Year Ended December 31, 1997 Compared to
Year Ended December 31, 1996

VimpelCom's total operating revenues (before deduction of revenue-based taxes) for the year ended December 31, 1997 increased by 44% to US$305.9 million from US$213.2 million in the corresponding period in 1996 primarily due to the growth in the number of subscribers. Service revenues and connection fees grew by 57% from the US$173.2 million in 1996 to US$271.4 million in 1997 and represented approximately 92% of net operating revenues as compared to 85% in 1996. In 1997, gross revenues from the sale of handsets and accessories declined by 10% from the US$35.3 million in 1996 to US$31.9 million. Such amounts represented 11% of net operating revenues in 1997 as compared to 17% in 1996. Management expects connection fee and handset revenues to continue to decline in importance as sources of revenue for VimpelCom as connection fee and handset tariffs are reduced in order to achieve greater market penetration, as has been experienced in other cellular markets around the world.

In 1997, revenue-based taxes increased by 32% to US$12.0 million compared to US$9.1 million in the corresponding period in 1996. The increase in revenue-based taxes was due primarily to higher revenues. These taxes are not income taxes, but are levied as a percentage of revenues.

During 1997, the gross margin on the sale of handsets and accessories was 18%, a reduction from the 38% achieved in 1996. Management expects the gross margin on sales of equipment to continue to decrease as VimpelCom lowers the prices of handsets in order to increase the number of subscribers as is the case in more mature cellular markets where companies often subsidize handsets in order to boost subscriber enrollment. The sales margin on connection and service revenues was slightly lower in 1997 than in 1996 due primarily to the reduction in connection fees charged to subscribers.

Selling, general and administrative expenses increased 58% to US$80.2 million in 1997 from US$50.7 million in 1996. This increase primarily reflects the overall increase in the level of business activity in 1997 compared to 1996, including increased expenditures on advertising, marketing, dealer commissions and other customer-related and administrative facilities. In addition, 1997 includes start-up costs relating to the new GSM 1800 network. The Company expects selling, general and administrative expenses to continue to increase as it continues to expand its operations and continues the build out of its new PCS network which went into commercial operations in June 1997.

VimpelCom recorded a US$10.2 million provision for doubtful accounts receivable in 1997 versus US$7.3 million in 1996. The increase in the provision for doubtful accounts receivable was due primarily to the increase in the level of business activity in 1997 and represented 3.5% of net operating revenues compared to 3.6% in 1996. The Company continues to believe the provision is conservative and more than adequate based upon its experiences to date.

Depreciation and amortization of network equipment, telephone line capacity, building and other asset charges in 1997 was US$25.3 compared to US$10.5 million in 1996. This increase is due to the increased depreciable asset base resulting from the Company's continuing capital investments. The Company expects to incur significant capital expenditures over the next few years as it continues to expand its existing AMPS networks and builds out its new PCS network. Accordingly, depreciation and amortization expenses are expected to continue to increase over the next few years.

VimpelCom generated operating income of US$86.8 million in 1997, an increase of 23% compared to US$70.5 million in 1996. This increase was due to the increase in subscribers and the overall level of the Company's business activities. The operating margin (operating income as a percentage of net operating revenues) in 1997 was 29.5% as compared to 34.5% in 1996. This decline was due to higher operating expenses (including depreciation and amortization) and a reduction in the margin on sale of handsets.

Total other net income was US$0.9 million in 1997 compared to a US$5.1 million loss in 1996. Other income was US$1.6 million in 1997, which comprises primarily US$1.2 million in investment income from the Company's interest in its 50% joint venture, Bee Line Samara. Net interest expense was US$2.6 million in 1997, as compared to US$5.4 million in 1996. The lower net interest charge was due to higher interest income. The foreign currency exchange gain was US$1.8 million in 1997 compared to a foreign currency gain of US$0.3 million in 1996. This foreign currency exchange gain was primarily due to the strength of the US dollar over the Swedish Krona and arose on re-valuing outstanding loans payable in Swedish Krona to an equipment supplier.

