SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
Golden Telecom, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
--------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
--------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------------------------
[GOLDEN TELECOM LOGO]
GOLDEN TELECOM, INC.
Representative Offices of Golden TeleServices, Inc.
1 Kozhevnichesky Proezd, 2nd Floor
Moscow, Russia 115114
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 20, 2003
Vienna, Austria
April 8, 2003
Dear Stockholders:
The 2003 annual meeting of stockholders of Golden Telecom, Inc. (the
"Company" or "Golden Telecom") will be held in the Ringstrassensalon at the
Imperial Hotel, Vienna, Austria on May 20, 2003 at 12:30 p.m. local time, to
consider and act on the following matters:
1. The election of nine directors for a term of one year (Item
No. 1); and
2. Ratification of the selection of the auditors of the Company
for fiscal year 2003 (Item No. 2).
Stockholders of record at the close of business on March 28, 2003 will
be entitled to vote at the meeting. If you will need special assistance at the
meeting because of a disability, please notify the Office of the General Counsel
of the Company at the Representative Offices of Golden TeleServices, Inc., 1
Kozhevnichesky Proezd, 2nd Floor, Moscow, Russia 115114 or Golden Telecom, Inc.,
4400 MacArthur Blvd., N.W., Suite 200, Washington, D.C., 20007 or through e-mail
at annualmeeting@gti.ru. A list of stockholders entitled to vote at the meeting
may be examined at the principal executive offices of the Company at the
Representative Offices of Golden TeleServices, Inc., 1 Kozhevnichesky Proezd,
2nd Floor, Moscow, Russia 115114.
By Order of the Board of Directors
/s/ JEFFREY A. RIDDELL
JEFFREY A. RIDDELL
Senior Vice President, General Counsel
and Secretary
IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND DATE THE
ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
TABLE OF CONTENTS
Introduction.............................................................................................3
Proxies And Voting Procedures............................................................................3
Proposals To Be Voted Upon...............................................................................4
Common Stock Ownership Of Certain Beneficial Owners And Management......................................12
Executive Officers......................................................................................14
Executive Compensation..................................................................................15
Report Of The Compensation Committee On Executive Compensation..........................................17
Employment Contracts, Termination Of Employment And Change Of Control Arrangements......................20
Certain Relationships And Related Transactions..........................................................21
Section 16(A) Beneficial Ownership Reporting Compliance.................................................23
Other Business Which May Properly Come Before The Meeting...............................................23
General Questions.......................................................................................23
Voting Procedures (For Stockholders Of Record).........................................................24
Voting Procedures (For Beneficial Stockholders)........................................................25
General Voting Questions................................................................................25
Annex A Charter Of The Audit Committee...............................................................A-1
2
[GOLDEN TELECOM LOGO]
GOLDEN TELECOM, INC.
Representative Offices of Golden TeleServices, Inc.
1 Kozhevnichesky Proezd, 2nd Floor
Moscow, Russia 115114
PROXY STATEMENT
April 8, 2003
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board of Directors" or the "Board") of Golden Telecom,
Inc. (the "Company" or "Golden Telecom") of proxies to be voted at the annual
meeting of stockholders of the Company in the Ringstrassensalon at the Imperial
Hotel, Vienna, Austria on May 20, 2003 beginning at 12:30 p.m. local time (the
"Annual Meeting"). Enclosed with this Proxy Statement is a Notice of the Annual
Meeting of Stockholders, together with a Proxy Card for your signature if you
are unable to attend. Stockholders of record who execute Proxy Cards may revoke
them at any time before they are voted. Any Proxy Card may be revoked by the
person giving it any time before it is voted by delivering to the Corporate
Secretary of the Company at the principal executive offices of the Company at
the Representative Offices of Golden TeleServices, Inc., 1 Kozhevnichesky
Proezd, 2nd Floor, Moscow, Russia 115114, on or before the business day prior to
the Annual Meeting or at the Annual Meeting itself, a subsequent written notice
of revocation or a subsequent Proxy Card relating to the same shares or by
attending the meeting and voting in person. The approximate date on which this
Proxy Statement and the accompanying Proxy Card will be sent to the Company's
stockholders is April 10, 2003.
PROXIES AND VOTING PROCEDURES
Shares of the Company's common stock, par value $0.01 per share ("Common
Stock"), represented by properly executed Proxy Cards received prior to or at
the meeting, unless such Proxy Cards have been revoked, will be voted in
accordance with the instructions indicated on the Proxy Card.
Stockholders of record (the "Stockholders") on March 28, 2003 (the "Record
Date") are entitled to vote at the Annual Meeting. On March 28, 2003, the
Company had outstanding approximately 27,144,947 shares of Common Stock, with
each share representing one vote.
If you return your signed Proxy Card to the Company before the Annual Meeting,
Golden Telecom will vote your shares as you direct. You can specify on your
Proxy Card whether your shares should be voted for all, some or none of the
nominees for director. You can also specify whether you approve, disapprove, or
abstain from each of the proposals. The proposals will be presented at the
Annual Meeting by management.
IF YOU RETURN THE PROXY CARD TO US AND DO NOT SPECIFY ON YOUR PROXY CARD HOW YOU
WANT TO VOTE YOUR SHARES, WE WILL VOTE THEM "FOR" THE ELECTION OF ALL NOMINEES
FOR DIRECTOR AS SET FORTH UNDER "ELECTION OF DIRECTORS" BELOW; AND "FOR" EACH OF
THE PROPOSALS.
3
The affirmative vote of the holders of a plurality of the votes cast by
stockholders will elect candidates for director (Item No. 1 on your Proxy Card).
The affirmative vote of the holders of at least a majority of the shares of
Common Stock present in person or represented by proxy at the meeting and
entitled to vote is required to ratify the Board of Directors' appointment of
Ernst & Young (CIS) Limited as the Company's independent public accountants for
2003 (Item No. 2 on your Proxy Card). The required quorum is a majority of the
outstanding shares of voting stock of Golden Telecom. Golden Telecom intends to
count abstentions both for purposes of determining presence or absence of a
quorum and in the total number of shares represented and voting with respect to
a proposal. Accordingly, abstentions will have the same effect as a vote against
Item 2.
The nominees for director receiving the highest number of affirmative votes will
be elected. Unless authority to vote is withheld or another contrary instruction
is indicated, properly executed Proxy Cards received by Golden Telecom prior to
or at the Annual Meeting will be voted FOR the election of the nominees listed
on the following pages. Should any of the nominees be unavailable to serve at
the time the election occurs, the proxyholders named in the Proxy Card will vote
for substitute nominees at their discretion.
Broker non-votes occur when nominees have voted on some of the matters to be
acted on at a meeting, but fail to vote on certain other matters because they
are not permitted to vote on such matters in the absence of instructions from
the beneficial owners of shares. Broker non-votes, if any, with respect to a
proposal will not be counted for purposes of determining the presence or absence
of a quorum, and will not be counted as shares represented and voting with
respect to that proposal. A broker non-vote will have no effect on the outcome
of the election of directors.
******************
PROPOSALS TO BE VOTED UPON
--------------------------------------------------------------------------------
ITEM NO. 1 ON YOUR PROXY CARD: ELECTION OF DIRECTORS
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS
The size of the Company's Board of Directors is set at nine directors.
At the Annual Meeting, nine directors will be elected. Each director will serve
a one year term and will serve until the next annual meeting of stockholders or
until the director is succeeded by another qualified director who has been
elected or until their earlier resignations. Each of the nominees is now a
member of the Board of Directors of the Company and each of the nominees has
indicated that he is willing and able to serve as a director if elected and has
consented to being named as a nominee in this Proxy Statement. The following
section sets forth the name and principal business occupation or employment of
each of these nominee directors.
Stan M. Abbeloos Since 1996, Mr. Abbeloos has held various positions
Age 50 in Golden Telecom companies. Since Golden Telecom's
initial public offering in 1999, Mr. Abbeloos has
acted as the Company's Chief Operating Officer. From
1991 through July 1996, Mr. Abbeloos worked for
Alcatel as General Director of LenBell, a joint
venture between Alcatel and Krasnaya Zaria, which
produces and sells Alcatel's switching and
transmission equipment in Russia.
Mr. Abbeloos was originally elected to the Board of
Directors for a one-year term in June 2001 and was
re-elected to a one-year term in May 2002. He
4
resigned from the Board in November 2002 to allow for
the appointment of a director nominee appointed by
OAO Rostelecom in accordance with the terms of a
shareholders agreement described herein. Mr. Abbeloos
was re-elected to the Board in December 2002 as a
nominee of Alfa Telecom Limited in accordance with
the terms of the same shareholders agreement.
Vladimir Androsik Mr. Androsik has extensive experience in Russian
Age 27 telecommunications and finance. He served as the
Deputy Finance Director of Peterstar, Inc. from 1997
to 2001, and since then has served as a member of the
Management Committee and as Deputy Director
General-Finance Director of OAO Rostelecom.
Mr. Androsik was elected to the Company's Board of
Directors in November 2002.
Petr Aven Since October 1994, Mr. Aven has served as President
Age 48 of Alfa Bank. As President, his major
responsibilities include strategic planning as well
as business and government relations in Russia and in
the other countries where the bank operates. Mr. Aven
also currently serves as the Chairman of the Board of
STS Television. Prior to his employment with Alfa
Bank, Mr. Aven acted as a financial consultant
specializing in financial instruments of the Russian
Federation in a consultancy that he established. From
November 1991 until his resignation in December 1992,
Mr. Aven served as the Minister of Foreign Economic
Relations of the Russian Federation. Prior to his
appointment as Minister, Mr. Aven was employed as a
principal researcher at the International Institute
for Applied System Analysis (IIASA) in Laxenburg,
Austria where his major projects included the
methodology of socio-economic comparisons,
comparative economics, and economic reforms in
centrally planned economies. Prior to this period,
from 1981 to 1989, Mr. Aven served as a research
scholar at the Institute for Systems Studies of the
USSR Academy of Sciences where he advised the
administration of Mikhail Gorbachev. Among his other
activities, Mr. Aven has acted as a guest professor
and lecturer at numerous universities, including Yale
University, Bar-Elan University (Israel), and the
University of Glasgow and has published two books on
econometrics and on economic reform and numerous
articles in Russian and international journals,
including "Communist Economies and Economic
Transformation", "Economic Policy." Yale University
Press and the Kiel Institute of World Economics, and
other scientific and academic institutes have
published Mr. Aven's monographs.
