
    2.34
    
    
    $
    3.93Diluted
    
    $
    2.08
    
    
    $
    2.33
    
    
    $
    3.91
 Note 4: Comprehensive Income
 Reporting Comprehensive Income
  Year Ended December 31,2005
    
    
    2006
    
    
    2007(in thousands)Net income, as reported
    
    $
    76,073
    
    
    $
    85,500
    
    
    $
    152,599Foreign currency translation adjustment
    
    
    
    
    
    
    75,072
    
    
    
    70,742Comprehensive income
    
    $
    76,073
    
    
    $
    160,572
    
    
    $
    223,341
 82




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 5: Goodwill and Intangible Assets
  As of December 31, 2006
    
    
    As of December 31, 2007(in thousands)Weighted Average
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    AccumulatedAmortization Lives
    
    
    Cost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationAmortized intangible assets:Telecommunications service contracts
    
    10 years
    
    $
    119,433
    
    
    $
    (49,450
    )
    
    $
    136,716
    
    
    $
    (66,914
    )Contract-based customer relationships
    
    5 years
    
    
    42,104
    
    
    
    (28,578
    )
    
    
    64,085
    
    
    
    (36,542
    )Licenses
    
    10 years
    
    
    26,948
    
    
    
    (4,295
    )
    
    
    114,246
    
    
    
    (5,737
    )Brand name
    
    10 years
    
    
    
    
    
    
    
    
    
    
    36,859
    
    
    
    (4,563
    )Other intangible assets
    
    6 years
    
    
    18,374
    
    
    
    (7,991
    )
    
    
    21,261
    
    
    
    (9,826
    )Total
    
    
    
    
    
    $
    206,859
    
    
    $
    (90,314
    )
    
    $
    373,167
    
    
    $
    (123,582
    )
  Business &
    
    
    Carrier &
    
    
    ConsumerCorporate
    
    
    Operator
    
    
    Internet
    
    
    MobileSegment
    
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    Total(in thousands)Balance as of December 31, 2005
    
    $
    88,387
    
    
    $
    59,732
    
    
    $
    1,130
    
    
    
    
    
    
    $
    149,249Goodwill related to acquisitions
    
    
    6,215
    
    
    
    420
    
    
    
    1,456
    
    
    
    
    
    
    
    8,091Other
    
    
    (133
    )
    
    
    (35
    )
    
    
    (717
    )
    
    
    
    
    
    
    (885
    )Foreign currency translation adjustment
    
    
    12,983
    
    
    
    11,011
    
    
    
    90
    
    
    
    
    
    
    
    24,084Balance as of December 31, 2006
    
    $
    107,452
    
    
    $
    71,128
    
    
    $
    1,959
    
    
    
    
    
    
    $
    180,539Goodwill related to acquisitions
    
    
    22,355
    
    
    
    3,209
    
    
    
    83,009
    
    
    
    6,153
    
    
    
    114,726Other
    
    
    (1,736
    )
    
    
    (231
    )
    
    
    (160
    )
    
    
    
    
    
    
    (2,127
    )Foreign currency translation adjustment
    
    
    8,528
    
    
    
    5,335
    
    
    
    4,180
    
    
    
    301
    
    
    
    18,344Balance as of December 31, 2007
    
    $
    136,599
    
    
    $
    79,441
    
    
    $
    88,988
    
    
    $
    6,454
    
    
    $
    311,482
 Note 6: Business Combinations and Investment Transactions
 Acquisitions in 2005
   83




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    Acquisitions in 2006
       84




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
      Acquisitions in 2007
    85




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Business Combinations
 May 31, 2007(in thousands)ASSETS:Current assets
    
    $
    32,987Property and equipment
    
    
    158,266Intangible assets
    
    
    50,550Goodwill
    
    
    104,343Other assets
    
    
    14,355Total assets
    
    $
    360,501LIABILITIES:Current liabilities
    
    $
    102,393Non-current liabilities
    
    
    25,157Net assets
    
    $
    232,951Less: Minority interest in net assets acquired
    
    
    (36,096
    )Total purchase consideration and transaction costs
    
    $
    196,855Consideration and transaction costs:GTI shares consideration
    
    
    142,130Cash consideration
    
    
    8,204Loan refinancing
    
    
    45,000Direct transaction costs
    
    
    1,521Total purchase consideration and transaction costs
    
    $
    196,855
 86




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Twelve Months Ended December 31,2006
    
    
    2007(unaudited)(in thousands, except per share data)Revenue
    
    $
    938,422
    
    
    $
    1,340,700Income before cumulative effect of
a change in accounting principle
    
    
    80,097
    
    
    
    151,428Cumulative effect of a change in
accounting principle
    
    
    (681
    )
    
    
    Net income
    
    $
    79,416
    
    
    $
    151,428Basic earnings per share of common stock:Income before cumulative effect of
a change in accounting principle
    
    $
    2.02
    
    
    $
    3.90Cumulative effect of a change in
accounting principle
    
    
    (0.02
    )
    
    
    Net income per share  basic
    
    $
    2.00
    
    
    $
    3.90Diluted earnings per share of common stock:Income before cumulative effect of
a change in accounting principle
    
    $
    2.01
    
    
    $
    3.88Cumulative effect of a change in
accounting principle
    
    
    (0.02
    )
    
    
    Net income per share  diluted
    
    $
    1.99
    
    
    $
    3.88
  87




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
        88




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
     Note 7: Investments in and Advances to Ventures
   December 31,2006
    
    
    2007(in thousands)Equity in net assets acquired
    
    $
    13,448
    
    
    $
    16,955Goodwill as part of investment
    
    
    1,313
    
    
    
    1,313Difference between fair value and historical value of
assets acquired
    
    
    (1,355
    )
    
    
    (1,615
    )Cash advances and other
    
    
    (1,520
    )
    
    
    (1,223
    )Total investments in and advances to ventures
    
    $
    11,886
    
    
    $
    15,430
  89




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 8: Supplemental Balance Sheet Information
 December 31,2006
    
    
    2007(in thousands)Other current assets consist of:Interest receivable
    
    $
    120
    
    
    $
    1,198Deferred cost
    
    
    4,355
    
    
    
    6,862Other current assets
    
    
    1,089
    
    
    
    2,173Total other current assets
    
    $
    5,564
    
    
    $
    10,233Other non-current assets consist of:Deferred tax asset
    
    $
    1,139
    
    
    $
    2,094Deferred cost
    
    
    8,731
    
    
    
    13,655Deferred debt issuance cost
    
    
    
    
    
    
    3,149Other non-current assets
    
    
    1,871
    
    
    
    1,104Total other non- current assets
    
    $
    11,741
    
    
    $
    20,002Accounts payable and accrued expenses consists of:Accounts payable
    
    $
    78,799
    
    
    $
    143,436Accrued compensation
    
    
    33,367
    
    
    
    32,844Accrued other taxes
    
    
    3,717
    
    
    
    12,415FIN No. 48 liability
    
    
    
    
    
    
    18,925Accrued access and network services
    
    
    27,734
    
    
    
    38,548Interest payable
    
    
    64
    
    
    
    1,903Other accrued expenses
    
    
    2,377
    
    
    
    8,546Total accounts payable and accrued expenses
    
    $
    146,058
    
    
    $
    256,617
 Note 9: Debt Obligations and Capital Leases
  December 31,2006
    
    
    2007(in thousands)Term Facility Agreement
    
    $
    
    
    
    $
    225,000Citibank Credit Facility
    
    
    6,600
    
    
    
    14,666Calyon Bank Credit Facility
    
    
    3,921
    
    
    
    2,178Other Credit Facilities
    
    
    1,813
    
    
    
    99512,334
    
    
    
    242,839Less: debt maturing within one year
    
    
    12,305
    
    
    
    17,680Total long-term debt
    
    $
    29
    
    
    $
    225,159
   90




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
       Lease payments(in thousands)2008
    
    $
    4,0502009
    
    
    3,1442010
    
    
    2,8782011
    
    
    2,4952012
    
    
    72813,295Less: amount representing
interest
    
    
    1,986Total principal payments
    
    $
    11,309
  Note 10: Derivative Financial Instruments
 Accounting
for Derivative Instruments and Hedging Activities
  91




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Note 11: Shareholders Equity
 Common Stock
       Preferred Stock
  92




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Dividends
   Note 12: Stock Appreciation Rights and Stock Option Plans
     93




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Year Ended December 31,2006
    
    2007Weighted-average volatility
    
    42.5%
    
    
    40.9
    %Expected dividend yield
    
    1.7%
    
    
    Expected term
    
    0.12  4.75 years
    
    0.21  1.75 yearsRisk-free rate
    
    4.7%
    
    
    3.5
    %
  Year Ended December 31,2005
    
    
    2006
    
    
    2007Weighted
    
    
    
    
    
    
    
    
    
    Weighted
    
    
    Aggregate
    
    
    
    
    
    
    Weighted
    
    
    AggregateAverage
    
    
    Aggregate
    
    
    
    
    
    
    Average
    
    
    Intrinsic
    
    
    
    
    
    
    Average
    
    
    IntrinsicExercise
    
    
    Intrinsic
    
    
    
    
    
    Exercise
    
    
    Value
    
    
    
    
    
    Exercise
    
    
    ValueSARs
    
    
    Price
    
    
    Value
    
    
    SARs
    
    
    Price
    
    

(in
thousands)
    
    
    SARs
    
    
    Price
    
    

(in
thousands)Outstanding at beginning of year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,251,800
    
    
    $
    29.19
    
    
    
    
    
    
    
    1,293,800
    
    
    $
    29.05SARs granted
    
    
    1,251,800
    
    
    $
    29.19
    
    
    
    
    
    
    
    177,000
    
    
    
    27.94
    
    
    
    
    
    
    
    
    
    
    
    SARs exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,200
    )
    
    
    28.15
    
    
    
    
    
    
    
    (926,334
    )
    
    
    28.61SARs expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    SARs forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (114,800
    )
    
    
    28.91
    
    
    
    
    
    
    
    (48,600
    )
    
    
    28.82Outstanding at end of year
    
    
    1,251,800
    
    
    
    29.19
    
    
    
    
    
    
    
    1,293,800
    
    
    
    29.05
    
    
    $
    23,007
    
    
    
    318,866
    
    
    
    30.38
    
    
    $
    7,467Exercisable at end of year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    233,217
    
    
    $
    28.63
    
    
    $
    4,247
    
    
    