The provision for income taxes for 1997 was US$26.8 million, compared to US$20.5 million in 1996. The effective tax rate in 1997 was 30.6% compared to a rate of 31.3% in 1996. The lower tax rate in 1997 was primarily due to VimpelCom's ability to reduce its taxable base by taking advantage of capital expenditure allowances and other tax benefits which were available under the Russian tax system, and the benefit of having interest income taxed at a lower rate than the statutory rate applied to operating income of 35%.

Provisions for income taxes were comprised of a current income tax charge of US$11.4 million for 1997 and US$5.1 million in 1996, and deferred taxes of US$15.4 million for 1997 and US$15.4 million in 1996, which arise due to temporary differences between the basis of computing income under Russian accounting principles and US GAAP.

VimpelCom's net income grew 36% from US$44.9 million in 1996 to US$61.1 million in 1997 due to the factors discussed above. Costs associated with the continued build out of the D-AMPS and PCS networks during 1998 and 1999 are expected to be significant and may therefore, reduce the growth in VimpelCom's consolidated earnings in those periods.

Year Ended December 31, 1996 Compared to
Year Ended December 31, 1995

VimpelCom's total operating revenues (before deduction of revenue-based taxes) for the year ended December 31, 1996 increased by 111% to US$213.2 million from US$100.9 million in 1995, primarily due to the growth in the number of subscribers. Service revenues and connection fees grew by 137% from US$73.2 million in 1995 to US$173.2 million in 1996 and represented approximately 84.8% of net operating revenues as compared to 75.3% in 1995. In 1996, gross revenues from the sale of handsets grew 27% from US$27.8 million in 1995 to US$35.3 million. Such amount represented 17.3% of net operating revenues as compared to 28.6% in 1995. Management expects connection fee and handset revenues to continue to decline in importance as sources of revenue for VimpelCom as connection fee and handset tariffs are reduced in order to achieve greater market penetration, as has been experienced in other cellular markets around the world.

In 1996, revenue-based taxes increased to US$9.1 million compared to US$3.8 million in 1995. The increase in revenue-based taxes was due to higher revenues and moderate increases in tax rates. These taxes are not income taxes, but are levied as a percentage of revenues.

During 1996, the margin on the sale of handsets and accessories was 38%, a slight increase from the 37% margin in 1995. However, Management expects this margin to decrease as VimpelCom decreases the prices of handsets in order to increase the number of subscribers as is the case in more mature cellular markets where companies often subsidize handsets in order to boost subscriber enrollment. The sales margin on connection and service revenues was slightly lower in 1996 than in 1995 due primarily to the reduction in connection prices charged by VimpelCom and to some extent increases in long distance and international charges paid by VimpelCom to its service providers, which were not fully passed on to subscribers.

Selling, general and administrative expenses increased significantly to US$50.7 million in 1996 from US$15.0 million in 1995. This increase primarily reflects the overall increase in the level of business activity in 1996 compared with 1995, and the build out of support infrastructure and other customer related and administrative facilities. Staffing levels increased in all departments and VimpelCom leased additional floor space for its administrative needs and to provide improved sales facilities to accommodate new subscribers in anticipation of future growth in the subscriber base. The Company significantly increased spending on advertising and marketing in order to maintain its leading position in the local cellular market and, as a consequence, increased its number of subscribers over 1995 levels by 151% to 56,584 by the end of 1996. VimpelCom spent US$6.4 million on advertising in 1996 as compared to US$1.5 million in 1995. Included in the 1996 selling, general and administrative expense figure is a non-recurring compensation charge of US$4.9 million incurred in the first quarter of 1996 representing the sale of 346,000 treasury shares to four members of Management for the nominal value of 5 rubles per share to satisfy a prior agreement. This was a non-cash transaction and had no impact on VimpelCom's cash flow. The Company expects selling, general and administrative expenses to increase in 1997 and 1998 as it continues to expand its existing AMPS operations and continues the build out of its new PCS business which is expected to go into commercial service in the second quarter of 1997.