Mr. Aven was originally elected to the Company's
Board of Directors in May 2001 and was re-elected to
one-year terms in June 2001 and in May 2002. Mr. Aven
serves as the Chairman of the Board since his
election to the Board in May 2001 and as Chairman of
the Board's Nominating and Corporate Governance
Committee since the formation of that Committee in
July 2002.
Michael Calvey Mr. Calvey is Co-Managing Partner of Baring Vostok
Age 36 Capital Partners and a Senior Partner of Baring
Private Equity Partners Limited. Mr. Calvey has been
working in Moscow on the First NIS Regional Fund
since its inception
5
in 1994 as the co-head of the investment team. In
December 2000, he led the creation of the Baring
Vostok Private Equity Fund, the first significant new
direct investment fund raised in Russia after the
1998 crisis. He is the Chairman of the investment
committee for both the NIS Fund and the Baring Vostok
Fund, and has been directly or indirectly involved in
most of the investments of both funds since
inception. Prior to his involvement with the First
NIS Regional Funds, Mr. Calvey worked at the European
Bank for Reconstruction and Development ("EBRD"),
where he was responsible for several of EBRD's
investments in the oil and gas sector in Russia.
Prior to his engagement with EBRD, he worked at
Salomon Brothers Inc in New York on a variety of
corporate finance and mergers and acquisitions
assignments.
Mr. Calvey was originally elected to the Company's
Board of Directors in May 2001 and was re-elected to
one-year terms in June 2001 and in May 2002. Mr.
Calvey has served on the Audit Committee of the Board
of Directors since June 2001 and on the Executive
Committee since May 2002. Mr. Calvey has also served
as a member of the Board's Nominating and Corporate
Governance Committee since July 2002.
Ashley Dunster Mr. Dunster is Vice President of Capital Research
Age 40 International, Inc., a subsidiary of The Capital
Group Companies, Inc. Mr. Dunster is responsible for
private equity investments in Eastern Europe and
Africa. Prior to joining Capital International
Research in 1997, Mr. Dunster spent four years at the
European Bank for Reconstruction and Development
where he was a principal banker in the Early Stage
Equity Team, with private equity responsibilities
covering Russia, Kazakhstan, Hungary and Slovenia.
Mr. Dunster was first elected to the Company's Board
of Directors in January 2000 and was re-elected to
one-year terms in June 2001 and May 2002. Mr. Dunster
has served as a member of the Board's Audit Committee
and as Chair of the Compensation Committee since
being elected director. Mr. Dunster has also served
as a member of the Board's Nominating and Corporate
Governance Committee since July 2002.
David Herman Mr. Herman has served in senior executive positions
Age 57 throughout the world, including the Commonwealth of
Independent States. He recently retired as Vice
President of General Motors, Russia and Commonwealth
of Independent States after 29 years with the
company. 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., prior to which he served as
President of SAAB Automobile.
Mr. Herman was elected to the Board in November 2002.
Mr. Herman has served as the Chair of the Board's
Audit Committee and member of the Board's
Compensation Committee since December 2002.
6
Andrey Kosogov Mr. Kosogov is the First Deputy Chairman of the
Age 42 Executive Board of Alfa Bank in Moscow since July
1998. In that position he oversees the investment
activities of Alfa Bank, including the Equity Sales
and Trading Division, Fixed Income Division,
Corporate Finance Division, Financial Operations
Division, Asset Management Division and Merchant
Banking Division. Prior to his appointment as First
Deputy Chairman at the Bank, Mr. Kosogov acted as the
Chairman of the Board of Directors of Alfa Capital, a
Moscow-based fund management company established in
1992.
Mr. Kosogov was originally elected to the Company's
Board of Directors in May 2001 and was re-elected to
one-year terms in June 2001 and in May 2002. Mr.
Kosogov has also served as Chairman on the Company's
Executive Committee since February 2003.
Michael North Michael North has over 10 years of mergers and
Age 48 acquisition, corporate restructuring, capital market
transactions and privatization experience in Central
and Eastern Europe and the telecommunications
industry. Mr. North was Senior Vice President and
Head of the Central and Eastern Europe
Telecommunications Group at Commerzbank Securities
and acted as Project Director in a number of mergers
and acquisition transactions in Russia. Mr. North
currently serves as the Managing Director of
eurokapital Verwaltungs GmbH.
Mr. North was elected to the Board of Directors in
November 2002.
Alexander Vinogradov Prior to joining the Company as President and Chief
Age 48 Executive Officer, Mr. Vinogradov worked at LLC EDN
Sovintel as General Director starting from November
1995. Prior to his appointment as General Director,
Mr. Vinogradov worked at LLC EDN Sovintel as
Commercial Director, Head of Marketing and Sales
Department and Head of Marketing and Development
Department. Mr. Vinogradov began his career at the
Main Center for Management of Long-Distance
Communications of the USSR.
Mr. Vinogradov was elected to Golden Telecom's Board
of Directors and became President and Chief Executive
Officer of Golden Telecom in November 2001. Mr.
Vinogradov has served on the Executive Committee of
the Board of Directors since his election as a
Director.
In November 2002, Mr. Izzet Guney and Mr. David Stewart resigned from
the Board. Mr. Stan Abbeloos resigned from the Board of Directors in November
2002 and was re-elected to the Board in December 2002. Mr. Tigran Agadzhanov
resigned from the Board of Directors in December 2002.
In accordance with the terms and conditions of a shareholders agreement
("May 2001 Shareholders Agreement") entered by the Company, Global TeleSystems
Europe Holdings B.V. (as assignee of Global TeleSystems, Inc.), Alfa Telecom
Limited (as assignee of Alfa Bank Holdings Limited), Capital International
Global Emerging Markets Private Equity Fund, L.P., Cavendish Nominees Limited
and First NIS Regional Fund SICAV, in May 2001, Alfa Telecom Limited designated
three persons to be elected to the Board and the Board duly elected Mr. Petr
Aven, Mr. Andrey Kosogov, and Mr, Tigran Agadzhanov as directors of the Company.
Mr. Aven, Mr. Kosogov and Mr. Agadzhanov were re-elected in June 2001 and May
2002 for one-year terms. Mr. Agadzhanov resigned in December 2002 and Mr.
Abbeloos was designated by
7
Alfa Telecom Limited and duly elected to the Board in December 2002. In
accordance with the May 2001 Shareholders Agreement, Mr. Michael Calvey,
Managing Partner of Baring Vostok Capital Partners, was designated by Cavendish
Nominees Limited and First NIS Regional Fund SICAV was duly elected to the
Board. Mr. Calvey was re-elected in June 2001 and May 2002 for one-year terms.
In accordance with the May 2001 Shareholders Agreement, Mr. Ashley Dunster was
designated by Capital International Global Emerging Markets Private Equity Fund,
L.P. and duly elected to the Board. Mr. Dunster was re-elected in June 2001 and
May 2002 for one-year terms, as of the date hereof.
In accordance with the terms and conditions of a shareholders agreement
(the "September 2002 Shareholders Agreement") entered into by the Company, Alfa
Telecom Limited, OAO Rostelecom, Capital International Global Emerging Markets
Private Equity Fund, L.P., Cavendish Nominees Limited and First NIS Regional
Fund SICAV, in September 2002, the parties to the Shareholders Agreement agreed
that three directors to the Board would be designated by Alfa Telecom Limited,
one director would be designated by Capital International Global Emerging
Markets Private Equity Fund, L.P., one director would be nominated by Cavendish
Nominees Limited and First NIS Regional Fund SICAV, two directors would be
nominated by OAO Rostelecom and two directors would be designated by the Board
of Directors. The September 2002 Shareholders Agreement supercedes the May 2001
Shareholders Agreement. In accordance with the September 2002 Shareholders
Agreement, one of the directors designated by OAO Rostelecom shall be
independent and financially literate. Mr. Vladimir Androsik and Mr. Michael
North were designated by OAO Rostelecom and were duly elected by the Board. The
Board has determined that Mr. North is an independent director as such term is
defined by NASDAQ and United States Securities and Exchange Commission ("SEC")
rules.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEES (ITEM NO. 1 ON YOUR PROXY CARD)
COMPENSATION OF DIRECTORS
Each non-employee member of Golden Telecom's Board of Directors is
entitled to receive an annual retainer fee of $15,000. In addition, each
non-employee member of the Board of Directors is entitled to receive a fee of
$1,000 for each Board meeting attended in person and a fee of $500 for each
Board meeting attended by telephone. Non-employee members are entitled to
receive a fee of $750 for each Board committee meeting attended in person, a fee
of $500 for each Board committee meeting attended by telephone and a fee of $500
for each Unanimous Written Consent in Lieu of Meeting adopted by the Board.
However, Board committee fees are not paid if the meeting is held on the same
day as a Board meeting. In accordance with the Golden Telecom 1999 Equity
Participation Plan, non-employee directors are also entitled to receive 10,000
stock options upon their initial appointment and 2,500 stock options for each
subsequent year of service.
Each of the Directors waived his right to receive stock options in
2002. Mr. Dunster also waived his rights to all forms of Director compensation
in 2002, which is in line with the policy of his employer, Capital International
Research, Inc.
All directors who are also Golden Telecom employees have waived their
rights to all forms of director compensation for 2002, including rights to stock
options, which is in line with Company policy.
