Description of share capital

The Company’s share capital is RUB 7,965,224.3450, consisting of 2,943,258,269 ordinary shares and 242,831,469 preferred shares, all of which are fully paid, issued and outstanding and have a nominal value of RUB 0.0025 each. The Company neither has convertible securities, nor exchangeable securities, nor securities with warrants.

The Company is also authorized to issue additional 3,685,438,051 ordinary shares and 531 preferred shares, all such shares having a nominal value of RUB 0.0025. Under Russian legislation, charter capital refers to the aggregate nominal value of the issued and outstanding shares. As of December 31, 2012, 55,244,704 of the ordinary shares and 31,539,995 of the preferred shares are subject to the Incentive Programme providing for Rostelecom employee’s options in respect of these shares. As of December 31, 2012, Rostelecom did not hold any ordinary or preferred shares, while Mobitel held 4.6% of the ordinary shares and 12.6% of the preferred shares acquired by Rostelecom, the IRCs and Dagsvyazinform as a result of the statutory share buy-out procedures during Reorganisation and then contributed to Mobitel.

In accordance with the Joint Stock Companies Law and the Company’s charter, a decision on any issuance of shares or securities convertible into shares by closed subscription, or an issuance by open subscription of ordinary shares or securities convertible into ordinary shares constituting more than 25% of the number of issued ordinary shares, requires a three quarters majority vote of a shareholders’ meeting. The Board of Directors is authorized to issue additional ordinary shares up to 25% of the previously issued shares through open subscription without obtaining further shareholder approval. As of December 31, 2012, Rostelecom had not issued any additional shares.

The following table sets out certain information with respect to the ownership of ordinary shares by each shareholder, as of December 31, 2012:

  Ordinary shares
Shareholder Number %
The State through:    
Svyazinvest(1)(2) 1,332,911,894 45.29
FASPM(1)(2) 218,620,597 7.43
VEB(1) 72,013,105 2.45
LLC Mobitel(3) 136,432,027 4.64
Other minorities 1,183,280,646 40.20
Total 2,943,258,269 100.00
(1) Controlled by the Russian Government.
(2) Holds an interest in the share capital in the Company notifiable to the Company and the FSFM, as described below.
(3) The Company owns 99.9% of the share capital of LLC Mobitel.

  Preferred Shares
Shareholder Number %
LLC Mobitel 30,487,109 12.55
Other minorities 212,344,360 87.45
Total 242,831,469 100.00

The Company is indirectly controlled by the Russian Government, which holds 55.16% of the Company’s ordinary shares through Svyazinvest, VEB and FASPM. There are no measures in place to ensure that such control is not abused.

Russian law, including the Joint Stock Companies Law and corporate governance requirements applicable to companies listed on Russian stock exchanges, provide certain protections to minority shareholders. For instance, there are supermajority shareholder approval requirements for certain corporate actions, pursuant to which a shareholder is able to demand that the company purchase the shares held by that shareholder if the shareholder voted against or did not participate in voting on certain types of actions. In addition, companies are required to obtain the approval of disinterested shareholders for certain transactions with interested parties and the shareholders owning not less than 1% of the company’s stock may bring an action for damages caused by the company’s managers or directors. Furthermore, since the Company’s shares are listed on MICEX-RTS, Rostelecom is and expect to continue to be required to comply with a number of corporate governance standards which provide additional protection to its shareholders, including minority shareholders. However, no assurance can be given that the applicable Russian laws and the corporate governance standards with which Rostelecom has to comply will be able to fully protect the interests of its minority shareholders if such interests are in conflict with the interests of its other shareholders.

None of the Company’s shareholders have voting rights different from any other holders of the shares.

Each shareholder of the Company has an obligation under Russian law to notify in writing the Company and the FSFM about (i) an acquisition of 5% or more of the Ordinary shares, and (ii) any circumstances which result in a change in the number of such shares above/below the 5%, 10%, 15%, 20%, 25%, 30%, 50%, 75% or 95% threshold. However, since the obligation to notify regarding such acquisitions or disposals lies on Rostelecom shareholders, the Company’s ability to know whether such information is up to date or accurate, depends on shareholders’ compliance with the regulation.

Ordinary shares are listed on quotation list “A1” of MICEX-RTS under the ticker “RTKM”. Preferred Shares are listed on quotation list “A1” of MICEX-RTS under the ticker “RTKMP”. ADRs are also traded over-the-counter in the United States on the OTCQX under the ticker “ROSYY”.