As previously announced, the Company was investigating ways to address the earnings volatility resulting from SARs costs from its 2005 Stock Appreciation Rights Plans. A new accounting rule adopted in 2006, (SFAS No. 123R “Accounting for Stock-based Compensation – Revised”) required that the SARs related estimated fair value costs and liability be reassessed and reported each reporting period. A main factor in the calculation is the Company’s share price, thus the reported amounts reflected market volatility and significantly impacted the quarterly results of operations.

The new program puts a cap on the existing outstanding SARs using the closing price as of June 27, 2007 of $53.80 per share. Simultaneously, for each outstanding SAR a new stock option was granted with the same vesting conditions and an exercise price of $53.80. This new arrangement helps to minimize potential earnings volatility resulting from future movements in the stock price as the costs related to the stock option plan are not subject to revaluation as of the end of each reporting period.

At the same time, in order to provide key members of the management team with additional equity based incentives the Board of Directors approved additional stock option grants.

Mr. Jean-Pierre Vandromme, CEO of Golden Telecom, noted: “Amendment of our SARs program and issuance of new stock options helps to address two issues at once:

- first, to minimize earnings volatility which makes it difficult to understand the operational performance of the Company; and

- second, to reward and motivate key personal in order to align their interests with those of our shareholders. Now, nearly 200 key people, covering the top tiers of the management of Golden Telecom, participate in the stock option program, which helps us to retain and promote talents in a tough and competitive labor environment.

I am confident that our team will continue to deliver outstanding results and will make Golden Telecom the leading fixed-line communication services provider in Russia and the CIS”.

Mr. Boris Svetlichny, CFO of Golden Telecom, added: “I am pleased at the solution reached which continues strong motivation of employees while achieving a far more favorable cash flow impact on the Company”.

In order to support the Stock Options Plan, the Board of Directors also approved an Open Market Share Buy-Back Program that may be used to minimize dilution from the Stock Options. In May 2007, the Shareholders approved an increase in the Company’s Equity Participation Plan of 1 million shares in order to support the above initiatives. The Board has now authorized that up to 1 million shares of its common stock may be repurchased by the Company in support of the equity plan, subject to market conditions and other factors, including the Company's insider trading policy, United States securities laws and Rule 10b-18 of the Securities Exchange Act of 1934.

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