8
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
BOARD OF DIRECTORS. The Board of Directors met eight times and acted through
unanimous written consents eight times during the year ended December 31, 2002.
An Independent Committee of the Board of Directors met once during fiscal year
ended December 31, 2002. During 2002, each of the then-incumbent directors
attended, in person or by telephone, 75 percent or more of the meetings of the
Board of Directors and 75 percent or more of the meeting of the committees on
which each director served.
The Board of Directors has four standing committees: the Executive
Committee, the Audit Committee, the Compensation Committee, and the Nominating
and Corporate Governance Committee. The Board of Directors established the
Nominating and Corporate Governance Committee in July 2002.
EXECUTIVE COMMITTEE. During the fiscal year ended December 31, 2002, the
Executive Committee of the Board of Directors met twice. A principal
responsibility of the Executive Committee is to have and exercise all the powers
of the Board of Directors when the Board is not in session, so far as such may
be delegated in accordance with law, except that the Committee may not take any
final action to: amend the Certificate of Incorporation or Bylaws; elect
directors to fill vacancies or newly created directorships on the Board of
Directors; fix the compensation of directors for services in any capacity; fill
vacancies on the Committee or change its membership; declare dividends (unless
authorized by resolution of the Board of Directors); exchange, consolidate,
sell, lease, pledge or exchange all or substantially all of the Company's
property and assets; recommend to the stockholders a plan of dissolution of the
Company or a revocation of a dissolution; or adopt an agreement of merger or
consolidation for the Company. The Executive Committee also assumes an advisory
role for the senior management of the Company. In this capacity, the Executive
Committee shall (i) provide counsel in regard to significant matters affecting
the Company, its operations and financial performance; (ii) provide advice on
proposed corporate structure, financings and financial strategy; (iii) review
and offer comment upon the strategic direction of the Company; and (iv)
undertake such other actions as may be requested by the Board of Directors.
The current members of the Executive Committee are Mr. Kosogov (Chair),
Mr. Calvey and Mr. Vinogradov.
AUDIT COMMITTEE. During the fiscal year ended December 31, 2002, the Audit
Committee of the Board of Directors held nine meetings and acted through
unanimous written consent in lieu of meeting two times. The Audit Committee has
a written charter, a copy of which is attached to this Proxy Statement as Annex
A. The Audit Committee's primary function is to assist the Board in fulfilling
its oversight responsibilities by reviewing (i) proposed financial plans; (ii)
the financial information provided to shareholders and others; (iii) systems of
internal controls that management and the Board of Directors have established;
and (iv) the audit process, including both internal and external audits. The
Audit Committee interacts with the independent auditor to ensure the independent
auditor's ultimate accountability to the Board and the Audit Committee, as
representatives of the shareholders. The Audit Committee exercises, as
appropriate, the authority and responsibility of the Board to select, evaluate,
and where appropriate, replace the independent auditor or to nominate an
independent auditor for shareholder ratification in any proxy statement. A
Report from the Audit Committee is contained herein in the section following
Item No. 2 on Your Proxy Card, Ratification of Appointment of Auditors.
9
The current members of the Audit Committee are Mr. Herman (Chair), Mr.
Calvey and Mr. Dunster.
INDEPENDENCE OF THE AUDIT COMMITTEE. The National Association of Securities
Dealers, as a condition for quotation on the Nasdaq, requires the Company to
comply with the Nasdaq's Marketplace Rules. One such rule requires the Company
to certify that it has and will continue to have an audit committee comprised of
at least three members, each of whom is independent, as defined by the
Marketplace Rules. The Company believes that it complies with this requirement.
COMPENSATION COMMITTEE. During the fiscal year ended December 31, 2002, the
Compensation Committee of the Board of Directors held three meetings and acted
through unanimous written consent in lieu of meeting two times. The primary
purpose of the Compensation Committee is to ensure that the compensation
practices and policies of the Company are consistent with and serve the best
interests of the Company's shareholders. To this end, the Committee develops and
approves the compensation arrangements of the officers of the Company, makes
recommendations to the Board of Directors regarding option or restricted stock
grants under the Company's 1999 Equity Participation Plan, approves the
compensation of, and makes recommendations to the full Board of Directors
regarding certain benefits provided to, and compensation plans applicable to the
Chief Executive Officer and those individuals whose cash compensation might
reasonably be expected to be among the top four most highly paid individuals. In
addition, the Committee acts as the Stock Option Administrator as defined in and
pursuant to the Company's 1999 Equity Participation Plan with regard to stock
option grants. A Report from the Compensation Committee is contained herein
after the discussion of executive compensation.
The current members of the Compensation Committee are Mr. Dunster
(Chair) and Mr. Herman.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE. The Board of Directors
established the Nominating and Corporate Governance Committee in July 2002.
During the fiscal year ended December 31, 2002, the Nominating and Corporate
Governance Committee of the Board of Directors held one meeting and acted by
unanimous written consent in lieu of meeting on one occasion. The primary
purposes of the Nominating and Corporate Governance Committee are to insure that
the Board is appropriately constituted to meet its fiduciary obligations to the
Company's shareholders and to the Company and to insure that the corporate
governance practices of the Company are appropriate and effective in enabling
the Board to fulfill its responsibilities independent of management and with a
view to the best interests of the Company and its shareholders generally. To
accomplish these purposes, the Committee develops and implements policies and
processes regarding corporate governance matters, assesses Board membership
needs and assists the Board in identifying, recruiting and nominating candidates
for directorships. The Committee will consider written recommendations from
shareholders regarding potential nominees for election as directors to the Board
upon written request by a shareholder addressed to any member of the Board.
The current members of the Nominating and Corporate Governance
Committee are Mr. Aven (Chair), Mr. Calvey and Mr. Dunster.
--------------------------------------------------------------------------------
ITEM NO. 2 ON YOUR PROXY CARD: RATIFICATION OF APPOINTMENT OF AUDITORS
--------------------------------------------------------------------------------
The Audit Committee of the Board of Directors has selected Ernst &
Young (CIS) Limited ("Ernst & Young"), independent public accountants, to audit
the consolidated financial
10
statements of the Company for the fiscal year ending December 31, 2003 and
recommends that the stockholders ratify such election.
The submission of the appointment of Ernst & Young is not required by
law or by the By-laws of the Company. The Board of Directors is nevertheless
submitting it to the stockholders to ascertain their views. If the stockholders
do not ratify the appointment, the selection of other independent public
accountants will be considered by the Board of Directors. If Ernst & Young shall
decline to accept or become incapable of accepting its appointment, or if its
appointment is otherwise discontinued, the Board of Directors will appoint other
independent public accountants.
A representative of Ernst & Young is expected to be present at the
Annual Meeting. If present, the representative will have the opportunity to make
a statement if they so desire and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF AUDITORS (ITEM NO. 2 ON YOUR PROXY CARD)
******************
REPORT OF THE AUDIT COMMITTEE
In accordance with its written charter adopted by the Board of
Directors, the Audit Committee assists the Board in fulfilling the Board's
responsibility for overseeing the quality and integrity of the accounting,
auditing and financial reporting practices and processes of the Company. The
Audit Committee selects the Company's independent auditors who report directly
to the Audit Committee. The Company's independent auditors are responsible for
expressing an opinion on the conformity of the Company's audited financial
statements with United States generally accepted accounting principles,
communicating its judgments as to the quality, not just the acceptability, of
the Company's accounting principles and reporting such other matters as required
to be discussed with the Audit Committee under generally accepted auditing
standards. In this context the Audit Committee has met and held discussions with
management and the Company's independent auditors.
Management, which has primary responsibility for the financial
statements and reporting process, has represented to the Audit Committee that
the Company's consolidated financial statements were prepared in accordance with
United States generally accepted accounting principles. The Audit Committee has
reviewed and discussed the consolidated financial statements with management and
the Company's independent auditors, including a discussion of the quality, not
just the acceptability, of the accounting principles, the reasonableness of
significant judgments and the clarity of disclosures in the financial
statements. The Audit Committee reviewed and discussed with the independent
auditors matters required to be discussed by Statement on Auditing Standards No.
61 (Communication with Audit Committees), as amended. The Company's independent
auditors also provided to the Audit Committee the written disclosures required
by Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees). The Audit Committee discussed with the independent auditors
their independence and considered the compatibility of non-audit services with
the auditors' independence. An outline of the fees billed by Ernst & Young for
the fiscal year ended December 31, 2002 is contained below. Based upon the Audit
Committee's discussion with management and the independent auditors and the
Audit Committee's review of the representations of management and the report of
the independent auditors to the Audit
11
Committee, the Audit Committee recommended that the Board of Directors include
the Company's audited consolidated financial statements in the Company's Annual
Report on Form 10-K for the year ended December 31, 2002 filed with the
Securities and Exchange Commission.
Submitted by the Audit Committee of the Board of Directors
Mr. David Herman (Chair)
Mr. Michael Calvey
Mr. Ashley Dunster
AUDIT FEES. Ernst & Young's fees for the fiscal year ended December 31, 2002 for
professional services rendered in connection with the audit of the Company's
annual financial statements, statutory audits of certain subsidiaries and
reviews of quarterly financial statements on Forms 10-Q were $469,000.
AUDIT RELATED FEES. Ernst & Young's fees for the fiscal year ended December 31,
2002 for other professional services related to acquisitions, accounting
consultations and internal control reviews during the fiscal year were $65,000.
TAX FEES. Ernst & Young fees for the fiscal year ended December 31, 2002 for tax
consulting and tax compliance services were $290,000.
ALL OTHER FEES. Ernst & Young had no other fees for the fiscal year ended
December 31, 2002 other than those listed under the above three categories.