    11,500
    
    
    $
    28.29
    
    
    $
    293
     Year Ended December 31, 2005Risk free interest rate
    
    
    3.86
    %Dividend yield
    
    
    3.0
    %Expected life (years)
    
    
    3.0Volatility
    
    
    88
    %
   Year Ended December 31, 2007Risk free interest rate
    
    
    4.98
    %Dividend yield
    
    
    Expected life (years)
    
    
    4.2Volatility
    
    
    42
    %
 94




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    Year Ended December 31,2005
    
    
    2006
    
    
    2007Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at beginning of
year
    
    
    517,013
    
    
    $
    14.18
    
    
    
    373,012
    
    
    $
    14.31
    
    
    
    157,915
    
    
    $
    13.82Options granted
    
    
    2,500
    
    
    
    26.32
    
    
    
    
    
    
    
    
    
    
    
    1,549,820
    
    
    
    55.85Options exercised
    
    
    (109,000
    )
    
    
    13.31
    
    
    
    (215,097
    )
    
    
    14.66
    
    
    
    (107,049
    )
    
    
    30.66Options expired
    
    
    (12,500
    )
    
    
    20.88
    
    
    
    
    
    
    
    
    
    
    
    (12,660
    )
    
    
    14.52Options forfeited
    
    
    (25,001
    )
    
    
    14.00
    
    
    
    
    
    
    
    
    
    
    
    (9,125
    )
    
    
    55.46Outstanding at end of year
    
    
    373,012
    
    
    
    14.31
    
    
    
    157,915
    
    
    
    13.82
    
    
    
    1,578,901
    
    
    
    53.69Exercisable at end of year
    
    
    369,817
    
    
    $
    14.22
    
    
    
    157,915
    
    
    $
    13.82
    
    
    
    736,858
    
    
    $
    49.33
  Options ExercisableWeightedAverageNumber
    
    
    RemainingOutstanding
    
    
    Contractual
    
    
    IntrinsicExercise Prices
    
    and
    
    
    Life
    
    
    Valueat December 31, 2007:
    
    Exercisable
    
    
    (In Years)
    
    
    (In thousands)$12.00
    
    
    62,154
    
    
    
    3.6
    
    
    $
    5,52915.63
    
    
    19,401
    
    
    
    2.7
    
    
    
    1,65553.80
    
    
    644,803
    
    
    
    4.5
    
    
    
    30,40255.01
    
    
    7,500
    
    
    
    4.5
    
    
    
    34561.04
    
    
    1,500
    
    
    
    4.8
    
    
    
    6068.61
    
    
    1,500
    
    
    
    4.7
    
    
    
    48736,858
    
    
    
    
    
    
    $
    38,039
  95




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 13: Income Taxes
  Year Ended December 31,2005
    
    
    2006
    
    
    2007(in thousands)Pretax income
(loss):Domestic
    
    $
    (8,405
    )
    
    $
    (11,176
    )
    
    $
    13,168Foreign
    
    
    125,272
    
    
    
    142,582
    
    
    
    205,352$
    116,867
    
    
    $
    131,406
    
    
    $
    218,520
  Year Ended December 31,2005
    
    
    2006
    
    
    2007(in thousands)Domestic  current
    
    $
    
    
    
    $
    
    
    
    $
    Domestic  deferred
    
    
    2,234
    
    
    
    
    
    
    
    (19
    )Foreign  current
    
    
    41,630
    
    
    
    44,242
    
    
    
    76,348Foreign  deferred
    
    
    (6,048
    )
    
    
    (3,825
    )
    
    
    (18,018
    )$
    37,816
    
    
    $
    40,417
    
    
    $
    58,311
    Year Ended December 31,2005
    
    
    2006
    
    
    2007Tax expense at US statutory rates
    
    
    (35.0
    )%
    
    
    (35.0
    )%
    
    
    (35.0
    )%Stock based compensation
    
    
    
    
    
    
    0.1
    
    
    
    (1.9
    )Other non-deductible expenses
    
    
    (4.8
    )
    
    
    (4.8
    )
    
    
    (3.7
    )Different foreign tax rates
    
    
    11.9
    
    
    
    11.9
    
    
    
    10.1Change in valuation allowance
    
    
    (4.2
    )
    
    
    (2.4
    )
    
    
    4.1Other permanent differences
    
    
    (0.3
    )
    
    
    (0.6
    )
    
    
    (0.3
    )Tax expense
    
    
    (32.4
    )%
    
    
    (30.8
    )%
    
    
    (26.7
    )%
 96




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  December 31,2006
    
    
    2007(in thousands)Deferred Tax Assets:Net operating loss carry-forwards
    
    $
    6,242
    
    
    $
    8,569Accrued expenses
    
    
    10,034
    
    
    
    23,104Deferred revenue
    
    
    13,940
    
    
    
    19,463Intangible assets
    
    
    2,359
    
    
    
    2,232Fixed assets
    
    
    294
    
    
    
    701Investment
in affiliates
    
    
    9,542
    
    
    
    Other deferred tax assets
    
    
    3,046
    
    
    
    14,561Valuation allowance
    
    
    (21,092
    )
    
    
    (12,248
    )Total deferred tax asset
    
    $
    24,365
    
    
    $
    56,382Deferred Tax Liabilities:Accrued revenue
    
    $
    693
    
    
    $
    1,271Deferred expenses
    
    
    3,129
    
    
    
    6,007Intangible assets
    
    
    26,606
    
    
    
    56,478Fixed assets
    
    
    9,172
    
    
    
    32,880Other deferred tax liabilities
    
    
    1,817
    
    
    
    3,588Total deferred tax liability
    
    $
    41,417
    
    
    $
    (100,224
    )Net deferred tax liability
    
    $
    (17,052
    )
    
    $
    (43,842
    )
  December 31,2006
    
    
    2007(in thousands)Deferred Tax Assets:US tax component
    
    $
    
    
    
    $
    Foreign tax component
    
    
    24,365
    
    
    
    56,382Total deferred tax asset
    
    $
    24,365
    
    
    $
    56,382Deferred Tax Liability:US tax component
    
    $
    
    
    
    $
    Foreign tax component
    
    
    41,417
    
    
    
    (100,224
    )Total deferred tax liability
    
    $
    41,417
    
    
    $
    (100,224
    )Net deferred tax liability
    
    $
    (17,052
    )
    
    $
    (43,842
    )
 Note 14: Commitments and Contingencies
 Leases
   Other Commitments and Contingencies
  97




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Tax Matters
    Russian Environment and Current Economic Situation
   Net Assets Position in Accordance with Statutory Requirements
  98




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Other Matters
     99




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 15: Related Party Transactions
  2005
    
    
    2006
    
    
    2007(in thousands)Revenue from equity investees
    
    $
    363
    
    
    $
    779
    
    
    $
    1,118Revenue from Rostelecom
    
    
    646
    
    
    
    1,953
    
    
    
    4,051Revenue from Telenor
    
    
    470
    
    
    
    593
    
    
    
    623Revenue from Alfa
    
    
    3,158
    
    
    
    4,552
    
    
    
    5,535$
    4,637
    
    
    $
    7,877
    
    
    $
    11,327Access and
network services from equity investees
    
    
    3,038
    
    
    
    7,867
    
    
    
    4,809Access and
network services from Rostelecom
    
    
    23,979
    
    
    
    33,721
    
    
    
    43,814Access and
network services from Telenor
    
    
    605
    
    
    
    367
    
    
    
    261Access and
network services from Alfa
    
    
    
    
    
    
    
    
    
    
    103$
    27,622
    
    
    $
    41,955
    
    
    $
    48,987
  2006
    
    
    2007(in thousands)Accounts receivable from Rostelecom
    
    $
    439
    
    
    $
    559Accounts receivable from Telenor
    
    
    107
    
    
    
    97Accounts receivable from Alfa
    
    
    681
    
    
    
    935$
    1,227
    
    
    $
    1,591Accounts payable from Rostelecom
    
    
    4,441
    
    
    
    6,326Accounts payable from Telenor
    
    
    57
    
    
    
    22Accounts payable from Alfa
    
    
    7
    
    
    
    423$
    4,505
    
    
    $
    6,771
    Note 16: Segment Information
 Line Of Business Data
  100




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Adjustments to ReconcileBusiness Segment toConsolidated ResultsBusiness
    
    Carrier
    
    
    
    
    
    
    
    
    
    Corporate,
    
    Business
    
    
    
    
    
    Equityand
    
    and
    
    Consumer
    
    Mobile
    
    Other &
    
    Segment
    
    Consolidated
    
    Method
    
    AffiliateCorporate
    
    Operator
    
    Internet
    
    Services
    
    Eliminations
    
    Total
    
    Results
    
    Ventures
    
    Adjustments(in thousands)Year EndedDecember 31, 2005Revenue from external
customers
    
    $
    387,532
    
    
    $
    222,904
    
    
    $
    44,484
    
    
    $
    14,103
    
    
    $
    
    
    
    $
    669,023
    
    
    $
    667,379
    
    
    $
    (4,449
    )
    
    $
    2,805Intersegment revenue
    
    
    
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    (52
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    102,415
    
    
    
    27,894
    
    
    
    (1,322
    )
    
    
    3,523
    
    
    
    (16,268
    )
    
    
    116,242
    
    
    
    115,942
    
    
    
    (300
    )
    
    
    Identifiable assets
    
    
    494,266
    
    
    
    323,278
    
    
    
    67,511
    
    
    
    2,855
    
    
    
    21,759
    
    
    
    909,669
    
    
    
    882,211
    
    
    
    (27,458
    )
    
    
    Capital expenditures
    
    
    89,386
    
    
    
    32,879
    
    
    
    8,360
    
    
    
    367
    
    
    
    132
    
    
    
    131,124
    
    
    
    130,775
    
    
    
    (349
    )
    
    
    
 Adjustments to ReconcileBusiness Segment toConsolidated ResultsBusiness
    
    Carrier
    
    
    
    
    
    
    
    
    
    Corporate,
    
    Business
    
    
    
    
    
    Equityand
    
    and
    
    Consumer
    
    Mobile
    
    Other &
    
    Segment
    
    Consolidated
    
    Method
    
    AffiliateCorporate
    
    Operator
    
    Internet
    
    Services
    
    Eliminations
    
    Total
    
    Results
    
    Ventures
    
    Adjustments(in thousands)Year EndedDecember 31, 2006Revenue from external
customers
    
    $
    487,970
    
    
    $
    318,698
    
    
    $
    48,744
    
    
    $
    9,599
    
    
    $
    
    
    
