Ladies and Gentlemen!

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2 Ladies and Gentlemen! Prospect Investment Company has been in operation on the Russian stock market since its origin. As far as the securities market in Russia is concerned, this period is equivalent to several decades in the history of the developed nations. Our company has successfully developed during the period of growth on the stock market and managed to optimize operations in the period of the financial crisis. The business was put under the new management. Our client services were improved on the basis of new investment products. At present, Russia has all the prerequisites to join the group of dynamically developing economies of the world. We are ready to meet new challenges because we have confidence in our strength. We can offer up-to-date products and services to all those who strive to gain from operations on the Russian stock markets and other countries. In order to win the confidence of our clients, Prospect Investment is prepared to make its financial reports absolutely transparent and disclose all information on company to any parties who might be interested in it. Yours faithfully, M. Vinchel, General Director

3 business principles When working for the clients, the company s managers and employees consider a number of certain business principles to be crucial factor for the successful fulfilment of its operation. Igor Nechaev, Deputy General Director Clients are our capital We strive to understand the needs of our clients and offer them the best solutions that can satisfy their needs We offer a wide range of products and services which our clients can use conveniently and easily We build relations with our clients on long-term basis, winning their confidence and mutual understanding We offer customized solutions to each client We apply most advanced technology, helping our clients to solve their problems Respect for the individual We treat all our clients and partners with equal due attention We create conditions under which our employees can fully realize their potential We pay due attention to the clients problems and needs We dedicate enough time to answering questions and explaining our point of view to our clients We resolve all arising disputes with regard to the mutual interests Team-work Prospect Investment operates as a single team within the business community Communication and exchange of information are essential elements of our day-to-day work Our employees share successes and failures of the company in order to achieve better results of our team-work We respect and pay attention to both individual and collective achievements

4 entering the 21st century with new ideas and solutions In 1998 and 1999, Prospect Investment Company carried out a reorganization of its business, putting its operations under the new management, creating new investment products and improving the quality of services. A number of new people whose previous employment records include leading western banks and investment companies were hired to occupy executive positions in the company. New employees head Securities Transactions, Financial Department, and Client Services, allowing the company to enter the new century with new ideas based on the up-to-date achievements in the field of finance. As a result, operations were promoted to a higher technological level, making our services more convenient for our clients. The company develops and offers new financial products, therefore creating for its clients new opportunities to obtain profit on the securities market. The economic crisis in Russia has accelerated consolidation of the financial and the investment markets. Many companies, which used to be considered corner-stones of the market, vanished as did many other small and mid-sized firms. Under such conditions, Prospect Investment continued operating, and, moreover, has significantly advanced in the investment circles. Our client s confidence has remained unchanged, and that is an important achievement on the part of the company s managers. The financial reports of the company were audited by Coopers & Lybrand и Arthur Andersen. Assets of the Group as of December 31, 1999 US$ million Shareholder equity of the Group as of December 31, 1999 US$ 17.7 million Total volume of transactions in RTS: in 1999 US$ 82.5 million

5 new investment products Margin operations Prospect Investment Company was one of the first Russian investment institutions to grant credits to its clients, allowing them to increase their trading volumes. A client can either buy or sell securities on margin, borrowing money or securities from the company against the assets on its current account opened with the company. The amount of loan in US dollars cannot exceed 50% of the client s liquid assets kept within the company. The client s liquid assets include free cash and Blue Chip stocks. Such attractive conditions has allowed the company s clients to increase their portfolios, boost profitability and hedge against risks. Andrey Galperin, Managing Director Operations on the foreign markets Prospect Investment and its foreign partners offer their clients an opportunity to invest in the US and European financial instruments as well as in ADR/GDRs of the leading Russian companies. Sales and purchases of securities and derivatives are effected through the most reliable US brokerage firms. As a result, all transactions can be made quickly, and clients assets remain safe and protected.