*******************
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Common Stock and rights to acquire Common Stock by stockholders
that own five percent or more of the Common Stock, by each of the Company's
directors and executive officers, and all the Company's directors and executive
officers as a group. For the purposes of this table, a person or a group of
persons is deemed to have "beneficial ownership" of any shares as of a date when
such person or group has the right to acquire or vote such shares within 60 days
after such date, but such shares are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person. Percentages
of shares owned are based on the 27,126,470 shares of Common Stock issued and
outstanding at March 20, 2003. These shareholding numbers are based in part on
the public filings of several of the shareholders listed below.
NUMBERS OF SHARES PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
------------------------------------ ------------------ ------------------
Alfa Telecom Limited (1) 10,731,707 (2) 39.56%
PO Box 3339 Geneva Place
333 Waterford Drive
Road Town, Tortola
British Virgin Islands
OAO Rostelecom 4,024,067 14.83
1st Tverskaya-Yamskaya 14
Moscow, Russia
125047
12
European Bank of Reconstruction and Development 3,003,564 11.07
One Exchange Square
London EC2A 2JN
Capital International Global Emerging Markets Private Equity 2,166,405 7.99
Fund L.P.
c/o Capital International, Inc.
11100 Santa Monica Boulevard Suite 1500
Los Angeles, California 90025
First NIS Regional Fund SICAV (3)(4)(5) 723,906 2.67
c/o Bank of Bermuda (Luxemburg ) S.A.
13 rue Goethe
B.P. 413
L-2014 Luxemburg
Cavendish Nominees Limited (3)(4)(5) 1,845,769 6.81
c/o International Private Equity Services
13-15 Victoria Road, P.O. Box 431
St. Peter Port
Guernsey, Channel Islands, GY1 3ZD
Stan Abbeloos (6) 341,200 --
Tigran Agadzhanov -- --
Vladimir Androsik -- --
Petr Aven -- --
Michael Calvey (5) -- --
Ashley Dunster -- --
Izzet Guney -- --
David Herman -- --
Andrey Kosogov -- --
Jeffrey Riddell (6) 321,715 --
David Stewart (6) 134,960 --
Alexander Vinogradov (7) 151,318 --
All Directors and Executive Officers as a Group (12 persons)(6) 949,193 --
1. Based on information provided in Amendment No. 5 to Schedule 13D filed
with the Securities and Exchange Commission on November 6, 2002, we
understand that Alfa Telecom Limited is a wholly-owned subsidiary of
Alfa Finance Holdings S.A. ("Alfa Finance"). As a result of an
agreement among the majority shareholders of Alfa Finance, CTF Holdings
Limited has the right to take certain actions with respect to such
majority shareholders' interest in Alfa Finance. CTF Holdings Limited
is a wholly-owned subsidiary of Crown Finance Foundation. As a result
of these relationships, each of Alfa Finance, CTF Holdings Limited and
Crown Finance Foundation may be deemed to beneficially own the shares
held for the account of Alfa Telecom Limited. In addition, Alfa Telecom
Limited has granted Alfa Capital Holdings (Cyprus) Limited ("Alfa
Capital Holdings") an option to purchase 1,609,756 of the shares
reported herein. Alfa Capital Holdings is a wholly-owned subsidiary of
ABH Financial Limited, which is a wholly-owned subsidiary of Alfa
Finance.
2. This number does not include 58,940 shares held for the account of Alfa
Capital Holdings based on information provided in a Form 4 filed with
the Securities and Exchange Commission on March 7, 2003.
13
3. Shares beneficially owned by The Barings Vostok Private Equity Fund
L.P. and The NIS Restructuring Facility (together, the "Barings Funds")
are held in the name of Cavendish Nominees Limited, as nominee. Of the
1,845,769 shares held of record by Cavendish Nominees Limited,
1,491,485 shares are beneficially owned by The Barings Vostok Private
Equity Fund L.P. and 354,284 shares are beneficially owned by The NIS
Restructuring Facility.
4. First NIS Regional Fund SICAV and the Barings Funds holdings shares
through Cavendish Nominees Limited may be deemed to be members of a
group pursuant to Rule 13(d)(5) under the Securities Exchange Act of
1934, as amended. However, such persons disclaim group status.
5. First NIS Regional Fund SICAV and the Barings Funds holdings shares
through Cavendish Nominees Limited are advised by Barings Vostok
Capital Partners Limited, as investment adviser. Mr. Michael Calvey is
the Managing Partner of Barings Vostok Capital Partners Limited. Mr.
Calvey disclaims beneficial ownership of the shares held by First NIS
Regional Fund SICAV and the Barings Funds holdings shares held by
Cavendish Nominees Limited.
6. Included in these figures is the number of shares of our Common Stock
which the holder has the right to acquire beneficial ownership of
pursuant to the exercise on or before May 20, 2003 of options we
granted, as follows: Mr. Stan Abbeloos, 321,527; Mr. Jeff Riddell,
321,527; and Mr. David Stewart, 124,999.
7. Golden Telecom has adopted the 1999 Equity Participation Plan, as
amended, whereby certain employees of Golden Telecom and its affiliates
are granted Golden Telecom stock options. Owing to ambiguities and
inconsistencies in the legislation of the countries in which some of
our employees live, the Compensation Committee of the Board of
Directors of Golden Telecom decided not to issue stock options to its
Russian employees, including Mr. Vinogradov. Instead, as part of its
key employee incentive and retention policy, Golden Telecom established
the Golden Telecom Incentive Bonus Program, whereby Golden Telecom
issues stock options to a trust in numbers corresponding to the level
of financial incentive Golden Telecom wishes to award its eligible
employees. When eligible employees, including Mr. Vinogradov, desire
and are eligible to receive the economic benefit of the options, they
inform Golden Telecom and the Company, in turn, advises the trustee,
who exercises an appropriate number of options for contribution to the
trust. Upon request of the Company and the employee, the funds
available in the trust may be disbursed to eligible employees in the
form of incentive bonuses. The economic value of Mr. Vinogradov's
participation in the Bonus Program is approximately equivalent to
300,000 options granted in 2001, 2,500 options granted in 2000 and
7,500 options granted in 1999.
******************
EXECUTIVE OFFICERS
Alexander Vinogradov. Mr. Vinogradov's biography may be found under
"Board of Directors".
Stan M. Abbeloos. Mr. Abbeloos' biography may be found under "Board of
Directors".
Jeffrey A. Riddell. Mr. Riddell joined Golden Telecom as Senior Vice
President, General Counsel and Secretary in June 1999. Prior to that, Mr.
Riddell served with Global TeleSystems, Inc. ("GTS") as Legal Director- GTS-CIS
from August 1998 until June 1999, and Deputy Director of the Legal Department-
GTS-CIS from July 1997 to August 1998. Prior to joining GTS, Mr. Riddell was in
private practice with Salans, Hertzfeld & Heilbronn.
14
David A. Stewart. Mr. Stewart was appointed as the Company's Chief
Financial Officer in October 2001. Prior to becoming the Chief Financial
Officer, Mr. Stewart served as the Finance Director of TeleRoss since 1996.
Prior to joining TeleRoss, Mr. Stewart worked in the Audit Department of Ernst &
Young offices in Australia and Russia. David Stewart graduated from Melbourne
University of Commerce in 1987 and is a member of the Institute of Chartered
Accountants in Australia since 1989.
******************
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or awarded to the
Company's Chief Executive Officer and the four other most highly compensated
executive officers in 2002 serving the operations of Golden Telecom in 2000,
2001 and 2002. Bonuses listed for the years 2000, 2001 and 2002 represent cash
payments for the services rendered in the first three quarters of those years
and the fourth quarter of the previous year. In addition, personal subjective
bonuses for 2001 and 2002 were paid in 2002 and 2003, respectively.
The amounts listed in the column "Restricted Stock Awards" represent
the value of the restricted stock granted to the listed employee on the date of
the Company's initial public offering except as otherwise indicated in the
footnotes. These awards reflect an arrangement whereby the Company granted
awards of restricted stock and options to acquire the Company's Common Stock to
the named employees and the named employees surrendered unvested stock options
previously granted to the employees by Global TeleSystems Inc., the Company's
sole shareholder prior to its initial public offering in September 1999. The
column entitled "Number of Securities Underlying Options" in 2000, 2001 and 2002
refers to shares of the Company's Common Stock that would be issued upon the
exercise of stock options awarded to the listed employee under the Golden
Telecom 1999 Equity Participation Plan.
In accordance with the Golden Telecom 1999 Equity Participation Plan,
not more than 4,320,000 shares of Common Stock (subject to antidilution and
other adjustment provisions) are authorized for issuance upon exercise of
options or upon vesting of restricted or deferred stock awards. As of December
31, 2002, 997,889 shares of Common Stock remained available for distribution to
employees.
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS/SAR COMPENSATION (2)
--------------------------- ---- ------ ----- --------------- ----------- ----------------
$ $ $ # $
Alexander Vinogradov (3) 2002 247,683 147,274 -- -- --
President and Chief 2001 180,871 104,121 -- 300,000(4) --
Executive Officer 2000 170,000 108,877 -- 2,500(4) --
Stan M. Abbeloos 2002 220,000 163,932 158,850 -- 1,050
Senior Vice President 2001 205,000 83,371 142,850 -- 439
and Chief Operating
Officer 2000 205,000 97,250 122,264 25,000 360
Jeffrey A. Riddell 2002 170,000 108,978 123,312 -- 18,265
15
Senior Vice President and 2001 170,000 92,721 154,155 -- 3,084
General Counsel 2000 155,000 74,110 131,583 25,000 4,466
David A. Stewart (5) 2002 148,333 74,423 146,145 125,000 1,050
Senior Vice President and 2001 130,000 34,401 131,188 -- 202
Chief Financial Officer 2000 127,333 35,525 141,830 15,000 197
and Treasurer
Kenneth M. Griffin 2002 145,000 55,258 222,920 -- 18,055
Managing Director of 2001 145,000 49,546 273,819 -- 2,666
Wholesale and 2000 133,750 39,493 184,809 15,000 1,539
International Operations
Business Unit
(1) Amounts disclosed represent compensation and reimbursements, provided
in addition to Salary and Bonus, for contracted expatriated executives,
which includes an overseas living and traveling allowance, rents for
Moscow residences, tax equalization payments and dependent tuition, as
applicable.