VimpelCom recorded a US$7.3 million provision for doubtful accounts receivable in 1996 and US$4.5 million in 1995. The increase in the doubtful accounts receivable was consistent with the overall increase in total revenues for 1996 and represented approximately 3.6% of total revenues. VimpelCom expects this percentage to grow in the future as it expands its subscriber base and takes on more noncorporate customers.

Depreciation and amortization of network equipment, telephone line capacity, building and other asset charges in 1996 was US$10.5 million compared to US$3.1 million in 1995. This increase is due to the increased depreciable asset base resulting from the Company's continuing capital investments. The Company expects to incur significant capital expenditures over the next few years as it continues to expand its existing AMPS networks and builds out its new PCS network. Accordingly, depreciation and amortization expenses are expected to increase over the next few years.

VimpelCom generated operating income of US$70.5 million in 1996, an increase of 55% compared to US$45.4 million in 1995. This increase was due to the increase of subscribers and the overall level of the Company's business activities. The operating margin (operating income as a percentage of net revenues) in 1996 was 34.5% as compared to 46.7% in 1995. This decline was primarily due to higher operating expenses.

Other net expenses were US$5.1 million in 1996 compared to US$4.2 million in 1995. Net interest expense was US$5.4 million in 1996, as compared to US$3.8 million in 1995. The higher charge is attributable to additional debt incurred to finance the overall growth of the network and the increased level of business activity. The foreign currency exchange gain was US$0.3 million in 1996 compared with a foreign currency exchange loss of US$0.4 million in 1995. This foreign currency exchange gain reflects the relative stability of the ruble exchange rate during 1996 as compared to 1995.

The provision for income taxes for 1996 was US$20.5 million, compared to US$13.5 million in 1995. The effective tax rate in 1996 was 31.3%, compared with a rate of 32.9% in 1995. Despite the higher income in 1996 the effective tax rate in 1996 was lower than the 1995 rate. This was primarily due to VimpelCom's ability to take advantage of capital expenditure allowances, the benefit of having interest income taxed at a lower rate than the statutory rate applied to operating income of 35% and other tax benefits which were available under the Russian tax system. These benefits resulted in tax savings for VimpelCom during 1996.

Provisions for income taxes were comprised of a current income tax charge of US$5.1 million in 1996 and US$5.9 million in 1995, and deferred taxes of US$15.4 million in 1996 and US$7.6 million in 1995, which arose due to the temporary differences between the basis of computing income under Russian accounting principles and US GAAP.

VimpelCom's net income grew 63% from US$27.6 million in 1995 to US$44.9 million in 1996 due to the factors discussed above (the increase would have been approximately 75% in 1996 excluding the US$4.9 million non-recurring compensation charge incurred in the first quarter of 1996). Build out expenses in connection with the PCS network during 1997 and 1998 are expected to be significant and are likely to reduce VimpelCom's consolidated earnings in those years.

LIQUIDITY AND CAPITAL RESOURCES

VimpelCom operates a capital and marketing intensive business which has seen rapid growth over the last few years and one which will continue to demand significant investments over the next few years. VimpelCom has been profitable and has generated positive cash flows from its operations since inception which has enabled it to meet most of its day-to-day operational cash requirements. Through 1997, VimpelCom had relied heavily on vendor financing for the development of its networks, and on short-term bank borrowing to finance the acquisition of its interest in KBI, line capacity and bulk purchase of handsets. In January 1998, ING Bank N. V. agreed to fund a five-year US$110.0 million credit facility to the Company. This credit will be used to finance capital expenditures and to refinance existing vendor financing, thereby reducing the Company's reliance on vendor financing. On November 20, 1996, VimpelCom completed the IPO. Approximately US$23.5 million of the proceeds was used to repay certain outstanding indebtedness, approximately US$15.1 million was used to purchase line capacity, approximately US$11.0 million was used for equipment purchases, approximately US$9.2 million was used to finance the build out of the PCS business and for working capital needs and approximately US$4.5 million was used in connection with the expansion of the Company's fiber optic transmission network.

VimpelCom's consolidated statements of cash flows classify cash flows into three broad categories: cash flows from operating activities, financing activities and investment activities.