6 client services The main goal of the company s employees, who work with clients, is to create the most favorable investment conditions for the clients which envisages for easy access to the most updated information, sound investment recommendations and accurate and prompt execution. We try to make our client services very personalized, spending considerable amount of time in getting acquainted with the clients needs and finding solutions to their problems. Legal purity A client receives several versions of standard contracts. They take into account the company s wide long-term experience and the recommendations of the Securities Market Commission and associations of professional stock market participants. Client orders The orders are executed by qualified brokers who work under the control of managers. Reports The company s reports on sales and purchases correspond to a stipulated form in compliance with the terms of the contract. If it is impossible to make a transaction under the given conditions, we promptly notify the client hereof. Analytical and informational support The company s annual report, general recommendations on investment, a detailed description of operational procedures, comprehensive informational materials and analytical reports are available to all our clients.

7 brokerage services Prospect Investment is one of the leading Russian brokers. In terms of trading volumes, it is among the top 10 Russian brokerage companies. The company s clientele includes a number of large Russian and foreign investors. Trading sites Prospect Investment is a member of the Russian Trading System (RTS), the Moscow Stock Exchange (MSE) and the Moscow Interbank Currency Exchange (MICEX). It can also buy and sell ADR/GDRs through the leading international trading sites. Opening a brokerage service account In order to open a brokerage account, a client signs the service agreement with Prospect Investment. All changes, both in cash and in a client s portfolio, are recorded on the account. Once the account is open, the client receives the name of his or her personal account manager. Apart from this further information on brokerage service accounts can be found on the company s Website. Execution Prospect Investment has reliable relations with many leading operators of the stock market. The company has reputation of a highly professional participant of the securities market, which is evidenced by various ratings and polls. Thus, our clients may be confident that their instructions will be carried out accurately and well in time. Guarantees of proper execution The Company is obligated to deliver to the client the original securities, he or she has purchased, or a relevant document, which confirms the transfer of ownership rights. The Company guarantees that the client s money and securities will be safely kept. Additional services Clients can receive information on the current situation on the market over the phone free of charge. The current data are also available through the Internet on the Company's site. Moreover, Prospect Investment offers its clients analytical support. Operational reports Any changes, both in cash balance and stocks in a client s portfolio, are reported in accordance with the stipulated form. Operations Clients of Prospect Investment can effect short sales and purchases, pledging their assets kept on the accounts in Prospect Investment and using credit facility granted by Prospect Investment.

8 asset management The Company offers this service to those investors who want to invest their funds in stocks but have neither sufficient experience nor time to make investment decisions independently. Advantages for a client The entire income from the investments belongs to the client, while the managing company obtains only management fee as a definite share of the client s actual profit. Moreover, clients do not need to create the necessary infrastructure and bear related current expenses and risks. Concluding an agreement The company and its client sign the agreement, under which Prospect Investment is appointed to act as an investment adviser to the client. The company invests and reinvests its clients funds forming the investment portfolio for the client. The company implements the investment strategy chosen by the client and observes the rules and regulations, which were previously arranged for in the agreement with the client. Portfolios Every client has an individual portfolio kept with the company. Operations with the portfolio are the responsibility of the portfolio manager and the head of the Client Services department. The minimum volume of funds to be invested is $100,000. The minimum investment period is six months. Guarantees During the entire investment period, the company properly registers all the operations with the client s funds and portfolio. The relevant reports can be at any time sent to the client on his or her request. Additional services Clients can receive information about the current market situation over the phone free of charge. The current data are also available on the Internet. Moreover, Prospect Investment offers its clients analytical support.

9 corporate finance Prospect Investment considers this sector of its business to be of crucial importance within the next several years. With a wide experience in the field of corporate finance, Prospect Investment will continue to render high quality services to its clients in the future. Dmitry Steinsapir, Chief Financial Officer The company s main services in this area include the following: Investment consultations Appreciation of the efficiency of capital expenditures Selection of the most suitable fund raising operations scheme Preliminary consultations with would-be investors Project financing Preparation of documents for loan application Preparation and placement of new share issues Appraisal of businesses Calculation of the initial price of the securities to be placed Developing the most optimal strategy for coming to the capital market Preliminary negotiations with prospective investors Initial public offering