(2) Amounts disclosed represent the sum of premia paid by the Company for
up to $325,000 term life insurance for each named executive officer,
except Mr. Vinogradov, and contributions made by the Company under the
Golden Telecom 401(k) Plan to Mr. Riddell and Mr. Griffin who
participate in the Company's 401(k) Plan as they are United States
citizens. The Golden Telecom 401(k) Plan was established in November
2001.
(3) Mr. Vinogradov became President and Chief Executive Officer of Golden
Telecom on November 6, 2001. Prior to that Mr. Vinogradov worked as
General Director of LLC EDN Sovintel. Amounts shown include
compensation earned for services rendered to Golden Telecom and LLC EDN
Sovintel.
(4) Golden Telecom has adopted the 1999 Equity Participation Plan, as
amended, whereby certain employees of Golden Telecom and its affiliates
are granted Golden Telecom stock options. Owing to ambiguities and
inconsistencies in the legislation of the countries in which some of
our employees live, the Compensation Committee of the Board of
Directors of Golden Telecom decided not to issue stock options to its
Russian employees, including Mr. Vinogradov. Instead, as part of its
key employee incentive and retention policy, Golden Telecom established
the Golden Telecom Incentive Bonus Program, whereby Golden Telecom
issues stock options to a trust in numbers corresponding to the level
of financial incentive Golden Telecom wishes to award its eligible
employees. When eligible employees, including Mr. Vinogradov, desire
and are eligible to receive the economic benefit of the options, they
inform Golden Telecom and the Company, in turn, requests that the
trustee exercise an appropriate number of options for contribution to
the trust. Upon request of the Company and the employee and upon
decision adopted by the Trustee, the funds available in the trust may
be disbursed to eligible employees in the form of incentive bonuses.
The economic value of Mr. Vinogradov's participation in the Bonus
Program is approximately equivalent to 300,000 options granted in 2001,
2,500 options granted in 2000 and 7,500 options granted in 1999.
(5) Mr. Stewart became interim Chief Financial Officer on October 1, 2001
and was confirmed as Chief Financial Officer on February 6, 2002. Prior
to that Mr. Stewart worked as Finance Director of TeleRoss, a
subsidiary of Golden Telecom. All amounts shown include compensation
earned for services rendered to Golden Telecom and TeleRoss.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR
VALUES
The following table provides information on the number and value of the
Company's stock options exercised by the Chief Executive Officer and the four
other most highly compensated officers during 2002, the number of options under
the Golden Telecom 1999 Equity Participation Plan and the Golden Telecom
Incentive Bonus Program held by such persons at December 31, 2002, and the value
of all unexercised options held by such persons as of that date. The closing
price of the Company's stock on December 31, 2002 was $12.65 per share on the
Nasdaq National Stock Market.
16
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END
ON EXERCISE REALIZED EXERCISEABLE/UNEXERCISEABLE EXERCISEABLE/UNEXERCISEABLE
----------- -------- --------------------------- ---------------------------
# $ # $
Alexander
Vinogradov 0 -- 117,638 192,362 75,291 124,584
Stan M.
Abbeloos 0 -- 318,055 6,945 195,000 --
Jeffrey A.
Riddell 0 -- 318,055 6,945 195,000 --
David A. Stewart
0 -- 70,833 129,167 39,000 81,250
Kenneth M.
Griffin 0 -- 85,833 4,167 48,750 --
The following table provides information on securities that were authorized for
issuance under the Company's 1999 Equity Participation Plan as of December 31,
2002.
(a) (b) (c)
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
BE ISSUED UPON EXERCISE EXERCISE PRICE OF EQUITY COMPENSATION
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, PLANS (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a))
------------- ------------------- ------------------- -----------------------
Equity compensation plan 2,657,073 $12.75 997,889
approved by security
holders
******************
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
OVERVIEW. The role of the Compensation Committee is to oversee and direct the
development of executive compensation policies and programs that are consistent
with, explicitly linked to, and supportive of the strategic objectives of
growing the Company's businesses in order to maximize shareholder value. The
Committee's specific responsibilities consist in determining the appropriate
levels of compensation, including salaries, quarterly or annual incentives,
long-term incentives and employee benefits, for members of the Company's senior
management, including executive officers. The Committee believes that a strong
link should exist between executive compensation and management's ability to
maximize shareholder value. The Committee seeks to realize this goal by
developing incentive compensation programs that provide competitive compensation
and reflect Company performance.
COMPENSATION PHILOSOPHY. The four fundamental principles to which the Committee
adheres in discharging its responsibilities are as follows. First, most
quarterly, annual and long-term incentive compensation for the Company's
executive officers should be at risk, with actual compensation levels
correlating with the Company's performance in certain key areas determined
17
by the Committee. Second, incentive compensation of the Company's executive
officers should focus more heavily on long-term rather than short-term
accomplishments and results. Third, equity-based compensation should be used to
provide executive officers with clear and direct links to the shareholders'
interests. Fourth, the overall executive compensation program should be
competitive, equitable and structured so as to ensure the Company's ability to
attract, retain, motivate and reward the talented executives who are essential
to the Company's continuing success in the difficult markets in which the
Company operates and the executives reside. Total compensation, rather than
distinct compensation elements, is the focus of the Company's goal to provide
competitive compensation opportunities.
COMPENSATION ELEMENTS. The Company's compensation program for executives and
senior management consists of four principal elements, each of which is vitally
important in meeting the Company's need to attract, retain, motivate and reward
highly-qualified executives and senior management in the markets where the
Company operates. The four principal elements are described below and include
base salaries, periodic performance incentives, long-term incentives and
benefits.
BASE SALARIES. Base salaries for executive officers and senior management are
generally set at levels that reflect the competitive marketplace for companies
that are of comparable size and complexity and that would be considered
competitors of the Company in attracting and retaining qualified executives. The
salaries of the executive officers are reviewed and approved by the Compensation
Committee based on its assessment of each executive's experience and performance
and a comparison of salaries of peers in other companies.
PERIODIC PERFORMANCE INCENTIVES. Incentive awards are made on a quarterly or
annual basis to executive officers and senior management on the basis of Company
and business unit performance relative to budget in such areas as revenue, net
income, and EBITDA, which is a common performance measure in the
telecommunications industry and means earnings before interest, tax,
depreciation and amortization. The Company adopted a revised executive officer
and senior management executive bonus program in 2001, whereby an additional
criterion, personal performance objectives, was added and executives and senior
management are eligible for an annual incentive payment based on the fulfillment
of these personal objectives. The bonus program was revised in 2003 such that
all bonus components will be paid annually. The Company intends to continue
providing incentives in concert with other compensation elements in order to
maintain a competitive total compensation program for its executive officers.
The Committee reviews and approves all performance measures and goals
established under the annual and long-term incentive plans.
LONG-TERM INCENTIVES. The Company relies on stock options as the principal means
of providing long-term incentive compensation. Stock options have been, and will
continue to be, granted to executive officers and senior management under the
1999 Equity Participation Plan. In considering the size and amount of option
grants, the Committee considers, among other things, previous grants made to the
executive officers, the amount of options currently available for issuance under
the guidelines established in the 1999 Equity Participation Plan, and the
desirability of retaining an executive officer for the vesting period of the
stock option.
BENEFITS. Benefits offered to executive officers serve a different purpose than
do other elements of the total compensation program. In general, they provide
for retirement income and act as a safety net against problems that can arise
from illness, disability or death. Benefits offered to executive officers are
basically those offered to other employees of the Company.
18
GOLDEN TELECOM, INC. 401(k) PLAN. The Company offers a 401(k) retirement savings
plan (the "401(k) Plan") to its employees. The 401(k) Plan is a defined
contribution retirement benefit, the prototype of which has been submitted by
the Company's 401(k) Plan administrators to the Internal Revenue Service for
favorable tax treatment under Section 401 of the Internal Revenue Service Code.
All employees of Golden Telecom, subject to certain regulatory qualifications,
who are U.S. citizens and at least 21 years of age and have completed the
minimum service requirement will be eligible to participate in the 401(k) Plan.
The 401(k) Plan participants are able to defer pre-tax income by contributing to
the plan up to the maximum amount permitted by law. After-tax contributions are
also permitted under the 401(k) Plan. Golden Telecom matches 50% of each
participant's pre-tax contribution to the 401(k) Plan, up to 5% of the
participant's total compensation. In addition, Golden Telecom may, in its sole
discretion and in a nondiscriminatory manner, contribute additional amounts as
profit sharing to each participant's account. The amounts deposited into each
participant's account will be invested among various investment options
according to the instructions of the participant. Each participant's pre-tax and
after-tax contributions will be immediately vested and non-forfeitable. The
Company's matching contribution and profit sharing allocations to each
participant's account will not vest until the participant has completed three
years of service with Golden Telecom at which time the matching contribution and
profit sharing allocations become 100% vested.
EVALUATION PROCEDURES. In determining matters regarding executive officer
compensation (other than the Chief Executive Officer), the Committee, with the
Chairman of the Board and Chief Executive Officer, reviews the performance of
key executives including the executive officers, the respective areas of
authority and responsibility of the various executive officers, and the
contribution of each to the efforts of the Company in meeting its financial and
strategic goals. The Committee has confirmed that the compensation paid in 2002
to the named executive officers is consistent with the Company's compensation
philosophy and objectives.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. On November 6, 2001 Mr. Alexander
Vinogradov was appointed as President and Chief Executive Officer of the Company
and entered into an employment agreement with Golden TeleServices, Inc. Mr.
