Dividend policy

Pursuant to the Joint Stock Companies Law, Rostelecom charter and the dividend policy, dividends on shares may be paid based on the results of the first three, six or nine months of the fiscal year and/or based on Rostelecom annual results. Declaring and paying dividends on the ordinary shares is the right of the Company, but not an obligation, while declaring and paying dividends in respect of the preferred shares is the Company’s obligation, and the amount of and procedure for paying dividends on the preferred shares are set forth in Rostelecom charter.

Annual dividends are proposed by the Board of Directors, based on the year-end statutory accounting reports prepared in accordance with IFRS (in case of ordinary shares) and RAS (in case of preferred shares), and are approved by the annual shareholders’ meeting, which is usually convened by the Board of Directors during the second quarter of each year. The right to receive dividends is attributable only to shareholders included in the list of persons entitled to receive dividends, which is compiled as of the record date for shareholders eligible to participate in the general shareholders’ meeting at which the decision on the relevant dividend payment is to be made.

The following table sets forth, on the per share basis, dividends which Rostelecom paid on our ordinary shares and preferred shares for the years ended December 31, 2012, 2011, 2010 and 2009, and the nine months ended 30 September 2010.


  Year ended  December, 31   Nine months ended
September 30
  2012 (1) 2011 2010 2009 2010

(1) Subject to AGM approval on June 17, 2013
         
  (RUB)  
Dividend per Preferred Share 4.1022 4.6959 0.4344 2.1005 1.6667
Dividend per Ordinary Share 2.4369 4.6959 1.4002 1.1113

The Board of Directors recommended that the AGM approves a 2012 dividend payment of RUB 8.17 billion, or 25% of the Company’s net profit for 2012 in accordance with Russian Accounting Standards (RAS), which amounts to 23.18% of the net profit for 2012 according to the International Financial Reporting Standards (IFRS), and consists of:

  • RUB 4.1022 per Class A preferred share (a total of 3.05% of 2012 net profit under RAS or 2.83% of 2012 net profit under IFRS will be distributed as a payment under this share class)
  • RUB 2.4369 per ordinary share (a total of 21.95% of 2012 net profit under RAS or 20.35% of 2012 net profit under IFRS will be distributed as a payment under this share class)

In addition, for the years ended December 31, 2010 and 2009, the IRCs also paid dividends in the aggregate amounts of RUB 4,036 million and RUB 3,484 million on their ordinary shares, respectively, and in the aggregate amounts of RUB 2,344 million and RUB 2,275 million on their preferred shares, respectively. The dividends for the nine months ended September 30, 2010 were paid in connection with the Reorganisation with the aim of ensuring fair distribution of profits generated by each company participating in the Reorganisation. Accordingly, the Company, along with each IRC, declared and paid dividends to their respective shareholders of record prior to the effective date of the Reorganisation. As a matter of Russian law, dividends for the year ended December 31, 2010 were declared and paid to the Company’s shareholders of record following the Reorganisation in respect of the Company’s profits for that year, excluding the profits of the IRCs, since on December 31, 2010, the Company and the IRCs existed as separate legal entities.

Under Russian law, dividends payable to shareholders may not exceed the amount proposed by the board of directors. The decision on the payment of dividends, as well as the amount and form of the dividend payable, is adopted by the shareholders’ meeting.

Dividends payable on each preferred share are fixed by Rostelecom charter in the amount of 10% of the Company’s net profits, based on the year-end RAS statutory accounting report, divided by the number of shares representing 25% of Rostelecom outstanding shares. the Company may not pay dividends on ordinary shares unless dividends on Preferred Shares are paid in full. In addition, if the dividend per ordinary share exceeds the dividend payable per preferred share, Rostelecom meeting must increase the dividend per preferred share to that per ordinary share. Failure to pay a dividend on preferred shares in full authorises holders of the preferred shares to vote on all matters considered by the general shareholders’ meeting until the date when dividends on preferred shares are paid in full. The total amount of dividends paid by Rostelecom on the preferred shares for the years ended December 31, 2011, 2010 and 2009 represented approximately 3.5%, 12.6% and 10.0% of the annual net profits under RAS, respectively. The significant difference in the amount of dividends paid for the years ended December 31, 2010 and 2011 is attributable to an approximately nine-fold increase in our RAS net profit following the Reorganization coupled with the increase in the number of ordinary shares due to the Reorganization, while the number of preferred shares remained unchanged, which resulted in the number of existing preferred shares representing approximately 7.6% of Rostelecom outstanding shares in the year ended December 31, 2011, as compared to approximately 25.0% in the year ended December 31, 2010.

Under Rostelecom dividend policy approved by the Board of Directors adopted in September 2010, dividend payable on each ordinary share had to amount to at least 20% of the net profit for the past fiscal year, based on the year-end RAS statutory accounting report, divided by the total number of outstanding ordinary shares. The total amount of dividends paid on the ordinary shares for the years ended December 31, 2010 and 2009 represented approximately 23.4% and approximately 20.0% of the annual net profits under RAS, respectively. In December 2011, this policy was revised to require that dividends payable on ordinary shares must be equal to at least 20% of the net profit for the past fiscal year based on the year-end IFRS financial statements. The total amount of dividends on the ordinary shares for the year ended December 31, 2011 represented approximately 42.5% and 30.0% of the annual net profits under RAS and IFRS, respectively.

The annual dividend, if declared, must be paid within sixty days following the date the decision on dividend payments was made at the general shareholders’ meeting.

* 2008/2009 and 9 months of 2010 – consolidated data on IRC and Rostelecom

History

Service