    $
    865,011
    
    
    $
    854,617
    
    
    $
    (18,074
    )
    
    $
    7,680Intersegment revenue
    
    
    
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    125,543
    
    
    
    31,574
    
    
    
    (7,999
    )
    
    
    722
    
    
    
    (18,514
    )
    
    
    131,326
    
    
    
    127,211
    
    
    
    (4,115
    )
    
    
    Identifiable assets
    
    
    611,275
    
    
    
    428,684
    
    
    
    107,966
    
    
    
    14,543
    
    
    
    (20,677
    )
    
    
    1,141,791
    
    
    
    1,107,190
    
    
    
    (34,601
    )
    
    
    Capital expenditures
    
    
    105,291
    
    
    
    45,542
    
    
    
    21,626
    
    
    
    13,069
    
    
    
    95
    
    
    
    185,623
    
    
    
    179,772
    
    
    
    (5,851
    )
    
    
    
 Adjustments to ReconcileBusiness Segment toConsolidated ResultsBusiness
    
    Carrier
    
    
    
    
    
    
    
    
    
    Corporate,
    
    Business
    
    
    
    
    
    Equityand
    
    and
    
    Consumer
    
    Mobile
    
    Other &
    
    Segment
    
    Consolidated
    
    Method
    
    AffiliateCorporate
    
    Operator
    
    Internet
    
    Services
    
    Eliminations
    
    Total
    
    Results
    
    Ventures
    
    Adjustments(in thousands)Year EndedDecember 31, 2007Revenue from external
customers
    
    $
    719,085
    
    
    $
    493,843
    
    
    $
    77,053
    
    
    $
    18,087
    
    
    $
    
    
    
    $
    1,308,068
    
    
    $
    1,292,899
    
    
    $
    (20,426
    )
    
    $
    5,257Intersegment revenue
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    188,200
    
    
    
    45,708
    
    
    
    (25,398
    )
    
    
    2,028
    
    
    
    (38,450
    )
    
    
    172,088
    
    
    
    169,364
    
    
    
    (2,724
    )
    
    
    Identifiable assets
    
    
    958,733
    
    
    
    602,973
    
    
    
    403,024
    
    
    
    36,554
    
    
    
    37,952
    
    
    
    2,039,236
    
    
    
    1,998,891
    
    
    
    (40,345
    )
    
    
    Capital expenditures
    
    
    183,761
    
    
    
    68,046
    
    
    
    70,769
    
    
    
    7,669
    
    
    
    5,021
    
    
    
    335,266
    
    
    
    326,184
    
    
    
    (9,082
    )
    
    
    
 101




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Geographic Data
   Corporate,OtherCountries &
    
    ConsolidatedRussia
    
    Ukraine
    
    Eliminations
    
    Results(in thousands)Year ended December 31, 2005Revenue
    
    $
    593,640
    
    
    $
    73,816
    
    
    $
    (77
    )
    
    $
    667,379Long-lived assets
    
    
    374,676
    
    
    
    39,121
    
    
    
    13,755
    
    
    
    427,552Year ended December 31, 2006Revenue
    
    $
    766,169
    
    
    $
    81,819
    
    
    $
    6,629
    
    
    $
    854,617Long-lived assets
    
    
    504,527
    
    
    
    57,878
    
    
    
    16,063
    
    
    
    578,468Year ended December 31, 2007Revenue
    
    $
    1,190,601
    
    
    $
    105,319
    
    
    $
    (3,021
    )
    
    $
    1,292,899Long-lived assets
    
    
    926,000
    
    
    
    73,879
    
    
    
    37,509
    
    
    
    1,037,388
 Note 17: Supplemental Cash Flow Information
  Year Ended December 31,2005
    
    2006
    
    2007(in thousands)Issuance of common stock in
connection with an acquisition
    
    $
    
    
    
    $
    
    
    
    $
    142,130Capitalized leased assets
    
    
    3,580
    
    
    
    
    
    
    
    18,407Amounts payable in connection with
business acquisitions
    
    
    885
    
    
    
    378
    
    
    
    Capitalized
interest
    
    
    
    
    
    
    
    
    
    
    5,901
 Note 18: Long Term Incentive Bonus Program
  102




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 19: Quarterly Financial Data (Unaudited)
  For the Three Months EndedMarch 31,
    
    June 30,
    
    September 30,
    
    December 31,2006
    
    2006
    
    2006
    
    2006(2)(3)(in thousands, except per share data)Revenues
    
    $
    178,140
    
    
    $
    196,968
    
    
    $
    228,717
    
    
    $
    250,792Access and network services (excluding
depreciation and amortization)
    
    
    93,393
    
    
    
    105,608
    
    
    
    128,153
    
    
    
    147,235Gross Margin
    
    
    84,747
    
    
    
    91,360
    
    
    
    100,564
    
    
    
    103,557Selling, general and administrative
(excluding
depreciation and amortization)
    
    
    33,881
    
    
    
    33,569
    
    
    
    37,505
    
    
    
    47,853
    (4)Net income
    
    
    18,785
    
    
    
    22,645
    
    
    
    24,229
    
    
    
    19,841Net income per share(1)- basic
    
    
    0.52
    
    
    
    0.62
    
    
    
    0.66
    
    
    
    0.54Net income per share(1)- diluted
    
    
    0.51
    
    
    
    0.62
    
    
    
    0.66
    
    
    
    0.54
 For the Three Months EndedMarch 31,
    
    June 30,
    
    September 30,
    
    December 31,2007
    
    2007
    
    2007
    
    2007(in thousands, except per share data)Revenues
    
    $
    255,739
    
    
    $
    297,669
    
    
    $
    350,391
    
    
    $
    389,100Access and network services (excluding
depreciation and amortization)
    
    
    150,095
    
    
    
    171,633
    
    
    
    202,004
    
    
    
    217,629Gross Margin
    
    
    105,644
    
    
    
    126,036
    
    
    
    148,387
    
    
    
    171,471Selling, general and administrative
(excluding
depreciation and amortization)
    
    
    48,986
    
    
    
    44,797
    
    
    
    63,316
    
    
    
    84,817
    (5)Net income
    
    
    16,719
    
    
    
    32,263
    
    
    
    74,375
    
    
    
    29,242Net income per share(1)-basic
    
    
    0.46
    
    
    
    0.85
    
    
    
    1.85
    
    
    
    0.72Net income per share(1)- diluted
    
    
    0.45
    
    
    
    0.85
    
    
    
    1.84
    
    
    
    0.71
 
 (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.(2)
    
    The operating results for the fourth quarter of 2006 include the impact of a $2.8 million
change in estimate with respect to the Companys allowance for doubtful accounts.(3)
    
    The operating results for the fourth quarter of 2006 include the impact of $2.6 million due
to the reversal of liabilities to a former shareholder because of the expiration of the
statute of limitations.(4)
    
    Includes SARs expense of $13.8 million.(5)
    
    Includes stock option expense of $7.5 million and SARs expense of $2.1 million and $3.7
million of expenses related to the merger as discussed in Note 20. Note 20: Subsequent Events
 Merger Transaction
   103




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
      Share-Based Payments
  104




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ITEM 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
  
 ITEM 9A. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Managements Report on Internal Control over Financial Reporting
   
    
    pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of our assets;
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles,
and that our receipts and expenditures are being made only in accordance with authorizations of
our management and members of our board of directors; and
    
    provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of our assets that could have a material effect on our
financial statements.
     105




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##### Table of Contents



1. Ineffective controls over accounting for revenues and billing process
  2. Ineffective controls over financial statement closing process
  3. Lack of controls over construction in process and fixed assets management
  4. Insufficient U.S. GAAP qualified accounting and finance personnel
  5. Accounting for stock based compensation
    106




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Remediation activities and Changes in Internal Control over Financial Reporting
 Remediation Activities
  
    
    With respect to the material weakness from the first to the fourth, described above, we
initiated a dedicated project on assessment of internal controls in Corbina. As a result of
these efforts an action plan on remediation of all significant findings, including the
material weaknesses described above, has been prepared and approved by the management.
Execution of the action plan is in progress and it is to be completed in 2008. We also
continue to recruit and hire additional qualified staff. We deployed Golden Telecom
employees in the performance of more extensive procedures in connection with the December
31, 2007 consolidated Golden Telecom financial statement close process in response to the
identified Corbinas material weaknesses and to ensure the accuracy of Golden Telecoms
consolidated financial reporting. Further, we plan to increase Corbinas training efforts
for certain of its personnel.
    
    With respect to the fifth material weakness, described above, we implemented additional
manual controls and procedures over the computations made and recorded for our stock-based
compensation expense. We plan to revise the calculation of stock-based compensation expense
and implement additional manual and automated controls over the calculation process.
 Changes in Internal Control over Financial Reporting
  107




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Report of Independent Registered Public Accounting Firm
        Accounting and Finance Personnel
  Financial Statement Close Process
  Construction in process and fixed assets management
  108




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Revenue
  Stock Based Compensation
       
 ITEM 9B. Other Information
  109




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PART III
 
 ITEM 10. Directors and Executive Officers of the Registrant
 The Board of Directors
  Peter Covell
Age 52
    
    Mr. Covell has served as Chief
Operations Officer of OAO Vimpel
Communications (VimpelCom) since
May 2006. From 2004 until 2006, Mr.
Covell served as Chief Operations
Officer at the Bulgarian
Telecommunication Company, a
telecommunications services
provider. Mr. Covell served as
Technical Consultant at Advent
International, a private equity
firm, from 2002 until 2004. Mr.
Covells business address is 4
Krasnoproletarskaya, Moscow, Russia,
127006.Patrick Gallagher
Age 52
    