Vinogradov's base salary is currently set at $290,000, and he is eligible for
periodic bonuses throughout the year targeted, in the aggregate, to be 50% of
his base salary. During 2002, Mr. Vinogradov received $240,000 as his base
salary and US$102,424 in bonus payments. In evaluating Mr. Vinogradov's
compensation, the Committee compared the Company's compensation practices and
levels to those of other companies involved in similar businesses, including but
not limited to, the companies included in the indices indicated in the
Performance Graph. Based on this review, the Committee determined Mr.
Vinogradov's compensation to be appropriate.
DEDUCTIBILITY OF CERTAIN EXECUTIVE COMPENSATION. Beginning in 1994, the Omnibus
Reconciliation Act of 1993 limits to $1 million the amount that may be deducted
by a publicly-held company for compensation paid to each of its named executive
officers in a taxable year, unless the compensation in excess of $1 million is
"qualified performance-based compensation." The Committee and the Company design
short-term and long-term compensation plans to qualify for the exemption from
the deduction limitations of Section 162(m) of the Internal Revenue Code and to
be consistent with providing appropriate compensation to executives. Shareholder
approval of incentive compensation plans and various provisions thereunder
covering the executive officers has been sought and obtained and will be sought
in the future to continue to qualify performance-based compensation for the
exemption. Although it is the Company's intent to qualify compensation for the
exemption from the deduction limitations, the Company's compensation practices
have been, and will continue to be, designed to serve the best interests of the
shareholders regardless of whether specific compensation qualifies for the
exemption.
19
Submitted by the Compensation Committee of the Board of Directors:
Mr. Ashley Dunster (Chair)
Mr. David Herman
******************
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
EMPLOYMENT AGREEMENT OF THE CHIEF EXECUTIVE OFFICER. On November 6, 2001 Mr.
Vinogradov was appointed as President and Chief Executive Officer of the Company
and entered into an employment agreement with Golden TeleServices, Inc., a
wholly-owned subsidiary of the Company. Mr. Vinogradov continued his employment
as General Director of LLC EDN Sovintel, a fully owned subsidiary of the
Company, until November 12, 2002. Mr. Vinogradov's overall annual base salary is
set at $290,000 and he is eligible for periodic bonuses throughout the year
targeted, in the aggregate, to be 50% of his base salary. If Mr. Vinogradov is
terminated without cause he is entitled to an amount equal to his salary at its
then current rate for a period of 6 months and any amount to be paid to him as a
cash payout of salary due for the notice period if the employer elects to make a
payment in lieu of continued payment throughout the notice period, and to the
cost of continuing all medical and dental plans or retirement benefits for such
periods.
Mr. Vinogradov's agreement contains provisions relating to the
protection of the employer's confidential information, non-competition during
the term of the agreement and for a six-month period thereafter,
non-solicitation of employer employees for twelve months following termination
of employment, and compliance with the Foreign Corrupt Practices Act of 1977.
Mr. Vinogradov may be terminated for cause if he fails to follow an order of the
Board, if he is engaged in fraud, embezzlement or any other similar illegal act
in connection with his duties as an employee, upon conviction of a felony or
crime involving moral turpitude which may cause substantial economic injury to
the Company, or upon the wilful or grossly negligent commission of any other act
which may cause substantial economic injury to the Company. In addition Golden
Teleservices, Inc. may terminate Mr. Vinogradov if he suffers total disability.
Mr. Vinogradov may terminate the agreement by giving Golden TeleServices, Inc.
ninety days prior written notice.
EMPLOYMENT AGREEMENTS OF OTHER EXECUTIVE OFFICERS. The employment contracts of
the other executive officers contain substantially the same terms, other than
compensation amounts, as that of Mr. Vinogradov's agreement.
20
COMPARISON OF 39 MONTH CUMULATIVE TOTAL RETURN*
AMONG GOLDEN TELECOM, INC., THE NASDAQ STOCK MARKET (U.S. & FOREIGN) INDEX
AND THE NASDAQ TELECOMMUNICATIONS INDEX
[PERFORMANCE GRAPH]
CUMULATIVE TOTAL RETURN
-----------------------------------------------------------------------------------
9/99 10/99 11/99 12/99 1/00 2/00 3/00 4/00
GOLDEN TELECOM, INC. 100.00 106.57 132.85 373.72 224.82 490.51 531.39 357.66
NASDAQ STOCK MARKET (U.S. & FOREIGN) 100.00 108.16 121.75 148.67 143.85 172.07 167.33 140.83
NASDAQ TELECOMMUNICATIONS 100.00 118.45 126.46 146.67 146.22 160.48 155.85 126.97
CUMULATIVE TOTAL RETURN
----------------------------------------------------------------------------------
5/00 6/00 7/00 8/00 9/00 10/00 11/00 12/00
GOLDEN TELECOM, INC. 348.91 347.45 353.28 359.12 202.92 181.02 129.20 59.85
NASDAQ STOCK MARKET (U.S. & FOREIGN) 123.83 145.00 137.48 153.68 134.20 122.92 94.57 89.89
NASDAQ TELECOMMUNICATIONS 106.19 123.03 109.48 111.30 98.21 85.77 62.39 62.52
CUMULATIVE TOTAL RETURN
-----------------------------------------------------------------------------------
1/01 2/01 3/01 4/01 5/01 6/01 7/01 8/01
GOLDEN TELECOM, INC. 128.47 105.11 115.33 107.56 109.78 163.50 148.91 117.96
NASDAQ STOCK MARKET (U.S. & FOREIGN) 100.86 78.08 66.82 76.89 76.72 78.57 73.65 65.58
NASDAQ TELECOMMUNICATIONS 78.49 62.54 55.09 57.26 53.85 52.17 47.31 41.87
CUMULATIVE TOTAL RETURN
-----------------------------------------------------------------------------------
9/01 10/01 11/01 12/01 1/02 2/02 3/02 4/02
GOLDEN TELECOM, INC. 91.09 140.61 143.07 136.29 153.58 143.07 180.79 204.37
NASDAQ STOCK MARKET (U.S. & FOREIGN) 54.41 61.41 70.17 70.90 70.29 62.93 67.13 61.41
NASDAQ TELECOMMUNICATIONS 38.00 37.07 40.96 41.84 35.17 30.22 29.80 23.71
CUMULATIVE TOTAL RETURN
-----------------------------------------------------------------------------------
5/02 6/02 7/02 8/02 9/02 10/02 11/02 12/02
GOLDEN TELECOM, INC. 186.28 205.55 167.01 157.66 140.73 172.73 184.29 147.74
NASDAQ STOCK MARKET (U.S. & FOREIGN) 58.76 53.31 48.45 47.96 42.78 48.56 54.03 48.82
NASDAQ TELECOMMUNICATIONS 22.57 17.98 17.27 18.09 16.51 19.34 20.62 19.28
*$100 invested on 9/30/99 in stock or index-
including reinvestment of dividends.
Fiscal year ending December 31.
******************
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SHAREHOLDERS AND STANDSTILL AGREEMENTS. On September 5, 2002, subsidiaries of
the Company completed the purchase of the remaining 50% ownership interest in
LLC EDN Sovintel from OAO Rostelecom. As a result of the transaction, OAO
Rostelecom acquired 15% of the Company's then issued and outstanding shares.
Also as a result of the transaction, the Company and certain major shareholders
of the Company entered into a shareholders agreement and a standstill agreement.
The shareholders agreement and standstill agreement were entered into on
September 5, 2002 by the Company, Alfa Telecom Limited ("Alfa"), OAO Rostelecom,
Capital International Global Emerging Markets Private Equity Fund, L.P.
("Capital"), Cavendish Nominees Limited and First NIS Regional Fund SICAV. An
Independent Committee of the Board of Directors authorized both agreements and
granted its approval of the acquisition pursuant to Section 203(a)(1) of the
Delaware General Corporate Law.
The shareholders agreement provides that the shareholders will vote
their shareholding such that three of Alfa's nominees will be elected to the
Golden Telecom Board of Directors. The shareholders also agreed to vote their
shares such that a candidate nominated by Capital will be elected to the Board.
The agreement also provides that a single candidate nominated by both Cavendish
Nominees Limited and First NIS Regional Fund SICAV (together, "Barings") will be
elected to the Board. According to the agreement, two directors shall be
designated by OAO
21
Rostelecom, one of whom shall be independent and financially literate under
NASDAQ and SEC rules, and two directors shall be designated by the directors
sitting on the Board at the Board meeting when the Board adopts the resolutions
concerning the annual meeting of shareholders. The shareholders agreement
terminates on the later of (i) May 11, 2004 and (ii) the date of the annual
meeting of shareholders of the Company held in calendar year 2004.
Generally, the standstill agreement provides that Alfa may not acquire
over 49% and OAO Rostelecom may not acquire over 35% of the Company's
outstanding stock on a fully diluted basis. Similar "standstill" provisions are
applicable to Capital and Barings whereby neither of these entities'
shareholdings may exceed 20% of the Company's outstanding stock. The standstill
agreement grants the signatory shareholders pro-rata pre-emptive rights in the
event of any issuance of equity by the Company, with certain limited exceptions.
This agreement also sets the total number of directors of the Company at nine.
The standstill agreement expires on September 5, 2004.
AGREEMENTS WITH AFFILIATES OF ALFA TELECOM LIMITED AND WITH OAO ROSTELECOM. In
the past, companies affiliated with Alfa Group have provided investment banking
and corporate finance services to the Company. We expect that this relationship
will continue. In particular, we engaged Alfa Bank Holdings Limited, an
affiliate of Alfa Telecom Limited, to provide investment-banking services to the
Company in connection with the acquisition by the Company of the remaining 50%
of LLC EDN Sovintel and paid investment banking fees of approximately $3.3
million to Alfa Bank Holdings, Limited in connection with this acquisition. The
Company has also entered an agreement with ABH Financial Limited (formerly named
Alfa Bank Holdings, Limited) to advise the Company on another potential
transaction. We have also entered into commercial arrangements in the ordinary
course of business with affiliates of Alfa Telecom Limited and with OAO
Rostelecom. OAO Alfa Insurance provides medical insurance to employees of some
of the Company's wholly owned subsidiaries. In 2002, payments to OAO Alfa
Insurance for medical insurance were approximately $148,000. In the regular
course of business, we enter into infrastructure, settlement and other
operational contracts with OAO Rostelecom. In 2002, payments to OAO Rostelecom
under such contracts were approximately $14.71 million. We believe that our
arrangements with these companies have been conducted on commercially reasonable
terms.
REGISTRATION RIGHTS AGREEMENTS. Golden Telecom entered into a registration
rights agreement with OAO Rostelecom on September 5, 2002 when OAO Rostelecom
acquired 15% of the issued and outstanding shares of Golden Telecom in
connection with the Sovintel transaction. The agreement provides that on
Rostelecom's written request to a maximum of two times, Golden Telecom will use
its reasonable best efforts to register under the applicable federal and state
securities laws the resale of any of OAO Rostelecom's shares of the Company's
Common Stock. OAO Rostelecom also has the right to include its shares of the
Company's Common stock in future registrations initiated by the Company on its
own behalf or on behalf of other shareholders. This right is subject to certain
limitations as to whether and to what extent OAO Rostelecom may request
registration. The Company has agreed to pay any registration expenses. The
registration rights agreement contains customary indemnification and
contribution provisions between the Company and OAO Rostelecom. The Company has
substantially similar registration rights agreements with its other significant
shareholders, including Alfa Telecom Limited, Capital International Global
Emerging Markets Private Equity Fund L.P., Digital Holdings Limited and
investment funds managed by Barings Vostok Capital Partners.
******************
22
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and related
regulations require the Company's directors, executive officers, and anyone
holding more than 10% of the Company's Common Stock to report their initial
ownership of the Company's Common Stock and any changes in that ownership to the
Securities and Exchange Commission and securities exchanges. The Company is
required to disclose in this Proxy Statement whether any reporting person did
not file these reports when due. Based on its review of the copies of Section
16(a) reports received by it or written representations from certain reporting
persons that no reports on Form 5 were required, the Company believes that all
reporting persons of the Company satisfied these filing requirements.
******************
OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING
Although we know of no items of business that will be presented at the
Annual Meeting other than those described herein, proxies in the accompanying
form will confer discretionary authority on us with respect to any other matters
that may come before the meeting to the extent permitted by applicable rules of
the SEC. In this regard consistent with the provisions of Rule 14a-14(c)(1),
this proxy will grant us discretionary authority to vote on any shareholder
proposals presented at the meeting of which we have not received notice at least
45 days before the anniversary of the date on which we first mailed our proxy
materials for last year's Annual Meeting.
******************
GENERAL QUESTIONS
Q.: WHEN AND WHERE IS THE SHAREHOLDER MEETING?
A.: The 2003 Annual Meeting of stockholders of Golden Telecom will be held in
the Ringstrassensalon at the Imperial Hotel, Vienna, Austria on May 20, 2003 at
12:30 p.m. local time.
Q.: WHY AM I RECEIVING THIS PROXY STATEMENT AND PROXY CARD?
A.: You are receiving this Proxy Statement and Proxy Card from us because you
owned shares in Golden Telecom on the record date. This Proxy Statement
describes issues on which we would like you, as a stockholder, to vote. It also
provides you information on these issues so that you can make an informed
decision. The Proxy Card is used for voting.
Q.: WHO CAN VOTE?
A.: Stockholders of record at close of business on March 28, 2003 are entitled
to vote at the 2003 Annual Meeting. A list of the stockholders of record
entitled to vote at the Annual Meeting will be available for review by any
stockholder, for any purpose relating to the meeting between 9:00 a.m. and 5:00
p.m. at the executive offices of the Company at the Representative Offices of
Golden TeleServices, Inc., 1 Kozhevnichesky Proezd, 2nd Floor, Moscow, Russia
115114.
Q.: HOW MANY SHARES ARE ENTITLED TO VOTE?
A.: On March 28, 2003 Golden Telecom had outstanding approximately 27,144,947
shares of Common Stock, par value $0.01 per share, with each share representing
one vote.
23
Q.: WHAT IS A QUORUM?
A.: In order to hold the meeting, there must be present in person or by Proxy
Card holders of a majority of voting power of the outstanding shares of stock
entitled to vote at the meeting, which is approximately 13,572,474 shares.
Q.: WHEN ARE STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING DUE?
A.: Stockholder proposals, in order to be timely submitted for inclusion in the
Company's proxy materials for the 2004 annual meeting of stockholders, must be
received at the Company's principal executive offices no later than December 1,
2003.
Q.: WHO PAYS THE COST OF SOLICITATION?
A.: Golden Telecom pays the cost of soliciting your proxy and reimburses
brokerage firms and others for forwarding this Proxy Statement and Proxy Card to
you. In addition, Mellon Investor Services has been retained by Golden Telecom
to assist in soliciting proxies from brokerage firms, bank nominees and other
institutional holders to assure a timely vote by the beneficial owners of stock
held of record by such firms, banks and institutions. This firm will receive a
fee of approximately $5,500, plus reasonable expenses, for its services. In
addition to solicitation by mail, proxies may be solicited in person, or by
telephone, facsimile transmission or other means of electronic communication, by
directors, officers and other employees of Golden Telecom. If you plan to
attend, please advise the Corporation's Corporate Secretary by e-mail at
annualmeeting@gti.ru or by written correspondence.
Q.: WHO CAN ATTEND THE ANNUAL MEETING?
A.: Only stockholders are invited to attend the meeting. To gain admittance to
the meeting, you must bring proof of your ownership. If you are a stockholder of
record and received this Proxy Statement and your Proxy Card by mail, no
admissions ticket is needed for you to attend the Annual Meeting. If a broker or
other nominee holds your shares, and you plan to attend the Annual Meeting, you
should bring a recent brokerage statement showing your ownership of the shares.
In all cases you must also bring a form of personal identification.
Q.: HOW CAN I RECEIVE A COPY OF THE ANNUAL REPORT?
A.: The 2002 Annual Report of Golden Telecom will be mailed together with this
Proxy Statement.
******************
VOTING PROCEDURES (FOR STOCKHOLDERS OF RECORD)
You are a stockholder of record if you have an account directly with our
transfer agent, Mellon Investor Services.
Q.: HOW DO I VOTE?
A.: You may vote by signing and mailing your Proxy Card. If you return your
signed Proxy Card to Golden Telecom before the Annual Meeting, Golden Telecom
will vote your shares as you direct. You can specify on your Proxy Card whether
your shares should be voted for all, some or none of the nominees for director.
You can also specify whether you approve, disapprove, or abstain from each of
the proposals. The proposals will be presented at the Annual Meeting by
management.
24
Q.: WHAT DOES DISCRETIONARY AUTHORITY MEAN FOR STOCKHOLDERS OF RECORD?
A.: If you return your Proxy Card to the Company, but do not specify on your
Proxy Card how you want to vote your shares, we will vote them "FOR" the
election of all nominees for director as set forth under "Election of Directors"
below, and "FOR" Item No. 2 on your Proxy Card.
Q.: HOW DO I CHANGE MY VOTE?
A.: Stockholders of record who execute proxies may revoke them at any time
before they are voted. Any Proxy Card may be revoked by the person giving it any
time before it is voted by delivering to the Corporate Secretary of the Company
at the Representative Offices of Golden TeleServices, Inc., 1 Kozhevnichesky
Proezd, 2nd Floor, Moscow, Russia 115114 or Golden Telecom, Inc., 4400 MacArthur
Blvd., N.W., Suite 200, Washington, D.C., 20007 on or before the business day
prior to the Annual Meeting or at the Annual Meeting itself, a subsequent
written notice of revocation or a subsequent Proxy Card relating to the same
shares or by attending the meeting and voting in person.
******************
VOTING PROCEDURES (FOR BENEFICIAL STOCKHOLDERS)
You are a beneficial stockholder if a brokerage firm, bank, trustee or other
agent (the "nominee") holds your stock. This form of ownership is often called
ownership in "street name" since your name does not appear anywhere on our
records.
Q.: HOW DO I VOTE?
A.: You must vote in the manner described by the nominee in the materials
delivered by the nominee with this Proxy Statement. Detailed instructions are
also included in this Proxy Statement.
Q.: HOW DO I CHANGE MY VOTE?
A.: To change your vote, follow the nominee's instructions on revoking or
changing your Proxy Card.
******************
GENERAL VOTING QUESTIONS
Q.: HOW MANY VOTES ARE NEEDED FOR A PROPOSAL TO PASS?
A.: The vote of the holders of a plurality of the votes cast by stockholders
will elect candidates for director (Item No. 1 on your Proxy Card). The vote of
the holders of at least a majority of the shares of Common Stock present in
person or represented by proxy at the meeting and entitled to vote is required
to ratify the Board of Directors' appointment of Ernst & Young (CIS) Limited as
the Company's independent public accountants for 2003 (Item No. 2 on your Proxy
Card).
Q.: WHAT SHARES ARE REFLECTED ON MY PROXY CARD?
A.: The Proxy Card we delivered to you reflects all shares owned by you at the
close of business on the record day. If you hold shares "in street name" you
will receive a voting instruction card from your nominee.
Q.: IF I PLAN TO ATTEND THE MEETING SHOULD I STILL VOTE BY PROXY CARD?
A.: Yes. Casting your vote in advance does not affect your right to attend the
meeting. Written ballots will be available at the Annual Meeting for
stockholders of record. If you send in your Proxy Card and also attend the
meeting, you do not need to vote again at the meeting unless you
25
want to change your vote. Beneficial owners who wish to attend the meeting and
vote in person must request a proxy from the nominee and bring that proxy to the
meeting.