Net cash flows from operating activities (net of short term investments) for 1997 were US$86.7 million, and US$72.0 million and US$30.9 million for the fiscal years 1996 and 1995, respectively. The increased cash flow primarily reflects the continued growth and strength in operating results and also reflects changes in working capital and other assets and liabilities including short-term investments.

Financing activities of VimpelCom generated net cash of US$2.1 million during 1997, US$25.2 million in 1996 and used net cash of US0.07 million in 1995. Cash flows from financing activities include cash flow from capital contributions, bank loans, bank loan repayments, vendor financing transactions and net proceeds from the IPO. In 1997 the Company had net inflows of short-term bank borrowings of US$7.2 million and repaid US$5.1 million in vendor lease financing contracts. In 1996, the IPO provided VimpelCom with net cash proceeds of US$63.3 million, net repayment under vendor financing contracts amounted to US$7.8 million and a net amount of US$14.7 million was repaid to local banks to pay down certain bank loans. In addition in 1996 VimpelCom repurchased treasury stock totaling US$18.0 million which was subsequently given in consideration for the acquisition of KBI. In 1995, VimpelCom had net inflows in the form of short-term bank borrowings of US$17.0 million and repayments under vendor financing contracts amounting to US$14.6 million.

Each year, VimpelCom has continued to invest in its networks, purchase line capacity and generally upgrade its infrastructure to enable it to meet subscriber growth in the market. Net cash used in investment activities and the purchase of property and equipment totaled US$103.9 million in 1997, US$72.8 million in 1996 and US$25.8 million in 1995. In 1997, purchase of property and equipment amounted to US$107.8 million and proceeds from other investments were US$3.9 million. In 1996, purchase of property and equipment amounted to US$73.9 million and proceeds from other investments were US$1.1 million. In 1995, purchases of property and equipment amounted to US$28.5 million and US$2.7 million was received from proceeds from the sale of property and equipment. VimpelCom anticipates total capital expenditures of US$157.0 million for 1998 and US$135.0 million for 1999.

VimpelCom had working capital, defined as current assets less current liabilities, of US$16.2 million as of December 31, 1997, a decrease of US$18.9 million from December 31, 1996. In 1997, the decrease in working capital was due primarily from current liabilities increasing more than current assets during the same period. As of December 31, 1996, VimpelCom had working capital of US$35.1 million, an increase of US$40.5 million from 1995. This increase was primarily the result of higher cash and short-term investments due to the additional cash generated by the IPO and increases in other current assets, partly offset by an increase in current liabilities during the same period. VimpelCom had negative working capital of US$5.4 million at December 31, 1995. The decrease in working capital in 1995 was primarily due to increases in short-term bank loans, current amounts due on equipment financing, accounts payable and customer deposits and prepayments, and was partly offset by increases in short-term investments and cash. The increase in current liabilities was primarily related to financing activities for network expansion.

VimpelCom had US$14.3 million of cash and cash equivalents and had US$24.2 million in short-term investments at December 31, 1997. In April 1997, VimpelCom entered into a US$35.0 million line of credit agreement with Eurobank. The US$35.0 million line of credit was used to purchase equipment and telephone line capacity. Interest on the out- standing balance was accrued at the six month US dollar London Interbank Offered Rate ("LIBOR") plus 4.0% per annum. At December 31, 1997 VimpelCom had repaid all but US$11.0 million of this facility. This amount was repaid in March 1998.

