16. Equity

The nominal share capital of the Company recorded on its incorporation has been indexed, to account for the effects of hyperinflation from that date through December 31, 2002. The share capital of the Company in the Russian statutory accounts at December 31, 2011 amounted to 7,965,224 nominal (uninflated) RUB (2010, 2009: 2,428,819).

The authorized share capital of the Company as at December 31, 2011 comprised 6,628,696,320 ordinary shares and 242,832,000 non-redeemable preferred shares (2010: 6,628,696,320 and 242,832,000, 2009: 1,634,026,541 and 242,832,000). The par value of both ordinary and preferred shares amounted to RUB 0.0025 per share.

On the 2010 Annual General Meeting, the shareholders of OJSC Rostelecom resolved to increase the number of shares available for additional issue to 5,900,000,000 ordinary shares with par value of RUB 0.0025 per share with the same rights as previously issued ordinary shares. Of them 2,214,561,949 ordinary shares were actually issued on April 1, 2011 to the shareholders of IRCs and OJSC Dagsvyazinform as part of the merger.

As at December 31, 2011 the issued share capital of the Company was as follows:


Type of shares Number of shares
issued
Total
par value
Carrying
value
Ordinary Shares, RUB 0.0025 par value 2,943,258,269 7.358 81
Preferred Shares, RUB 0.0025 par value 242,831,469 0.607 25
Total 3,186,089,738 7.965 106

As at December 31, 2010 and December 31, 2009 the issued share capital of the Company was as follows:


Type of shares Number of shares
issued
Total
par value
Carrying
value
Ordinary Shares, RUB 0.0025 par value 728,696,320 1.822 75
Preferred Shares, RUB 0.0025 par value 242,831,469 0.607 25
Total 971,527,789 2.429 100

Ordinary shares carry voting rights with no guarantee of dividends. Preferred shares have priority over ordinary shares in the event of liquidation but carry no voting rights except on resolutions regarding liquidation or reorganization, changes to dividend levels of preferred shares, or the issuance of additional preferred shares. Such resolutions require two-thirds approval of preferred shareholders. The preferred shares have no rights of redemption or conversion.

Owners of preferred shares have the right to participate in and vote on all issues within the competence of shareholders' general meetings following the annual shareholders' general meeting at which a decision not to pay (or to pay partly) dividends on preferred shares has been taken.

In case of liquidation, the property remaining after settlement with creditors, payment of preferred dividends and redemption of the par value of preferred shares is distributed among preferred and ordinary shareholders proportionately to the number of owned shares.

Accordingly, the preferred shares of the Company are considered participating equity instruments for the purpose of earnings per share calculations (refer to Note 30).

Treasury shares

As at December 31, 2011, 2010 and 2009 total number of treasury shares held by the Group was as follows:


Type of shares December 31, 2011 December 31, 2010 December 31, 2009
       
Ordinary Shares 183,348,169 191,795,532 4,080
Preferred Shares, 70,384,795 70,384,795 62
Total 253,732,964 262,180,327 4,142

As at December 31, 2010 and 2009 number of shares represents equivalent of shares of the Combined entity.

At the 2010 Annual General Meetings of Shareholders of the Companies, which took place in May - June 2010, shareholders approved the merger of the seven Interregional Companies and OJS Company of Telecommunication and Information of the Republic of Dagestan with and into OJSC Rostelecom. Shareholders dissenting with the decision, could require redemption of their shares at predetermined rates for both ordinary and preferred shares. According to applicable law, funds allocated for share redemption are limited to 10% of net assets of the companies comprising the Group determined in accordance with Russian accounting principles. As at December 31, 2010, the Group had completed the repurchase of its shares from dissenting shareholders. Total number of treasury shares purchased was an equivalent of 79,356,780 ordinary and 70,384,733 preferred shares of the Combined entity. As at December 31, 2010, all repurchased shares were held by the Group.

During 2010, the Group also purchased share of the companies comprising the Group of an equivalent of 112,434,672 ordinary shares of the Combined entity for 10,850 as a part of a management motivation program (refer note 29).

In October 2011 the Board of Directors of the Company approved decision on shares buy back up to the amount of US$ 500 million.

In December 2011 first tranche of share options granted to employee under the management motivation program started to be exercisable. As at December 31, 2011 total number of ordinary shares realized as an exercise of the options constitutes 18,122,013.

In December 2011 the Group purchased 9,674,650 ordinary shares for 1,480.

Dividends

According to the charter of the Company preferred shares carry dividends amounting to the higher of 10% of the net income after taxation of the Company as reported in the Russian statutory accounts divided by 25% of total number of shares and the dividends paid on one ordinary share.

Total amount of dividend paid on ordinary shares should be not less than 20% of net profit of the Group as reported under IFRS.

History

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