10 settlements Prospect Investment normally works with its business counterparts on standard contracts. Because of this, the whole process of re-registration of ownership rights can be accelerated and the risk of non-execution can be significantly reduced. The company s technical department has created a number of software programs that enable us to maintain accounts accurately and update them promptly at the same time. Registries and depositories Prospect has opened accounts with many Russian registries and depositories, which are cumulatively responsible for 97% of turnover on the Russian securities market. Because of this, re-registration of ownership rights is carried out quickly and reliably. Prospect Investment helps to open individual accounts for its clients in many registries and depositories within the shortest period of time. Prospect s depository When rendering depository services, the company pursues the purpose of a creating comfortable business environment on the securities market for all of its clients. The concentration of operations within a limited circle of market participants reduces operational costs and increases turnover, since, in that case, securities are transferred between the company s clients. Oksana Maiorova, Head of Custody Settlements A special department registers all the transactions and changes on the clients accounts. Its qualified personnel monitors the conditions, under which transactions are effected, and protects clients rights. Fees for depository services Most of depository services are free of charge for the company s clients.

11 research Information is a crucial factor that determines efficiency of investments. The company s analytical products serve not only to solve current problems, but also to develop investment strategy. Alexander Korchagin, Head of Research Fundamental analysis Analysis of various financial instruments Analysis of companies, sectors and the microeconomic situation as a whole. Customized research. Preparation of sector research materials and companies profiles. Preparation of daily and weekly newsletters and reviews of the stock market. Technical analysis The combination of technical data and the recommendations of our experts enables our clients to make optimal investment decisions. Portfolio analysis This type of analysis allows our specialists to find an optimal trade-off between return and risk for every operation with clients portfolios. The analysis is based on modern statistical methods, as well as on the mathematical simulation of market situations.

12 legal support Prospect Investment operates in conformity with the Civil Code of the Russian Federation, the Federal Law on the Securities Market, the regulations of the Federal Commission on the Securities Market, and other legal acts and regulations. Our legal advisors prepare reliable documents, guaranteeing our clients the highest degree of protection in all types of investment activities, including transactions with securities and the re-registration of ownership rights. From the very beginning, when a client is just beginning to consider various possible agreements with Prospect, our specialists are prepared to provide their assistance in regard of current laws and regulations. In case a client needs legal advice, our specialists are happy to offer this service. Eduard Neigebauer, Head of Legal Department

13 Prospect Investment on the Internet Prospect Investment considers availability of information to be an indispensable condition of successful development. In pursuing this goal, the company attempts to provide the most convenient access to its information resources, and constantly improves its Website. The structure of our Internet resources is based on the latest achievements in informational technology. The site traditionally contains information on the company and its services. A large amount of analytical materials in various data formats can also be found here. Access to them is free of charge for all. Prospect s Website is popular not only among our clients but also among many stock market professionals. Many Russian and foreign news agencies including Interfax, Prime TASS, RosBusinessConsulting, Skate Press, and others use our data. The Company s modern technical equipment guarantees permanent high-speed access to the information. The user-friendly interface serves to simplify and accelerate searches for any information on the site. All materials on the site are available in both Russian and English, making it possible for the company s foreign clients and partners to access reliable information on the Russian stock market.

14 combined balance sheet Prospect Group 31/12/99* 31/12/98 US$ US$ Assets Bank and cash balances 16,379,270 17,182,659 Securities owned 4,351,513 2,224,098 Debtors 5,026,947 1,728,188 Other current assets 7,000 16,077 Current assets 25,764,730 21,151,022 Long-term investments 653,867 1,876,543 Fixed assets, net 107, ,966 TOTAL ASSETS 26,526,042 23,140,531 LIABILITIES AND SHAREHOLDERS FUNDS Creditors 8,791,562 4,006,043 Tax due 52,593 27,267 Current liabilities 8,844,155 4,033,310 Share capital 62,331 62,331 Additional paid in capital 206, ,065 Reserves 17,413,491 18,838,825 Shareholders funds 17,681,887 19,107,221 TOTAL LIABILITIES AND SHAREHOLDERS FUNDS 26,526,042 23,140,531 *-preliminary data

15 PROSPECT INVESTMENT Vrubel street 12, Moscow , Russia Phone: (095) Fax: (095) Internet: