Quarterly report

7.7. Data on Issuer’s Participation in Any Court Proceedings, if Such Participation May Materially Affect Financial or Economic Operation of the Issuer

Data on Issuer’s Participation in Any Court Proceedings (with indication of imposed sanctions), if Such Participation May Materially Affect Financial or Economic Operation of the Issuer, during the three years preceding the expiry date of the quarter under report.

1)"UTK" PJSC’s claim against Russia’s Inter-regional Tax Inspectorate № 7, Moscow

At present "UTK" PJSC’s claim contesting the decision of Tax Inspectorate № 7, namely, Decision N 9 of 16 December 2005 resulting in back-tax claim issued to "Southern Telecommunications Company" PJSC is in the Moscow arbitration court. According to the Decision and the claim of 21 December 2005 underpaid taxes in the amount of 677,979,856.04 rubles and the penalties interest in the amount of 240,261,304.64 rubles should be paid by "UTK" PJSC. The Company filed a request to the Moscow Arbitration court to suspend the execution of Decision № 9 of Russia’s Inter-regional Tax Inspectorate № 7. On 28th December 2005 the request was upheld and the execution of Decision № 9 of Russia’s Inter-regional Tax Inspectorate № 7 was suspended till making court decision on the case. Appeals of the Tax Inspectorate № 7 to reverse the above mentioned court decision was not upheld.

On the 21st of March 2006 Inter-regional Tax Inspectorate № 7 filed a counter-claim to Moscow Arbitration court demanding to enforce tax penalties to the amount of 135,604,340.67 rubles charged on the basis of the results of the above mentioned scheduled traveling tax check. On 17th May 2006 Moscow Arbitration court rejected the counter-claim of Inter-regional Tax Inspectorate № 7.

Inter-regional Tax Inspectorate № 7 filed an application to the Krasnodar kray Arbitration court. At the preliminary judicial session held on 26 July 2006 it was decided to suspend consideration of the application till the judgment on case №А40-83704/05-14-671 was pronounced in Moscow court.

On the 5th of March 2007 the Moscow Arbitration court held a stated hearing of the case related to UTK’s claim contesting the Decision of Russia’s Inter-regional Tax Inspectorate № 7 of 26th December 2005 regarding a back-tax claim issued by it to "Southern Telecommunications Company" PJSC. As a result, the Moscow Arbitration Court postponed the hearing of the case till the Court decisions on two similar cases ((№ А40-28715/06-142-211 и № А40-6755/05-107-27) came into force, as those decisions were of a prejudicial character for the case. Besides, the Moscow Arbitration Court wanted the judicial practice regarding such cases to be uniform.

"UTK" PJSC engaged LLC “ Yuridicheskaya business kollegia” as its representative.

The Company cannot predict the outcome of the case consideration and cost value of the effects of the court decision.

2) Claim of the Ministry of Finance of the Russian Federation against "UTK" PJSC

The Ministry of Finance of the Russian Federation, Vnesheconombank, "UTK" PJSC and the companies merged into "UTK" PJSC during its reorganization concluded guarantee contracts to recover the funds due to the federal budget for the equipment delivery contracts.

The Ministry of Finance of the Russian Federation advanced a claim to the Issuer concerning the repayment of the debts overdue to the federal budget This claim was considered by Arbitrary Court of Krasnodar region (file №А-32-27336/2005-26/852). The amount of the claim was 28,200,871.31 EURO.

As at December 27, 2006 the outstanding amount of the debt was 33 346,039.43 (thirty three million three hundred forty six thousand thirty nine 43/100) EURO, including:

the principal amount of 18,651,678.20 (eighteen million six hundred fifty one thousand six hundred seventy eight 20/100) EURO;

interest payable in the amount of 3,584,429.58 (three million five hundred eighty four thousand four hundred twenty nine 58/100) EURO;

insurance commission payable to the Ministry of Finance of the Russian Federation in the amount of 1,583,936.21(one million five hundred eighty three thousand nine hundred thirty six 21/100) EURO.

penalty interest in the amount of 9,525,995.44 (nine million five hundred twenty five thousand nine hundred ninety five 44/100) EURO.

On December 27, 2006 the Company concluded an amicable agreement with the Ministry of Finance of the Russian Federation which conditions were approved by the Arbitration court of the Krasnodar kray on 5 March 2007. The amicable agreement has come into force since December 27, 2006 providing for settlement of debts through their consolidation and re-structuring. The amicable agreement stipulated:

1)payment by "UTK" PJSC of the amount 23,820,043.99 EURO (principal debt, interest, insurance commission. Restructured debts will be paid) in equal annual installments no later than on December, 31, till January 1, 2012.

2) The debtor will be released from the obligation to pay penalty interest amounting to 9,525,995.44 EURO (penalty interest).

3) Claims of CJSC "Vestelcom" against "UTK" PJSC

CJSC "Vestelcom" advanced a claim against "UTK" PJSC demanding to recover debts under the contract of joint activity of 15.11.1995 in the sum of 33,323,488 rubles and to pay penalty fee of 10,169,349 rubles. CJSC "Vestelcom" also advanced a claim against "UTK" PJSC demanding to return the contribution in the form of a 2.5%-share of the building of Dom Svyazi located at the address: 22, Pionerskaya Street, Maikop, as well as to return the contribution in monetary form amounting to 9,680 thousand rubles, to replace the value of diesel plant (136,000 rubles) and the value of ACP equipment (465,169 rubles). The first claim was satisfied partially (penalty fee was refused), the second claim was satisfied in full. Both court decisions were appealed, the appeals were not upheld.

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