    Mr. Gallagher, a citizen of the
United Kingdom, has over 25 years
experience in international
telecommunications. In October
2007, Mr. Gallagher was appointed as
a non-executive director of
Harmonics Inc., a US publicly listed
global provider of high performance
video solutions to broadcast, cable,
telecom, and other industries. In
January 2008, he was appointed
Chairman of Macro4 plc, a global
software solutions company. From
April 2004 to October 2007 he was a
member of the Supervisory Board of
Getronics NV, a Dutch listed global
ICT solutions and services company.
From April 2006 until March 2007,
Mr. Gallagher was non-executive Vice
Chairman of FLAG Telecom Group, a
global company which owns and
manages an extensive sub sea optical
fiber network spanning four
continents and serving the business
markets of Asia, Europe, Middle East
and the U.S. From March 2003 until
March 2006, Mr. Gallagher was
Executive Vice Chairman and Chief
Executive Officer of FLAG Telecom
Group. Prior to joining FLAG in
March 2003, he had a 17 year career
with British Telecommunications plc
(BT). Initially, Mr. Gallagher
held the position of Commercial
Advisor and Commercial Director of
BT and in 1994 he was appointed
Director of Business Development to
lead BTs international expansion
and investment strategy. He was
President of BT Europe from January
1996 until July 2000 where he grew
and managed BTs European operations
to include 12 equity joint venture
companies and five subsidiaries,
generating over £6 billion in annual
revenue. Subsequently, he sat on
BTs Executive Committee as Group
Strategy and Development Director
where he was central to BTs
restructuring and strategic
re-positioning. Before joining BT,
Mr. Gallagher spent eight years with
Racal Electronics, managing
international communications
projects in Europe, the Middle East
and South America. Mr. Gallagher is
a graduate of Warwick University
with a degree in Economics and
Industry.Alexander Gersh
Age 43
    
    Mr. Gersh has served as Chief
Financial Officer of NDS Group plc,
a provider of technology solutions
for digital pay-TV, since January
2005. From 2003 until December 2004,
Mr. Gersh served as Chief Financial
Officer of FLAG Telecom, a
telecommunications services
provider. Mr. Gersh has been a
member of VimpelComs Audit
Commission since June 2003 and the
Chairman of VimpelComs Audit
Commission since 2004. Mr. Gersh is
a member of the Institute of
Certified Public Accountants. Mr.
Gershs business address is 1
Heathrow Boulevard, 28-6 Bath Road,
West Drayton, Middelsex, UB7 0DQ,
United Kingdom.David Herman
Age 62
    
    Mr. Herman, a citizen of the United
States, has served in senior
executive positions throughout the
world, including the Commonwealth of
Independent States (CIS). He
retired in 2002 from the position of
Vice President of General Motors
Corporation for Russia and the CIS
after 29 years with General Motors
and since 2002 has been a consultant
to General Motors. Mr. Herman was
instrumental in the establishment of
a $340 million car plant by General
Motors, Avtovaz and the European
Bank for Reconstruction and
Development. Prior to his
appointment with General Motors in
the Commonwealth of Independent
States, Mr. Herman served as
Chairman of Adam Opel A.G., and
served as President of SAAB
Automobile.Dmitry
A. Pleskonos
Age 43
    
    Mr. Pleskonos has served as
Executive Vice President, Business
Development for the CIS at VimpelCom
since May 2007. From January 2007
until May 2007, Mr. Pleskonos served
as Vice President, General Manager
for the Moscow Region of VimpelCom.
From January 2006 until January
2007, Mr. Pleskonos served as
General Manager for the Moscow
Region of VimpelCom. From July 2004
until January 2006, Mr. Pleskonos
served as Sales Director of
VimpelCom. From May 2002 until June
2004, Mr. Pleskonos served as Sales
Operations Director for Russia and
CIS countries at Mars LLC, a
consumer products manufacturer. Mr.
Pleskonoss business address is 4
Krasnoproletarskaya, Moscow, Russia,
127006.
 110




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##### Table of Contents



Elena
A. Shmatova
Age 48
    
    Ms. Shmatova has served as Chief
Financial Officer of VimpelCom since
January 2003 and as Executive Vice
President since October 2005. Ms.
Shmatova served as Vice President of
VimpelCom from June 2004 to October
2005. Ms. Shmatovas business
address is 4 Krasnoproletarskaya,
Moscow, Russia, 127006.Jean-Pierre Vandromme
Age 53
    
    Mr. Vandromme, a citizen of Belgium,
has served as the Chief Executive
Officer of the Company since
September 1, 2005. Mr. Vandromme is
also the founder and Chairman of
VoIP.co.uk, a United Kingdom based
company, and is a Board member of
Completel, Ventelo Sweden and
Norway, and was a Board member of
Axxessit. From 2001 to 2003, Mr.
Vandromme was Chairman, President
and Chief Executive Officer of
VENTELO Europe and from 1994 to
2001, Mr. Vandromme served in a
variety of positions with Global
TeleSystems, Inc. (GTS), including
as President of GTS-Business
Services.
  Executive Officers who are not directors
  Alexander Vinogradov
President 
Age 53
    
    Mr. Vinogradov, a citizen of Russia,
became President and Chief Executive
Officer of the Company in November
2001. Mr. Vinogradov has served on
the Executive Committee of the Board
since his initial election as a
Director until May 2005. Prior to
joining the Company as President and
Chief Executive Officer, Mr.
Vinogradov worked at EDN Sovintel
LLC (Sovintel) as General Director
from November 1995. Before his
appointment as General Director, Mr.
Vinogradov worked at Sovintel as
Commercial Director, Head of
Marketing and Sales and Head of
Marketing and Development. Prior to
his employment with Sovintel, Mr.
Vinogradov worked for over 10 years
at the Main Centre for Management of
Long-Distance Communications of the
USSR where he was in charge of
numerous commercial and technical
development programs. Mr. Vinogradov
holds a degree from Moscow
Telecommunications Institute and is
a Member of the International
Academy of Telecommunications. In
2003 he became a Master of
Communications of the Russian
Federation.Boris Svetlichny
Senior Vice President, Chief
Financial Officer (CFO) and
Treasurer Age 46
    
    Mr. Svetlichny, a citizen of the
United States, was appointed as
Senior Vice President, Chief
Financial Officer (CFO) and
Treasurer in March 2006. From
October 2004, Mr. Svetlichny served
as the Financial Controller of
Bulgarian Telecommunications Company
Plc (BTC), the Bulgarian incumbent
telecommunications operator. Prior
to joining BTC, Mr. Svetlichny was a
Partner from 2003 to 2004 with VSRK
Associates Ltd., a United Kingdom
based management consulting company.
From 2000 to 2003, Mr. Svetlichny
was the Director and Vice President
of Finance of Ventelo (UK) Ltd. for
its Western European operations, and
from 1994 to 2000, Mr. Svetlichny
served in a variety of positions
with GTS, including Director of
Finance of GTS Business Services
and Finance Director of Sovintel.
Mr. Svetlichny holds a BBA in
Accounting from the University of
Massachusetts and a MSIA (MBA) from
Carnegie-Mellon University in the
USA.Ilya Smirnov
Vice President, General Counsel and
Corporate Secretary 
Age 40
    
    Mr. Smirnov, a citizen of Russia,
 was appointed Vice-President, Acting
General Counsel and Corporate
Secretary of the Company in July,
2006. Mr. Smirnov became General
Counsel in June 2007. Mr. Smirnov
has been working for us as legal
counsel and Director of Legal
Department of Sovintel since 1995.
He graduated from the Moscow State
Institute of International Relations
in 1989 and has an MBA degree from
Dowling College of 2002. Mr. Smirnov
has a strong background in business
development and a deep knowledge of
both Russian and Western law with
extensive work experience and high
professional skills.Michael
Wilson
Vice President, Corporate Controller
and Principal Accounting Officer
Age 38
    
    Mr. Wilson, a citizen of the United States, was appointed Vice
President, Corporate Controller and
Principal Accounting Officer of the
Company in July 2003, having joined
the Company as the Director of
Financial Reporting in September
1999. From November 1997 until
September 1999, Mr. Wilson was
Accounting and Finance Special
Projects Director of GTS. Prior to
that, Mr. Wilson worked as the
General Ledger Accounting Manager
for Computer Sciences Corporate in
Washington, DC. Mr. Wilson is a
Certified Public Accountant and a
member of the American Institute of
Certified Public Accountants. Mr.
Wilson holds a Bachelors Degree in
Accounting from Fairmont State
College and a Masters Degree in
Accounting from West Virginia
University.
 111




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##### Table of Contents



Kevin
Cuffe
Vice President, Head of the BCS &
Customer Care Business Units
Age 47
    
    Mr. Cuffe, a citizen of the United
States, has been with the Company
since 1998 where he previously
served as Commercial Director for
Sovintel. He came to the Company
after 15 years with AT&T and worked
in the Russian and European telecom
markets from 1992 in a variety of
senior management roles. In Russia,
he led the commercial activities of
AT&Ts first Russian joint venture.
In Italy, he was AT&Ts Business
Services Director charged with the
development and extension of the
Business Service offerings of AT&T
in Southern Europe, the Middle East
and Africa. He holds a Bachelor of
Business Administration degree from
the University of Miami and an MBA
from San Diego State University.
 Section 16(a) Beneficial ownership reporting compliance
  Conduct guidelines
 http://www.goldentelecom.com
 Audit Committee financial expert
  
 ITEM 11. Executive Compensation
 Compensation Committee Report
   
 112




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Compensation Discussion and Analysis
 Overview of Compensation Program
   Compensation Philosophy and Objectives
   Elements of Compensation
 Base Salary
  Bonus
  113




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##### Table of Contents



Company Performance
  Individual Performance
  Bonus calculation
 .
 Bonus for the Chief Executive Officer
   Special Cash Bonuses
  114




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Equity-based Compensation; Long Term Incentive Plans
      115




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##### Table of Contents



Currency of Payments
  Perquisites and Other Personal Benefits
  Employment Agreements For Certain Executives
   Chief Executive Officer Employee Agreement
   116




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##### Table of Contents



Taxation Policy for Expatriate Employees
  Review of All Components of Executive Compensation
  Deductibility of Executive Compensation
  Accounting for Stock-Based Compensation
  SUMMARY COMPENSATION TABLE
  Non-EquityStock
    
    Option
    
    Incentive Plan
    
    All OtherName and
    
    
    
    
    
    
    
    
    
    Bonus
    
    Awards
    
    Awards
    
    Compensation
    
    CompensationPrincipal Position
    
    Year
    
    Salary ($)
    
    ($)
    
    ($)(2)
    
    ($)(3)
    
    ($)
    
    ($)
    
    Total ($)Jean-Pierre Vandromme
Chief Executive Officer
    
    
    2007
    
    
    
    615,889
    
    
    
    650,000
    (1)
    
    
    
    
    
    
    6,424,164
    
    
    
    
    
    
    
    54,797
    (4)
    
    
    7,744,8502006
    
    
    
    500,118
    
    
    
    408,713
    
    
    
    
    
    
    
    5,835,076
    
    
    
    
    
    
    
    53,057
    
    
    
    6,796,964Alexander Vinogradov
President
    
    
    2007
    
    
    
    501,377
    
    
    
    
    
    
    
    40,998
    
    
    
    
    
    
    
    360,000
    (1)
    
    
    23,803
    (5)
    
    
    921,1782006
    
    
    
    481,534
    
    
    
    
    
    
    
    60,890
    
    
    
    
    
    
    
    127,518
    
    
    
    
    
    
    
    669,942Boris Svetlichny
Senior Vice President,
Chief Financial
Officer and Treasurer
    
    
    2007
    
    
    
    361,786
    
    
    
    
    
    
    
    
    
    
    
    1,877,104
    
    
    
    543,375
    (1)
    
    
    297,802
    (6)
    
    
    3,080,0672006
    
    
    
    246,109
    
    
    
    
    
    
    
    
    
    
    
    597,549
    
    
    
    250,254
    
    
    
    108,732
    
    
    
    1,202,644
 117




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##### Table of Contents



Non-EquityStock
    
    Option
    
    Incentive Plan
    
    All OtherName and
    
    
    
    
    
    
    
    
    
    Bonus
    
    Awards
    
    Awards
    
    Compensation
    
    CompensationPrincipal Position
    
    Year
    
    Salary ($)
    
    ($)(1)
    
    ($)(2)
    
    ($)(3)
    
    ($)
    
    ($)
    
    Total ($)Kevin Cuffe
Vice Managing Director
Business & Consumer
Solutions BU
    
    
    2007
    
    
    
    315,314
    
    
    
    
    
    
    
    
    
    
    
    762,558
    
    
    
    472,500
    (1)
    
    
    286,600
    (7)
    
    
    1,836,9722006
    
    
    
    302,475
    
    
    
    
    
    
    
    
    
    
    
    728,704
    
    
    
    164,832
    
    
    
    131,554
    
    
    
    1,327,565Michael Wilson
Vice President,
Corporate Controller
and Principal
Accounting Officer
    
    
    2007
    
    
    
    270,371
    
    
    
    
    
    
    
    12,770
    
    
    
    545,614
    
    
    
    295,596
    (1)
    
    
    177,455
    (8)
    
    
    1,301,8062006
    
    
    
    241,547
    
    
    
    
    
    
    
    18,605
    
    
    
    132,536
    
    
    
    172,765
    
    
    
    86,352
    
    
    
    651,805
 
 (1)
    
    Determinations regarding bonus payments to employees for 2007 have not been made by the
Compensation Committee. The number shown in this column assumes a maximum personal
coefficient for each person. EBITDA for 2007 is $338.7 million.(2)
    
    This column represents the dollar amount recognized for financial statements reporting
purposes with respect to the 2006 and 2007 fiscal years for the grant date stock price of
restricted shares. Fair value is calculated using the closing price of our stock on the date
of grant recognized over the vesting period which is two years for Messrs. Vinogradov and
Wilson, with one third of the restricted shares having vested when granted in 2005.(3)
    
    The fair value of each SAR award is estimated at the end of each reporting period using the
Monte Carlo simulation-based valuation model assuming a 0.12-1.57 year expected term, a 39.9%
weighted average volatility, an expected dividend yield of 1.7% and a risk free rate of 3.45%.
Estimated volatilities are based on historical volatility of our stock for the period matching
the awards expected term. We use historical data to estimate SAR exercise and employee
termination within the valuation model; separate groups of employees that have similar
historical exercise behavior are considered together for valuation purposes. The expected term
of the SARs granted is derived from the output of the SAR valuation model and represents the
period of time that SARs granted are expected to be outstanding. The risk-free rate for
periods within the expected term of the SAR is based on the US Treasury yield curve in effect
at the end of the reporting period.The fair value of each Stock Option award is estimated at the grant date using the Monte Carlo
simulation-based valuation model assuming a 0.17-2.49 year expected term, a 40.1% weighted
average volatility, an expected dividend yield of 1.7% and a weighted average risk free rate of
5.00%. Estimated volatilities are based on historical volatility of our stock for the period
matching the awards expected term. We use historical data to estimate Stock Option exercise and
employee termination within the valuation model; separate groups of employees that have similar
historical exercise behavior are considered together for valuation purposes. The expected term
of the Stock Options granted is derived from the output of the Stock Option valuation model and
represents the period of time that Stock Options granted are expected to be outstanding. The
risk-free rate for periods within the expected term of the Stock Options granted is based on the
US Treasury yield curve in effect at the grant date.(4)
    
    This amount includes costs associated with the personal use of two cars and drivers, personal
cellular telephone use, medical premiums, tax filing preparation fees, and language lessons.(5)
    
    This amount includes costs associated with the personal use of a car and driver, personal
cellular telephone use, and medical premiums.(6)
    
    This amount includes costs associated with personal use of a car and driver, personal
cellular telephone use, legal fees related to his former employment, storage expenses, various
travel expenses for Mr. Svetlichnys family to obtain Russian visas, matching our
contributions under our 401(k) plan, medical premiums, tax filing preparation fees, $41,920 in
school fees for Mr. Svetlichnys children, and $111,159 for Russian tax protection payments
which were grossed up in the amount of $63,756 for his 2006 tax year and gross-ups on fringe
benefits in the amount of $27,596.(7)
    
    This amount includes costs associated with the personal use of a car and driver, personal
cellular telephone use, storage expenses, $12,785 in school fees for Mr. Cuffes children,
matching contributions under our 401(k) plan, medical premiums, tax filing preparation fees
and $139,185 for Russian tax protection payments which were grossed up in the amount of
$81,142 for his 2006 tax year, and gross-ups on fringe benefits.(8)
    
    This amount includes storage fees, personal cellular telephone use, matching contributions
under our 401(k) plan, medical premiums, tax filing preparation fees and $93,825 for Russian
tax protection payments which were grossed up in the amount of $54,480 for his 2006 tax year. 118




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##### Table of Contents



GRANTS OF PLAN-BASED AWARDS IN 2007
  Estimated Possible Payouts Under Non-Equity
    
    All Other OptionIncentive Plan Awards (1)
    
    Awards: Number ofThres-
    
    
    
    
    
    
    
    
    
    Securities
    
    Exercise or Base
    
    Market Price on
    
    Grant Date Fair Valuehold
    
    Target
    
    Maximum
    
    Underlying Options
    
    Price of Option
    
    Grant Date
    
    of Stock and OptionName
    
    Grant Date
    
    ($)
    
    ($)
    
    ($)
    
    (#)
    
    Awards ($/Sh)(2)
    
    ($/Sh)(3)
    
    Awards ($)Jean-Pierre Vandromme
    
    27-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000
    
    
    
    53.80
    
    
    
    53.80
    
    
    
    2,884,000Jean-Pierre Vandromme
    
    27-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    667
    
    
    
    53.80
    
    
    
    53.80
    
    
    
    11,166Jean-Pierre Vandromme
    
    27-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,667
    
    
    
    53.80
    
    
    
    53.80
    
    
    
    1,153,339Jean-Pierre Vandromme
    
    27-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,666
    
    
    
    53.80
    
    
    
    53.80
    
    
    
    1,201,988Alexander Vinogradov
    
    
    
    
    
    
    
    
    
    
    120,000
    
    
    
    480,000Boris Svetlichny
    
    
    
    
    
    
    
    
    
    
    181,125
    
    
    
    724,500Boris Svetlichny
    
    27-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,500
    
    
    
    53.80
    
    
    
    53.80
    
    
    
    193,375Boris Svetlichny
    
    27-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,500
    
    
    
    53.80
    
    
    
    53.80
    
    
    
    221,750Boris Svetlichny
    
    27-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,500
    
    
    
    53.80
    
    
    
    53.80
    
    
    
    233,500Boris Svetlichny
    
    27-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,500
    
    
    
    53.80
    
    
    
    53.80
    
    
    
    239,750Boris Svetlichny
    
    28-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,500
    
    
    
    53.80
    
    
    
    55.01
    
    
    
    130,125Boris Svetlichny
    
    28-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,500
    
    
    
    56.49
    
    
    
    55.01
    
    
    
    159,375Boris Svetlichny
    
    28-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,500
    
    
    
    59.31
    
    
    
    55.01
    
    
    
    164,925Boris Svetlichny
    
    28-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,500
    
    
    
    62.28
    
    
    
    55.01
    
    
    
    169,125Kevin Cuffe
    
    
    
    
    
    
    
    
    
    
    157,500
    
    
    
    630,000Kevin Cuffe
    
    27-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,500
    
    
    
    53.80
    
    
    
    53.80
    
    
    
    229,000Kevin Cuffe
    
    27-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,500
    
    
    
    53.80
    
    
    
    53.80
    
    
    
    230,375Kevin Cuffe
    
    28-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,875
    
    
    
    53.80
    
    
    
    55.01
    
    
    
    32,531Kevin Cuffe
    
    28-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,875
    
    
    
    56.49
    
    
    
    55.01
    
    
    
    39,844Kevin Cuffe
    
    28-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,875
    
    
    
    59.31
    
    
    
    55.01
    
    
    
    41,231Kevin Cuffe
    
    28-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,875
    
    
    
    62.28
    
    
    
    55.01
    
    
    
    42,281Michael Wilson
    
    
    
    
    
    
    
    
    
    
    98,532
    
    
    
    394,128Michael Wilson
    
    27-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,500
    
    
    
    53.80
    
    
    
    53.80
    
    
    
    45,800Michael Wilson
    
    27-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,500
    
    
    
    53.80
    
    
    
    53.80
    
    
    
    46,075Michael Wilson
    
    27-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,250
    
    
    
    53.80
    
    
    
    53.80
    
    
    
    23,938Michael Wilson
    
    27-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,250
    
    
    
    53.80
    
    
    
    53.80
    
    
    
    24,988Michael Wilson
    
    27-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,250
    
    
    
    53.80
    
    
    
    53.80
    
    
    
    25,938Michael Wilson
    
    28-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,750
    
    
    
    53.80
    
    
    
    55.01
    
    
    
    65,063Michael Wilson
    
    28-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,750
    
    
    
    56.49
    
    
    
    55.01
    
    
    
    79,688Michael Wilson
    
    28-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,750
    
    
    
    59.31
    
    
    
    55.01
    
    
    
    82,463Michael Wilson
    
    28-Jun-2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,750
    
    
    
    62.28
    
    
    
    55.01
    
    
    
    84,563
 119




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##### Table of Contents



(1)
    
    This column estimates the amounts that could have been earned under our Bonus Plan. For
further details, please see the Summary Compensation.(2)
    
    The exercise price increases by 5% on the anniversary of the grant date for the options that
have not yet vested on such anniversary dated resulting in the increasing exercised price for the
unvested option, as indicated.(3)
    
    The market price is the closing price of our common stock on the Nasdaq market on the grant
date. OUTSTANDING EQUITY AWARDS
AT THE END OF FISCAL 2007
    Option AwardsEquityIncentive PlanAwards:Number of
    
    Number ofSecurities
    
    SecuritiesUnderlying
    
    UnderlyingUnexercised
    
    Unexercised
    
    
    
    
    
    OptionOptions (#)
    
    Unearned
    
    Option Exercise
    
    ExpirationName
    
    Exercisable1
    
    Options (#)
    
    Price ($)
    
    DateJean-Pierre Vandromme
    
    
    267,334
    
    
    
    66,666
    (1)
    
    
    53.80
    
    
    1-Sep-2010
    
    
    
    66,666
    (2)
    
    
    29.83
    (3)
    
    
    (4
    )Alexander Vinogradov
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Boris Svetlichny
    
    
    7,500
    
    
    
    22,500
    (5)
    
    
    53.80
    (6)
    
    28-Jun-201225,000
    
    
    
    25,000
    (7)
    
    
    53.80
    
    
    27-Jun-2012
    
    
    
    25,000
    (8)
    
    
    29.63
    (3)(9)
    
    17-Mar-2011Kevin Cuffe
    
    
    1,875
    
    
    
    5,625
    (10)
    
    
    53.80
    (6)
    
    28-Jun-201212,500
    
    
    
    12,500
    (11)
    
    
    53.80
    
    
    27-Jun-2012
    
    
    
    12,500
    (12)
    
    
    31.03
    (3)(13)
    
    12-Dec-20103,000
    
    
    
    
    
    
    
    12.00
    
    
    1-Oct-200910,000
    
    
    
    
    
    
    
    15.63
    
    
    12-Oct-2010Michael Wilson
    
    
    3,750
    
    
    
    11,250
    (14)
    
    
    53.80
    (6)
    
    28-Jun-20122,500
    
    
    
    2,500
    (15)
    
    
    53.80
    
    
    27 Jun-20121,250
    
    
    
    2,500
    (16)
    
    
    53.80
    
    
    27 Jun-2012
    
    
    
    2,500
    (17)
    
    
    31.03
    (3)(13)
    
    12-Dec-2010
    
    
    
    2,500
    (18)
    
    
    26.10
    (3)(19)
    
    26-Jul-2011
 120




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##### Table of Contents



(1)
    
    These options vest on September 1, 2008.(2)
    
    These SARs vest on September 1, 2008.(3)
    
    The exercise price of these SARs has been capped at $53.80 such that maximum amount that a
person can receive per SAR exercised is the difference between the grant price and $53.80.(4)
    
    Under the terms of Mr Vandrommes employment agreement, there is no expiration date for his
SARs.(5)
    
    7,500 options vest on June 28, 2008; 7,500 vest on June 28, 2009; and 7,500 vest on June 28,
2010.(6)
    
    The base exercise price for this grant increases by 5 percent on each anniversary date of the
grant date for the options that have not yet vested on such anniversary date resulting in an
increased base exercise price for the unvested options as follows: Vesting Date:
    
    Exercise Price:June 28, 2008
    
    $
    56.49June 28, 2009
    
    $
    59.31June 28, 2010
    
    $
    62.28
 
 (7)
    
    12,500 options vest on March 17, 2008 and 12,500 options vest on March 17, 2009.(8)
    
    12,500 SARs vest on March 17, 2008 and 12,500 SARs vest on March 17, 2009.(9)
    
    The base exercise price for this grant increases by 5 percent on each anniversary date of the
grant date for the options that have not yet vested on such anniversary date resulting in an
increased base exercise price for the unvested options as follows: Vesting Date:
    
    Exercise Price:March 17, 2008
    
    $
    32.67March 17, 2009
    
    $
    34.30
 
 (10)
    
    1,875 options vest on June 28, 2008; 1,875 options vest on June 28, 2009; and 1,875 vest on
June 28, 2010.(11)
    
    These options vest on December 12, 2008.(12)
    
    These SARs vest on December 12, 2008.(13)
    
    The base exercise price for this grant increases by 5 percent on each anniversary date of the
grant date for the options that have not yet vested on such anniversary date resulting in an
increased base exercise price for the unvested options as follows: Vesting Date:
    
    Exercise Price:December 12, 2008
    
    $
    31.03
 
 (14)
    
    3,750 options vest on June 28, 2008; 3,750 options vest on June 28, 2009; and 3,750 options
vest on June 28, 2010.(15)
    
    2,500 options vest on December 12, 2008.(16)
    
    1,250 options vest on July 26, 2008 and 1,250 vest on July 26, 2009.(17)
    
    2,500 vest on December 12, 2008.(18)
    
    1,250 vest on July 26, 2008 and 1,250 vest on July 26, 2009.(19)
    
    The base exercise price for this grant increases by 5 percent on each anniversary date of the
grant date for the options that have not yet vested on such anniversary date resulting in an
increased base exercise price for the unvested options as follows: Vesting Date:
    
    Exercise Price:July 26, 2008
    
    $
    26.10July 26, 2009
    
    $
    27.40
 OPTION EXERCISES AND STOCK VESTED IN 2007
  Option AwardsNumber
    
    Valueof Shares
    
    RealizedAcquired on
    
    onExercise
    
    ExerciseName
    
    (#)
    
    ($)Jean-Pierre Vandromme
    
    
    
    
    
    
    Alexander Vinogradov
    
    
    30,000
    
    
    $
    1,440,000Boris Svetlichny
    
    
    
    
    
    
    Kevin Cuffe
    
    
    
    
    
    
    Michael Wilson
    
    
    
    
    
    
    
 121




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##### Table of Contents



POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
 Employment Agreements
  Mr. Vandrommes Employment Agreement
 Mr. Vinogradovs Employment Agreement.
 Mr. Svetlichnys Employment Agreement.
 Mr. Cuffes Employment Agreement
 Mr. Wilsons Employment Agreement.
 122




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##### Table of Contents



Potential Payments Upon Termination of Employment or Change of Control.
 Severance UponTermination by
    
    Severance Upon
    
    
    
    Severance UponReason of Total
    
    Termination by
    
    Change of Control
    
    Termination WithoutName
    
    Disability
    
    Reason of Death
    
    Cash Payment
    
    Cause (1)$
    
    $
    
    $
    
$Jean-Pierre Vandromme
    
    (2)
    
    (3)
    
    1,700,000
    
    554,167Alexander Vinogradov(4)
    
    (2)
    
    (3)
    
    1,008,000
    
    403,000Boris Svetlichny
    
    (2)
    
    (3)
    
    905,625
    
    309,422Kevin Cuffe
    
    (2)
    
    (3)
    
    787,500
    
    269,063Michael Wilson
    
    (2)
    
    (3)
    
    
    
    231,668
 
 (1)
    
    Reflects the amount of severance payable assuming termination of their respective employment
agreements without cause, including the following amounts which are conditioned upon the
execution of the releases referenced above: Mr. Vandromme, $450,000; Mr. Vinogradov, $378,000;
Mr. Svetlichny, $271,688; Mr. Cuffe, $236,250; and Mr. Wilson, $211,140.(2)
    
    We provide no special compensation upon a termination by reason of total disability. However,
we will pay all salary earned prior to the date of termination; a pro rata share of any bonus
for the fiscal year in which the total disability occurred; any benefits in which the employee
is a participant to the full extent of the employees rights under such plans; and
reimbursement of business and/or entertainment expenses incurred by the employee prior to
termination with the exception of disability benefits, which shall continue to be paid from
our insured long-term disability plan for the period specified by such plan. In the event
there is a period of time in which the employee is not paid salary and does not receive
long-term disability payments for any reason, the Compensation Committee shall decide, in its
sole discretion, whether we shall make interim payments to the employee until the commencement
of payments under the long-term disability plan. Assuming a December 31, 2007 date of
termination by reason of total disability and a 100% payout of target bonuses, the following
named executive officers would receive the following pro rata share of any bonus: Mr
Vandromme, $500,000; Mr. Vinogradov, $120,000; Mr. Svetlichny, $181,125; Mr. Cuffe, $157,500;
and Mr. Wilson, $98,532. Due to Russian legislation, Mr. Vinogradov will also be paid an
additional two weeks salary in the approximate amount of $19,385.(3)
    
    We provide no special compensation for any period after the employees death. However, we
will pay to the employees beneficiary, to the degree earned but not paid prior to the date of
the employees death, all salary; a pro rata share of any bonus for the fiscal year in which
the death occurred; any benefits in which the employee is a participant to the full extent of
the employees rights under such plans; and reimbursement of business and/or entertainment
expenses incurred by the employee prior to termination. Assuming a December 31, 2007 date of
termination by reason of death and a 100% payout of target bonuses, the following named
executive officers would receive the following pro rata share of any bonus: $500,000; Mr.
Vinogradov, $120,000; Mr. Svetlichny, $181,125; Mr. Cuffe, $157,500; and Mr. Wilson, $98,532.(4)
    
    Upon expiration of the term of Mr. Vinogradovs employment agreement, he is entitled to an
amount equal to $378,000, representing nine months salary. Mr. Vinogradov shall also be
entitled to receive continuation of benefits under our medical insurance plan for the earlier
of nine months or until such time as Mr. Vinogradov receives comparable benefits from a new
employer. Company Equity Awards and Change of Control.
 Company EquityAwards ThatAccelerateVested Company
    
    Upon a Change ofName
    
    Equity Awards
    
    Control
    
    Total$
    
    $
    
    $Jean-Pierre Vandromme
    
    13,687,501
    
    5,011,283
    
    18,698,798Alexander Vinogradov
    
    
    
    
    
    Boris Svetlichny
    
    
    
    
    
    Kevin Cuffe
    
    
    
    
    
    Michael Wilson
    
    
    
    
    
    
 123




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##### Table of Contents



COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
  DIRECTOR COMPENSATION
 Board of Directors Fees
  Committee Fees
     2007 DIRECTOR COMPENSATION TABLE
 All OtherFees Earned or Paid
    
    
    
    
    
    CompensationName
    
    in Cash ($)
    
    Stock Awards ($)
    
    ($)
    
    Total ($)Peter Aven
    
    
    84,000
    
    
    