For the development of its D-AMPS network, VimpelCom has relied significantly on vendor financing provided by AB LM Ericsson Finans with terms that Management believes are commercially advantageous for the Company. The value of equipment acquired from financing agreements from Ericsson Project Finance AB (together with AB LM Ericsson Finans, "Ericsson") during 1997 was US$55.7 million, US$41.5 million in 1996 and US$36.3 million in 1995. VimpelCom has acquired equipment pursuant to seven equipment supply agreements with Ericsson (the "Ericsson Agreements") with a total value of approximately US$171.6 million. The Ericsson Agreements have either related supplier credit facilities or sale and lease arrangements with options to purchase the equipment. The total contract value of the seventh Ericsson Agreement is US$53.6 million, US$34.9 million of which is to be financed by ING Bank N. V. over five years at terms which the Company believes are attractive. In January 1998, agreements between Ericsson and ING Bank N. V. transferred ultimate collection rights under the Ericsson Agreements from Ericsson to ING Bank N. V. While VimpelCom will continue to make payments to Ericsson, VimpelCom, is subject to certain defined debt covenant restrictions, including several related to financial condition. In addition, certain of VimpelCom's assets, including trade accounts receivable and telephone line capacity, have been pledged to Ericsson as collateral to the extent needed to fulfill VimpelCom's obligations in the event of default. VimpelCom shares held by VimpelCom's President and Chief Executive Officer, entities controlled by him, and four members of management were also pledged as collateral. Equipment supplied under these agreements has been accounted for as capital leases. As of December 31, 1997, VimpelCom's indebtedness to Ericsson was US$76.9 million.

In connection with the build out of the PCS network, KBI has entered into exclusive agreements with Alcatel (the "Alcatel Agreements") for the purchase of GSM-1800 network infrastructure equipment and services at an aggregate cost, including finance charges, of approximately US$135.0 million. As part of the purchase price for such equipment, KBI issued to Alcatel common shares representing approximately 12% of the capital stock of KBI after giving effect to such issuance. In 1997, KBI ordered the second phase of equipment valued at US$47.8 million which will be financed on terms similar to the first phase except that Alcatel will not receive any shares of capital stock of KBI as part of the purchase price. Pursuant to the Alcatel Agreements, Alcatel is permitted to designate one representative on the board of directors of KBI.

VimpelCom has an option to purchase from Alcatel 5,784 shares of KBI (representing 6.3% of KBI) at anytime before April 2001, for US$10.9 million plus interest at a variable rate based on LIBOR for U. S. dollars. In addition, in certain circumstances, VimpelCom has a right of first refusal with respect to Alcatel's transfer of such shares. In addition, at any time upon occurrence of certain events of default, Alcatel has the option to sell up to 100% of its KBI shares to VimpelCom for an amount up to US$21.8 million plus interest at a variable rate based on LIBOR for U. S. dollars (the "Put Price"). In the event that Alcatel elects to sell less than 100% of such shares to VimpelCom, the Put Price will be reduced proportionately. Furthermore, after April 2001, Alcatel has the option to sell 50% of its KBI shares to VimpelCom for 50% of the Put Price. In order to make hard currency payments for such shares, VimpelCom would need to obtain an appropriate permission from the Central Bank of the Russian Federation (the "Central Bank"). VimpelCom has also agreed to guarantee certain payments to be made by KBI to Alcatel in connection with the Alcatel Agreements. Management believes that terms of such financing are commercially advantageous for the Company. As of December 31, 1997, KBI's indebtedness through Alcatel was US$70.5 million. In the future, equipment and services to be supplied pursuant to the Alcatel Agreements may be financed by Alcatel at a variable interest rate based on LIBOR for U. S. dollars.

Future Capital Requirements

In April 1997, VimpelCom entered into a US$35.0 million line of credit agreement with Eurobank which was used for payment of equipment and telephone line capacity purchases. Interest on the outstanding balance accrued at six-month U. S. dollar LIBOR plus 4% per annum. As of December 31, 1997, VimpelCom had repaid all but US$11.0 million of this facility. This amount was repaid in March 1998. VimpelCom had outstanding capital leases with Ericsson totaling US$76.9 million as of December 31, 1997 with US$10.4 million payable in 1998 and the remainder repayable through 2003. The Ericsson capital leases bear interest at a variable rate based on the three-month LIBOR plus 4.5% per annum. In addition, KBI's indebtedness to Alcatel at December 31, 1997, was US$70.5 million (which includes VimpelCom's option to purchase shares of KBI from Alcatel pursuant to the Alcatel Agreements).

The mobile communications industry is highly capital intensive, requiring significant amounts of capital to construct networks and purchase line capacity. Management expects that total capital expenditures, including non-network expenditures for VimpelCom and KBI will continue to be substantial over the next few years, approximating US$157.0 million in 1998 and US$135.0 million in 1999. The Company sees 1998 as a critical year in terms of implementing the Company's overall strategy in order to maintain its position as market leader. To this end, in 1998, the AMPS network is expected to significantly increase the number of base stations, significantly extend the coverage area and expand the capacity of the network to over 180,000 subscribers. Due to the lack of a modern telephone infrastructure outside the City of Moscow, the development of networks in the Regions is much more expensive. The Company therefore needs to spend more on the initial phases of its network development in the Regions (for developing base station sites, building more radio relay networks and purchasing and installing more technically powerful and sophisticated systems to cope with the greater distances involved) than it would in the City of Moscow. In addition, in June 1997 the Company launched commercial operation of its new PCS network in order to better position itself competitively in the market in terms of coverage, capacity and quality. During 1998 the Company will continue to enhance the quality and coverage of the network in the City of Moscow and the Moscow Region.

Management believes that existing cash balances, cash flows from operations and existing and future vendor financing, bank borrowings and credit facilities, debt and equity financing and joint ventures will provide sufficient financial resources to meet capital expenditures and to meet the Company's financial obligations in 1998 and 1999. Of the US$157.0 million of capital expenditures anticipated for 1998, the Company estimates that approximately US$72.2 million will be funded through existing bank or vendor financing arrangements and approximately US$84.8 million will be funded with cash from operations or other sources. Of the US$135.0 million of capital expenditures anticipated for 1999, the Company estimates that approximately US$40.0 million will be funded with existing bank or vendor financing arrangements and approximately US$95.0 million will be funded with cash from operations or other sources. In addition to its existing business commitments, the Company's strategy is to continue to consider potential opportunities in telecommunications business in Russia by entering into joint ventures, making acquisitions or obtaining additional licenses. Management believes that the Company can obtain necessary financing for such opportunities through additional borrowings or the issuance of debt or possibly equity.

BASIS OF PRESENTATION OF FINANCIAL RESULTS

VimpelCom maintains its records and prepares its statutory financial statements in accordance with Russian accounting principles and tax legislation. The consolidated financial statements herein have been prepared from the Russian accounting records for presentation in accordance with US GAAP. The consolidated financial statements and results differ from the financial statements issued for statutory purposes in Russia in that they reflect certain adjustments not recorded in VimpelCom's books, which are appropriate to present the financial position, results of operations and cash flows in accordance with US GAAP. The principal adjustments relate to: (i) revenue recognition; (ii) recognition of interest expense and other operating expenses; (iii) valuation and depreciation of property and equipment; (iv) foreign currency translation; (v) deferred income taxes; (vi) capitalization and amortization of telephone line capacity; (vii) valuation allowances for unrecoverable assets; (viii) capital leases; and (ix) consolidation accounting for subsidiaries.

The consolidated financial statements include the accounts of VimpelCom and all of its majority-owned subsidiaries. All material inter-company accounts and transactions have been eliminated. Investments in other affiliated companies in which VimpelCom has at least 20% ownership and does not have management control are accounted for at cost as the effect would not be material to the financial condition or operating results of VimpelCom.

VimpelCom pays taxes computed on income reported for Russian tax purposes. This computation is based on Russian accounting principles which differ substantially from US GAAP. Certain items that are capitalized under U. S. GAAP are recognized under Russian accounting principles as an expense in the year paid. As a consequence, VimpelCom's effective tax charge is lower under Russian accounting principles than under U. S. GAAP.

INFLATION

The Russian Government has been implementing policies of economic reform and stabilization which have resulted in reduced, although still significant levels of inflation. Annual inflation has decreased from 130% in 1995 to 22% in 1996 and 11% in 1997. The devaluation of the ruble in recent years has not kept pace with inflation. The Company prices its equipment and services in U. S. dollars thereby mitigating the effects of the devaluation of the ruble. However, such pricing has not been able to fully offset the effects of inflation because substantially all collections are in rubles. In addition, the Company is experiencing increased costs in hard currency terms due to the devaluation of the ruble. If the Company is unable to increase prices in line with inflation, due to competitive pressures or otherwise, it may have a materially adverse effect on the Company.

YEAR 2000

Like many companies, VimpelCom is reliant on technology to deliver services to its customers. During 1998, the Company will utilize internal and external resources to identify, correct or reprogram and test its computer systems for year 2000 compliance. The "Year 2000" problem is the result of computer programs being written using two digits rates rather than four to define the applicable year. Any of the Company's programs that have date sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. The Company expects to replace some systems and modify others as part of this process. Based on preliminary assessments at this time, Management does not expect that the Company will incur significant operating expenses or be required to invest heavily in computer system improvements in order to be year 2000 compliant. However, there can be no assurance that the systems of other companies on which the Company's operations rely will also be converted in a timely manner, or that any such failure to convert by another company will not have an adverse effect on the Company's operations.

FOREIGN CURRENCY TRANSLATION

VimpelCom reports to the Russian tax authorities in rubles and its accounting records are maintained in that currency. The consolidated financial statements herein have been prepared in accordance with US GAAP and are stated in U. S. dollars. Accordingly, transactions and balances not already measured in U. S. dollars (primarily Russian rubles and Swedish Krona) have been remeasured into U. S. dollars in accordance with the relevant provisions of US Financial Accounting Standard ("FAS") No 52 "Foreign Currency Translation" as applied to entities in highly inflationary economies. Under FAS No 52, revenues, costs, capital and non-monetary assets and liabilities are translated at historical exchange rates prevailing on the transaction dates. Monetary assets and liabilities are translated at exchange rates prevailing on the balance sheet date. Exchange gains and loses arising from re-measurement of monetary assets and liabilities that are not denominated in U. S. dollars are credited or charged to operations.

The functional currency of VimpelCom is the Russian ruble. This currency is not convertible outside of Russia and has been very volatile in the past. From 1995 to date, the Russian Government and Central Bank have successfully kept the ruble trading within a fixed band and as a result the currency has been declining at relatively stable rate. VimpelCom does not engage, and does not plan to engage, in hedging or other transactions intended to manage risks relating to fluctuations in foreign currency exchange rates, inflation or interest rates. However, to minimize the risk of ruble fluctuations and consequent devaluation VimpelCom has adopted a number of measures, including listing tariffs for customers in U. S. dollars and calculating customers' monthly bills in U. S. dollars and requesting payment in rubles (in accordance with applicable law) based on the exchange rates on the date the bill is send to the customer. All invoices include a 3% charge to cover the devaluation exposure for the 15-day payment period. Payments received after 15 days are converted into U. S. dollars at the prevailing rate of exchange on the date payment is received and adjustments due to ruble fluctuations from the date of billing are made to the customer's account in the next billing period. VimpelCom has significant foreign currency liabilities, primarily associated with purchase of network equipment. Certain of the Ericsson Agreements require amounts due to be paid in Swedish Krona and U. S. dollars. In addition, under the Alcatel Agreements, KBI will remit payments to Alcatel in U. S. dollars. Under applicable law and based upon permissions received from the Central Bank, VimpelCom and its affiliated companies are permitted to buy hard currency to settle such contracts; provided, however, that VimpelCom would need to obtain appropriate permission from the Central Bank in connection with exercise of the options to purchase and sell the shares of KBI in connection with Alcatel Agreements.

The Board of Directors and Shareholders
Open Joint Stock Company Vimpel-Communications

We have audited the accompanying consolidated balance sheets of Open Joint Stock Company Vimpel-Communications ("VimpelCom") as of December 31, 1997 and 1996, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1997. These consolidated financial statements are the responsibility of VimpelCom's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Open Joint Stock Company Vimpel-Communications at December 31, 1997 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with accounting principles generally accepted in the United States of America.

Ernst & Young (CIS)
Limited Moscow, Russian Federation
March 25,1998

See accompanying notes.

CONSOLIDATED STATEMENTS OF CASH FLOWS
Open Joint Stock Company Vimpel-Communications