A COPY OF THE ANNUAL REPORT TO SHAREHOLDERS OF GOLDEN TELECOM, INC., WHICH
INCLUDES FINANCIAL STATEMENTS, WILL BE MAILED TO YOU WITH THIS PROXY STATEMENT.
YOU MAY RECEIVE AN ADDITIONAL COPY OF THE ANNUAL REPORT TO SHAREHOLDERS AT NO
CHARGE UPON WRITTEN REQUEST DIRECTED TO SHAREHOLDER RELATIONS, REPRESENTATIVE
OFFICES OF GOLDEN TELESERVICES, INC., 1 KOZHEVNICHESKY PROEZD, 2ND FLOOR,
MOSCOW, RUSSIA, 115114, FAX NUMBER 7-095-797-9306 OR FROM SHAREHOLDER RELATIONS,
GOLDEN TELECOM, INC., 4400 MACARTHUR BLVD., N.W., SUITE 200, WASHINGTON, D.C.,
20007, FAX NUMBER 1-202-332-4877 OR E-MAIL TO ANNUALMEETING@GTI.RU
--------------------
26
ANNEX A
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF GOLDEN TELECOM, INC.
AS AMENDED ON SEPTEMBER 10, 2002
Mission Statement
The Audit Committee (the "Committee") is a committee of the Board of
Directors of Golden Telecom, Inc. ("GTI" or the "Company"). Its primary function
is to assist the Board in fulfilling its oversight responsibilities by reviewing
(i) proposed financial plans; (ii) the financial information provided to
shareholders and others; (iii) systems of internal controls which management and
the Board of Directors have established; and (iv) the audit process, including
both internal and external audits. The Audit Committee interacts directly with
the independent auditor to ensure the independent auditor's ultimate
accountability to the Board and the Committee, as representatives of the
shareholders, and is directly responsible for the appointment, compensation and
oversight of the independent auditor.
Members
The Committee will be composed of three members of the Board of
Directors who shall serve at the pleasure of the Board and who will be appointed
to the Committee in accordance with NASD and SEC rules and regulations. Each
member shall be:
1. In the opinion of the Board of Directors and as defined by NASD and SEC
rules and regulations, free from any relationship that would interfere
with the exercise of independent judgment; and
2. Financially literate and capable of understanding fundamental financial
statements.
At least one member of the Committee must be a financial expert. This
person should have, through education and experience as an auditor or a
principal financial officer, comptroller or principal accounting officer of a
company, an understanding of generally accepted accounting procedures,
experience with internal accounting controls and an understanding of audit
committee functions, or as otherwise determined by Nasdaq or SEC rules and
regulations.
Audit Committee members will be appointed by the Board of Directors at
the recommendation of the Chairman of the Board or the Executive Committee. One
of the members will be designated by the Committee as its Chairman. The Chairman
will preside over the Committee meetings and report Committee actions to the
Board of Directors.
Meetings
The Committee will meet on a regular basis at least four times annually
and will call special meetings as circumstances require. It will meet privately
with the Company's Compliance Officer, the Chief Financial Officer, and the
Company's independent auditor in separate executive sessions to discuss any
matters that the Committee, Compliance Officer, the Chief Financial Officer or
the independent auditor believe should be discussed privately. The
A-1
Committee may ask members of management or others to attend the meetings and
provide pertinent information, as necessary. A quorum for the transaction of
business at meetings of the Audit Committee shall consist of at least two
members of the Committee.
Responsibilities
The Committee shall have the following responsibilities, such list of
responsibilities being indicative only and representing corporate best practices
for audit committee:
1. Provide an open avenue of communication between the independent auditor
and the Board of Directors.
2. Preapprove all auditing and non-auditing services provided by the
auditor to the Company.
3. Choose on an annual basis the independent auditor; determine the
compensation of the independent auditor; and review and approve the
discharge of the independent auditor.
4. Review and concur in the appointment, replacement, reassignment or
dismissal of the Chief Financial Officer.
5. Confirm and take any necessary action to assure the independence of the
internal auditors and the independent auditor.
6. Actively engage in a dialogue with the independent auditor with respect
to any disclosed relationships and services that may impact the
objectivity and the independence of the independent auditor.
7. Consider reports to the Committee required to be provided by the
independent auditor on the Company's critical accounting policies and
practices, alternative treatments of financial information permitted
within generally accepted accounting principles, the ramifications of
the use of such treatments and the treatment preferred by the auditor,
and all other material written communications with management.
8. Ensure the receipt by the Committee from the independent auditor of a
formal written statement delineating all relationships between the
auditor and the Company, consistent with ISBS No.1.
9. Inquire of management, the Chief Financial Officer, the Compliance
Officer, the General Counsel and the independent auditor about
significant risks or exposures to the Company and assess the steps
management has taken to minimize such risk to the Company.
10. Establish and maintain appropriate procedures for the receipt,
retention and treatment of complaints and concerns received by the
Company regarding accounting, internal accounting controls, or auditing
matters, and the confidential, anonymous submissions by employees of
concerns regarding questionable accounting or auditing matters.
11. Consider and approve the annual plan of the internal auditing function,
and the independent auditor's proposed audit plan, including
coordination with the internal audit plan.
A-2
12. Consider and concur in any special audit of systems or procedures
suggested by the Compliance Officer, the Chief Financial Officer, the
General Counsel or the independent auditors.
13. Review with the Chief Financial Officer and the independent auditor the
coordination of audit effort to assure completeness of coverage,
reduction of redundant efforts and the effective use of audit
resources.
14. Consider with management and the independent auditor the rationale for
employing audit or compliance audit firms other than the principal
independent auditor, and preapprove any employment of such firms.
15. Consider and review with the independent auditor, Chief Financial
Officer and General Counsel, as appropriate:
a. The adequacy of the Company's internal controls, including
computerized information system controls and security and
training programs; and
b. Any related significant issues identified by the independent
auditor and internal auditing, together with management's
responses thereto.
16. Review with management and the independent auditor at the completion of
the annual audit:
a. The Company's annual financial statements and related
footnotes;
b. The independent auditor's audit of the financial statements
and the report thereon;
c. Any significant changes required in the independent auditor's
audit plan and scope;
d. Any serious difficulties or disputes with management
encountered during the course of the audit; and
e. Other matters related to the conduct of the audit which are to
be communicated to the Committee under generally accepted
auditing standards.
17. Consider and review with management and the Chief Financial Officer:
a. Any difficulties encountered in the course of their audits,
including any restrictions on the scope of their work or
access to required information;
b. Any significant changes required in their audit plan.
18. Review with the Compliance Officer and General Counsel the results of
the management questionnaires regarding compliance issues.
19. Review legal and regulatory matters that may have a material impact on
the financial statements, related Company compliance policies and
programs and reports received from regulators.
A-3
20. Report Committee actions to the Board of Directors with such
recommendations as the Committee may deem appropriate.
21. Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities, and retain independent counsel,
accountants or others, when needed, to assist it in the course of any
investigation, with funding for engaging such outside advisors to be
provided by the Company.
22. Review and recommend to the Board of Directors the annual corporate
budget and corporate budget and capital or other significant
expenditure requests.
23. Assume such other duties and considerations as may be delegated to the
Committee by the Board of Directors, or required of the Committee upon
the request of the Board of Directors from time to time pursuant to a
duly adopted resolution of the Board of Directors.
In fulfilling these responsibilities, the Committee shall have full
authority to investigate any aspect of the Company's affairs, at its discretion.
The Committee shall have full and unrestricted access to all of the Company's
records and personnel.
A-4
Please Mark [X]
your votes as
indicated in
this example
1. Election of Directors
FOR all nominees WITHHOLD
listed below AUTHORITY
(except as marked to vote for all nominees
to the contrary) listed below
[ ] [ ]
Nominees: 01 Stan M. Abbeloos, 02 Vladimir Androsik, 03 Petr Aven, 04 Michael
Calvey, 05 Ashley Dunster, 06 David Herman, 07 Andrey Kosogov, 08 Michael
North and 09 Alexander Vinogradov.
For, except vote withheld from the following nominee(s):
--------------------------------------------------------------------------------
2. RATIFICATION OF THE SELECTION OF ERNST & YOUNG FOR AGAINST ABSTAIN
(CIS) LIMITED AS INDEPENDENT PUBLIC [ ] [ ] [ ]
AUDITORS OF THE COMPANY
CHECK HERE IF YOU PLAN TO ATTEND THE STOCKHOLDERS [ ]
MEETING ON MAY 20, 2003
Please sign exactly as name appears below. When shares are held
by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate
name by president or authorized person. If a partnership, please
sign in full partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR THE ELECTION OF THE NOMINATED DIRECTORS AND
RATIFICATION OF THE SELECTION OF ERNST & YOUNG (CIS) LIMITED AS
INDEPENDENT PUBLIC AUDITORS OF THE COMPANY FOR 2003.
Signature Signature Date
----------------------------- ------------------ -------
-------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
[Golden Telecom(TM) Logo]
ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 2003
COMMON STOCK
GOLDEN TELECOM, INC.
Representative Offices of Golden TeleServices, Inc.
1 Kozhevnichesky Proezd, 2nd Floor, Moscow, 115114, Russia
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates and appoints David Stewart and Jeff Riddell
as proxies with full power of substitution to each, and hereby authorizes them
to represent and to vote, as designated hereon, all shares of Common Stock of
GOLDEN TELECOM, INC. (the "Company") which the undersigned is entitled to vote
on all matters that come before the Annual Meeting of Stockholders to be held on
May 20, 2003, and any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR (I) THE ELECTION OF THE NOMINATED DIRECTORS AND (II) RATIFICATION
OF THE SELECTION OF ERNST & YOUNG (CIS) LIMITED AS INDEPENDENT PUBLIC
AUDITORS OF THE COMPANY FOR 2003.
(Continued and to be signed on the reverse side)
-------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\