    36,000
    (1)
    
    
    
    
    
    
    120,000Vladimir Bulgak
    
    
    84,000
    
    
    
    36,000
    (1)
    
    
    41,963
    (3)
    
    
    162,183Patrick Gallagher
    
    
    134,000
    
    
    
    36,000
    (1)
    
    
    
    
    
    
    170,000Thor Halvorsen
    
    
    84,000
    
    
    
    36,000
    (1)
    
    
    
    
    
    
    120,000David Herman
    
    
    99,000
    
    
    
    36,000
    (1)
    
    
    
    
    
    
    135,000Kjell Johnsen
    
    
    99,000
    
    
    
    36,000
    (1)
    
    
    
    
    
    
    135,000Alexey Khudyakov(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Oleg Malis
    
    
    84,000
    
    
    
    36,000
    (1)
    
    
    
    
    
    
    120,000Ronny Naevdal(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Alexey Reznikovich
    
    
    84,000
    
    
    
    36,000
    (1)
    
    
    
    
    
    
    120,000David Smyth
    
    
    149,000
    
    
    
    36,000
    (1)
    
    
    
    
    
    
    185,000
 124




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##### Table of Contents



(1)
    
    During 2007, the non-executive directors received 680 shares of our common stock under the
Equity Plan. In accordance with FAS 123R, the grant date fair value was $52.93 per share. Fair
value is calculated using the closing price of our common stock on the date of grant
recognized over the vesting period, which is one year.(2)
    
    Messrs. Khudyakov and Naevdal did not stand for re-election at the May 2007 annual meeting of
shareholders.(3)
    
    Included in this figure is the cost of an office in the amount of $32,385 and the hiring of a
personal assistant our office in the amount of $10,428. 
 ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
 EQUITY COMPENSATION PLAN INFORMATION
  (a)


    
    (b)

    

    (c)Number of securitiesremaining availablefor future issuanceNumber of securities
    
    
    
    under equityto be issued upon
    
    Weighted-average
    
    compensation plansexercise of
    
    exercise price of
    
    (excluding securitiesoutstanding options,
    
    outstanding options,
    
    reflected in columnPlan category
    
    warrants and rights
    
    warrants and rights
    
    (a))Equity compensation plans approved by security holders (1)
    
    
    936,858
    
    
    $
    45.42
    
    
    
    956,492Total
    
    
    936,858
    
    
    $
    45.42
    
    
    
    956,492
 
 (1)
    
    Includes the Equity Plan and the 2005 SAR Plan SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  
 ITEM 13. Certain Relationships and Related Transactions
   125




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##### Table of Contents



TRANSACTIONS WITH RELATED PERSONS
 Certain Transactions with Altimo and Telenor
   .
 .
 Certain Transactions with Family Member
   Shareholders Agreement
     126




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##### Table of Contents



Registration Rights Agreements
   Confidentiality Agreements
      The Merger Agreement
  127




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##### Table of Contents



ITEM 14 Principal Accountant Fees and Services
 Audit Fees.
 Audit-Related Fees.
 Tax Fees.
 All other fees.
 128




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##### Table of Contents



PART IV
 
 ITEM 15. Exhibits and Financial Statement Schedules
  1.
    
    Financial StatementsThe following consolidated financial statements of the Company are included as part of this
document:
 §
    
    Report of Independent Registered Public Accounting Firm§
    
    Consolidated Balance Sheets as of December 31, 2006 and 2007§
    
    Consolidated Statements of Operations for the years ended December 31, 2005, 2006 and
2007§
    
    Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2006 and
2007§
    
    Consolidated Statements of Changes in Shareholders Equity for the years ended
December 31, 2005, 2006 and 2007§
    
    Notes to Consolidated Financial Statements
 2.
    
    Consolidated Financial Statement Schedules
    Exhibit Number
    
    Description of Exhibit3.1
    
    Amended and Restated Certificate of Incorporation of Golden
Telecom, Inc. (Incorporated by reference to Exhibit 3.1 to
the Companys current report on Form 8-K dated February 29,
2008).3.2
    
    Amended and Restated By-laws of Golden Telecom, Inc.
(Incorporated by reference to Exhibit 3.2 to the Companys
current report on Form 8-K dated February 29, 2008).4.1
    
    Specimen certificate representing shares of Common Stock.
(Incorporated by reference to Exhibit 4.1 to the Companys
registration statement on Form S-1 dated July 14, 1999
(Commission File No. 333-82791)).10.1
    
    Shareholders Agreement among Golden Telecom, Inc., Alfa
Telecom Limited, Nye Telenor East Invest AS, OAO
Rostelecom, Capital International Global Emerging Markets
Private Equity Fund, L.P., Cavendish Nominees Limited and
First NIS Regional Fund SICAV. (Incorporated by reference
to Exhibit 99.7 to the Companys current report on From 8-K
dated August 19, 2003).10.2
    
    Registration Rights Agreement among Golden Telecom, Inc.,
Alfa Telecom Limited, Nye Telenor East Invest AS, OAO
Rostelecom, Capital International Global Emerging Markets
Private Equity Fund, L.P., Cavendish Nominees Limited and
First NIS Regional Fund SICAV. (Incorporated by reference
to Exhibit 99.5 to the Companys current report on From 8-K
dated August 19, 2003).10.3
    
    Golden Telecom, Inc. 1999 Equity Participation Plan.
(Incorporated by reference to the Companys definitive
proxy statement on Form DEF-14A dated April 25, 2000).10.4
    
    Amendment to the Golden Telecom, Inc. 1999 Equity
Participation Plan. (Incorporated by reference to the
Companys definitive proxy statement on Form DEF-14A dated
May 23, 2001).10.5
    
    Amendment to the Golden Telecom, Inc. 1999 Equity
Participation Plan. (Incorporated by reference to the
Companys definitive proxy statement on Form DEF-14A dated
April 27, 2007).
 129




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##### Table of Contents



Exhibit Number
    
    Description of Exhibit10.6
    
    Form of Stock Option Award Agreement. (Incorporated by
reference to Exhibit 10.8 to the Companys annual report on
Form 10-K for the year ended December 31, 2004).10.7(a)
    
    Golden Telecom, Inc. 2005 Stock Appreciation Rights Plan.
(Incorporated by reference to Exhibit 10.1 to the Companys
current report on Form 8-K dated November 22, 2005).10.7(b)
    
    Amendment to the Golden Telecom, Inc. 2005 Stock
Appreciation Rights Plan. (Incorporated by reference to
Exhibit 10.1 to the Companys current report on Form 8-K
dated December 12, 2005).10.8(a)
    
    Form of Award Agreement under the Golden Telecom, Inc. 2005
Stock Appreciation Rights Plan. (Incorporated by reference
to Exhibit 10.2 to the Companys current report on Form 8-K
dated November 22, 2005).10.8(b)
    
    Amended Form of Award Agreement under the Golden Telecom,
Inc. 2005 Stock Appreciation Rights Plan. (Incorporated by
reference to Exhibit 10.2 to the Companys current report
on Form 8-K dated December 12, 2005).10.9
    
    EDN Sovintel 2005 Stock Appreciation Rights Bonus Plan.
(Incorporated by reference to Exhibit 10.3 to the Companys
current report on Form 8-K dated November 22, 2005).10.10
    
    Form of Award Agreement under the EDN Sovintel 2005 Stock
Appreciation Bonus Rights Plan. (Incorporated by reference
to Exhibit 10.4 to the Companys current report on Form 8-K
dated November 22, 2005).10.11
    
    Employment Agreement between Golden Telecom, Inc. and
Jean-Pierre Vandromme, Chief Executive Officer.
(Incorporated by reference to Exhibit 99.2 to the Companys
current report on Form 8-K dated July 18, 2005).10.13(a)
    
    Employment Agreement between Golden TeleServices, Inc. and
Alexander Vinogradov, President. (Incorporated by reference
to Exhibit 10.5 to the Companys annual report on Form 10-K
for the year ended December 31, 2004).10.13(b)
    
    Amendment No. 1 to Employment Agreement between Golden
TeleServices, Inc. and Alexander Vinogradov, President.
(Incorporated by reference to Exhibit 10.1 to the Companys
current report on Form 8-K dated October 24, 2005).10.14
    
    Employment Agreement between Golden Telecom, Inc. and Boris
Svetlichny, Senior Vice-President, Chief Financial Officer
and Treasurer. (Incorporated by reference to Exhibit 10.1
to the Companys current report on Form 8-K dated January
26, 2006).10.15
    
    Employment agreement between Golden Telecom, Inc. and Ilya
Smirnov, Vice President, General Counsel and Corporate
Secretary. (Incorporated by reference to Exhibit 10.14 to
the Companys annual report on Form 10-K for the year ended
December 31, 2006).10.16*
    
    Schedule of Compensation Arrangements with Directors.10.17
    
    Facility Agreement, dated January 25, 2007, entered into by
Golden Telecom, Inc., GTS Finance, Inc., and EDN Sovintel
LLC with Lenders, Citibank N.A. London Branch and ING Bank
N.W. as mandated lead arrangers and Citibank International
plc as agent. (Incorporated by reference to Exhibit 10.1 to
the Companys current report on Form 8-K dated January 25,
2007) as amended on March 22, 2007 and November 21, 2007
and incorporated by reference to Exhibits 10.1 to the
Companys current reports on Form 8-K dated March 22, 2007
and November 20, 2007, respectively.10.18
    
    Stock Purchase Agreement, dated as of February 22, 2007, by
and among EDN Sovintel LLC, Golden Telecom, Inc., Inure
Enterprises Ltd., and Rambert Management Limited.
(Incorporated by reference to Exhibit 10.1 to the Companys
current report on Form 8-K dated February 22, 2007).10.19
    
    Registration Rights Agreement, dated as of February 22,
2007, by and between Golden Telecom, Inc. and Inure
Enterprises Ltd. (Incorporated by reference to Exhibit 10.2
to the Companys current report on Form 8-K dated February
22, 2007).10.20*
    
    Shareholders Agreement, dated as of February 22, 2007, by
and among EDN Sovintel LLC, SFMT-CIS, Inc., Inure
Enterprises Ltd., and ZAO Cortec and as amended on December 11,
2007.
 130




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##### Table of Contents



Exhibit Number
    
    Description of Exhibit10.21
    
    Agreement and Plan of Merger, dated as of December 21,
2007, by and among the Company, VimpelCom Finance B.V. and
Lillian Acquisition, Inc. (Incorporated by reference to
Exhibit 2.1 to the Companys current report on Form 8-K
dated December 21, 2007).10.22
    
