On February 11, 2004 "Southern Telecommunications Company" PJSC is to execute a placement of RUR 1.5 billion series 02 non-convertible interest-bearing documentary pay-to-bearer bond issue due 2007 with annual offer in the MICEX Stock market section. Interest rates of half-year coupons are fixed for the first and second coupon periods and to be determined during the auction. Interest rates on other coupons are to be announced by the Company not later than 10 business days prior to the date of the previous coupon payment.

Funds earned from series 02 bond issue are to be allocated to increasing installed capacity by 128 ths lines in 1H04 with 2004 capital investments totaling 8.5 billion rubles and fixed assets to be put into operation amounting to 8.4 billion rubles. "UTK" PJSC plans to increase its total capacity by more than 594 thousand numbers and to build a total of 3,300 km of fiber optic lines.

After realization of 2004 Investment program total installed capacity of the Company will stand at 4,2 million numbers. Digitization level will reach 58,2%. The Company's subscriber base is expected to be increased by 390 ths telephone sets in 2004 due to large-scale construction of "UTK" PJSC local network (59,3% of 2004 total capital expenditures). As a result average number of UTK lines will reach 3,75 million in 2004.

UTK funds will be invested in upgrading existing and developing new telecom networks. 2004 investment program includes over 70% of investment projects aimed at gaining profit and 30% of them aimed at improvement of quality. 60% of 2004 capex are to be allocated to acquiring new equipment and 40% - to executing building and assembly jobs.

The Company plans to continue development of digital cable TV, IP-telephony, xDSL-based high-speed access, intelligent services, Call centers, high-speed zonal data networks and multi-service networks.

Placement of UTK 1.5 billion series 01 non-convertible interest-bearing documentary pay-to-bearer bond issue due 2006 with offer for the redemption - 1 year from the date of placement was successfully performed on September 18, 2003. Fixed interest rate on half-year coupon was determined at 14.24% per annum during the auction. Secondary circulation of 01 bond issue (UTK-01) was launched on October 31, 2003 in the MICEX Stock market section.

According to the results for 3 months of circulation (as at 09.02.2004) UTK-01 bond trading volume stood at RUR 2 615,5 mln, including RUR 673,5 mln - on the conditions of market transactions (ORT) (26% of total trading volume), RUR 1 300,5 mln (50%) - on the conditions of negotiable transactions (RPS) and RUR 641,4 mln - on the conditions of REPO transactions (25%). Thus UTK-01 bond issue turned round completely in the secondary market during one and a half months (31 trading days). Total number of transactions made up 867, including 708 market transactions (82%), 120 target transactions (14%) and 39 REPO transactions (4%).

Liquidity of UTK-01 bond issue had a rising tendency, increase in number of transactions and trading volume with UTK 01 bond issue exceeded 50% in January 2004. During the circulation period weighted average price of UTK-01 bond was up 7,72% making up 109,54% of its face value as at 06.02.2004 (maximum 111% at the end of January 2004).

Effective profitability vs. repayment was down from 13,93% as at the first trading day to 10,22% as at 06.02.2004. During 3 months of circulation UTK-01 bonds brought in an annual income of 43,5% including 38% - from price growth for their owners who had acquired them at placement.