    Subordination Deed dated February 28, 2008 among the
Company, Open Joint Stock Company Vimpel-Communications
and Citibank International plc as agent (Incorporated by
reference to Exhibit 10.1 to the Companys current report
on Form 8-K dated February 29, 2008)21.1*
    
    List of subsidiaries of Golden Telecom, Inc.24.1*
    
    Powers of Attorney (included on signature page).31.1*
    
    Certification of the Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of the Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of the Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of the Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith. 131




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##### Table of Contents



SIGNATURES
  GOLDEN TELECOM, INC.
(Registrant)By:
Name:
    
    /s/ BORIS SVETLICHNY

Boris SvetlichnyTitle:
    
    Senior Vice President, Chief Financial Officer and Treasurer(Principal Financial Officer)By:
    
    /s/ MICHAEL D. WILSONName:
    
    Michael D. WilsonTitle:
    
    Vice President and Corporate Controller(Principal Accounting Officer)
   Signature
    
    Title
    
    Date/s/ JEAN-PIERRE VANDROMME

Jean-Pierre Vandromme
    
    Chief Executive Officer and Director
(Principal Executive Officer)
    
    March 17, 2008/s/ PETER COVELL

Peter Covell
    
    Director
    
    March 17, 2008/s/ PATRICK GALLAGHER

Patrick Gallagher
    
    Director
    
    March 17, 2008/s/ ALEXANDER GERSH

Alexander Gersh
    
    Director
    
    March 17, 2008/s/ DAVID HERMAN

David Herman
    
    Director
    
    March 17, 2008/s/ DMITRY A. PLESKONOS

Dmitry A. Pleskonos
    
    Director
    
    March 17, 2008Elena A. Shmatova
    
    Director/s/ BORIS SVETLICHNY

Boris Svetlichny
    
    Senior Vice President, Chief
Financial Officer and Treasurer

(Principal Financial Officer)
    
    March 17, 2008/s/ MICHAEL D. WILSON

Michael D. Wilson
    
    Vice President and
Corporate Controller
(Principal Accounting Officer)
    
    March 17, 2008
 132




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##### Table of Contents



SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
 Golden Telecom, Inc.
 COL. A
    
    COL. B

    
    
    COL. C
    
    
    COL. D

    
    
    COL. EAdditionsBalance at
    
    
    Charged to
    
    
    Reserves
    
    
    
    
    
    
    Balance atBeginning
    
    
    Costs and
    
    
    From
    
    
    
    
    
    EndDescription
    
    of Period
    
    
    Expenses
    
    
    Acquisitions
    
    
    Deductions
    
    
    of PeriodAllowance for doubtful accounts at
12/31/07
    
    
    25,224
    
    
    
    5,277
    
    
    
    4,122
    
    
    
    (7,671
    )
    
    
    26,952Allowance for doubtful accounts at
12/31/06
    
    
    27,327
    
    
    
    4,128
    
    
    
    
    
    
    
    (6,231
    )
    
    
    25,224Allowance for doubtful accounts at
12/31/05
    
    
    23,205
    
    
    
    7,967
    
    
    
    53
    
    
    
    (3,898
    )
    
    
    27,327
 133




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##### Table of Contents



EXHIBIT INDEX
 Exhibit Number
    
    Description of Exhibit3.1
    
    Amended and Restated Certificate of Incorporation of Golden
Telecom, Inc. (Incorporated by reference to Exhibit 3.1 to
the Companys current report on Form 8-K dated February 29,
2008).3.2
    
    Amended and Restated By-laws of Golden Telecom, Inc.
(Incorporated by reference to Exhibit 3.2 to the Companys
current report on Form 8-K dated February 29, 2008).4.1
    
    Specimen certificate representing shares of Common Stock.
(Incorporated by reference to Exhibit 4.1 to the Companys
registration statement on Form S-1 dated July 14, 1999
(Commission File No. 333-82791)).10.1
    
    Shareholders Agreement among Golden Telecom, Inc., Alfa
Telecom Limited, Nye Telenor East Invest AS, OAO
Rostelecom, Capital International Global Emerging Markets
Private Equity Fund, L.P., Cavendish Nominees Limited and
First NIS Regional Fund SICAV. (Incorporated by reference
to Exhibit 99.7 to the Companys current report on From 8-K
dated August 19, 2003).10.2
    
    Registration Rights Agreement among Golden Telecom, Inc.,
Alfa Telecom Limited, Nye Telenor East Invest AS, OAO
Rostelecom, Capital International Global Emerging Markets
Private Equity Fund, L.P., Cavendish Nominees Limited and
First NIS Regional Fund SICAV. (Incorporated by reference
to Exhibit 99.5 to the Companys current report on From 8-K
dated August 19, 2003).10.3
    
    Golden Telecom, Inc. 1999 Equity Participation Plan.
(Incorporated by reference to the Companys definitive
proxy statement on Form DEF-14A dated April 25, 2000).10.4
    
    Amendment to the Golden Telecom, Inc. 1999 Equity
Participation Plan. (Incorporated by reference to the
Companys definitive proxy statement on Form DEF-14A dated
May 23, 2001).10.5
    
    Amendment to the Golden Telecom, Inc. 1999 Equity
Participation Plan. (Incorporated by reference to the
Companys definitive proxy statement on Form DEF-14A dated
April 27, 2007).10.6
    
    Form of Stock Option Award Agreement. (Incorporated by
reference to Exhibit 10.8 to the Companys annual report on
Form 10-K for the year ended December 31, 2004).10.7(a)
    
    Golden Telecom, Inc. 2005 Stock Appreciation Rights Plan.
(Incorporated by reference to Exhibit 10.1 to the Companys
current report on Form 8-K dated November 22, 2005).10.7(b)
    
    Amendment to the Golden Telecom, Inc. 2005 Stock
Appreciation Rights Plan. (Incorporated by reference to
Exhibit 10.1 to the Companys current report on Form 8-K
dated December 12, 2005).10.8(a)
    
    Form of Award Agreement under the Golden Telecom, Inc. 2005
Stock Appreciation Rights Plan. (Incorporated by reference
to Exhibit 10.2 to the Companys current report on Form 8-K
dated November 22, 2005).10.8(b)
    
    Amended Form of Award Agreement under the Golden Telecom,
Inc. 2005 Stock Appreciation Rights Plan. (Incorporated by
reference to Exhibit 10.2 to the Companys current report
on Form 8-K dated December 12, 2005).10.9
    
    EDN Sovintel 2005 Stock Appreciation Rights Bonus Plan.
(Incorporated by reference to Exhibit 10.3 to the Companys
current report on Form 8-K dated November 22, 2005).10.10
    
    Form of Award Agreement under the EDN Sovintel 2005 Stock
Appreciation Bonus Rights Plan. (Incorporated by reference
to Exhibit 10.4 to the Companys current report on Form 8-K
dated November 22, 2005).10.11
    
    Employment Agreement between Golden Telecom, Inc. and
Jean-Pierre Vandromme, Chief Executive Officer.
(Incorporated by reference to Exhibit 99.2 to the Companys
current report on Form 8-K dated July 18, 2005).10.13(a)
    
    Employment Agreement between Golden TeleServices, Inc. and
Alexander Vinogradov, President. (Incorporated by reference
to Exhibit 10.5 to the Companys annual report on Form 10-K
for the year ended December 31, 2004).




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##### Table of Contents



Exhibit Number
    
    Description of Exhibit10.13(b)
    
    Amendment No. 1 to Employment Agreement between Golden
TeleServices, Inc. and Alexander Vinogradov, President.
(Incorporated by reference to Exhibit 10.1 to the Companys
current report on Form 8-K dated October 24, 2005).10.14
    
    Employment Agreement between Golden Telecom, Inc. and Boris
Svetlichny, Senior Vice-President, Chief Financial Officer
and Treasurer. (Incorporated by reference to Exhibit 10.1
to the Companys current report on Form 8-K dated January
26, 2006).10.15
    
    Employment agreement between Golden Telecom, Inc. and Ilya
Smirnov, Vice President, General Counsel and Corporate
Secretary. (Incorporated by reference to Exhibit 10.14 to
the Companys annual report on Form 10-K for the year ended
December 31, 2006).10.16*
    
    Schedule of Compensation Arrangements with Directors.10.17
    
    Facility Agreement, dated January 25, 2007, entered into by
Golden Telecom, Inc., GTS Finance, Inc., and EDN Sovintel
LLC with Lenders, Citibank N.A. London Branch and ING Bank
N.W. as mandated lead arrangers and Citibank International
plc as agent. (Incorporated by reference to Exhibit 10.1 to
the Companys current report on Form 8-K dated January 25,
2007) as amended on March 22, 2007 and November 21, 2007
and incorporated by reference to Exhibits 10.1 to the
Companys current reports on Form 8-K dated March 22, 2007
and November 20, 2007, respectively.10.18
    
    Stock Purchase Agreement, dated as of February 22, 2007, by
and among EDN Sovintel LLC, Golden Telecom, Inc., Inure
Enterprises Ltd., and Rambert Management Limited.
(Incorporated by reference to Exhibit 10.1 to the Companys
current report on Form 8-K dated February 22, 2007).10.19
    
    Registration Rights Agreement, dated as of February 22,
2007, by and between Golden Telecom, Inc. and Inure
Enterprises Ltd. (Incorporated by reference to Exhibit 10.2
to the Companys current report on Form 8-K dated February
22, 2007).10.20*
    
    Shareholders Agreement, dated as of February 22, 2007, by
and among EDN Sovintel LLC, SFMT-CIS, Inc., Inure
Enterprises Ltd., and ZAO Cortec and as amended on
December 11, 2007.10.21
    
    Agreement and Plan of Merger, dated as of December 21,
2007, by and among the Company, VimpelCom Finance B.V. and
Lillian Acquisition, Inc. (Incorporated by reference to
Exhibit 2.1 to the Companys current report on Form 8-K
dated December 21, 2007).10.22
    
    Subordination Deed dated February 28, 2008 among the
Company, Open Joint Stock Company Vimpel-Communications
and Citibank International Plc as agent (Incorporated by
reference to Exhibit 10.1 to the Companys current report
on Form 8-K dated February 29, 2008)21.1*
    
    List of subsidiaries of Golden Telecom, Inc.24.1*
    
    Powers of Attorney (included on signature page).31.1*
    
    Certification of the Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of the Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of the Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of the Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith.