Dividend policy

Pursuant to the Joint Stock Companies Law, our charter and the dividend policy, dividends on shares may be paid based on the results of our first three, six or nine months of our fiscal year and/or based on our annual results. Declaring and paying dividends on the ordinary shares is our right, but not an obligation, while declaring and paying dividends in respect of the preferred shares is our obligation, and the amount of and procedure for paying dividends on the preferred shares are set forth in our 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 our 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 our 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 we paid on our ordinary shares and preferred shares for the years ended December 31, 2011, 2010 and 2009, and the nine months ended September 30, 2010, as discussed in note 16 to the Audited Combined and Consolidated Financial Statements.

The Board of Directors recommended that the AGM approves to pay a dividend for 2011 that amounts to RUB 14,961.559 million or 45.95% of 2011 net profit in accordance with RAS, which equals 32.48% of 2011 net profit as determined in accordance with International Financial Reporting Standards (“IFRS”), including:

  • a 2011 cash dividend of RUB 4.6959 per share on the Company’s Class A preferred shares, which represents 3.5% of 2011 net profit under RAS or 2.48% of 2011 net profit under IFRS on all Class A preferred shares;
  • a 2011 cash dividend of RUB 4.6959 per share on the Company’s ordinary shares, which is equivalent to 42.45% of 2011 net profit under RAS or 30% of 2011 net profit under IFRS on all ordinary shares.

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.

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 the preferred shares are fixed by our charter in the amount of 10% of our net profits, based on the year-end RAS statutory accounting report, divided by the number of shares representing 25% of our outstanding shares. We 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, our 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 our general shareholders’ meeting until the date when dividends on preferred shares are paid in full. The total amount of dividends paid by us on the ordinary shares for the years ended December 31, 2011, 2010 and 2009 represented approximately 42.5%, 23.4% and approximately 20.0% of our annual net profits under RAS, respectively.

Under our dividend policy approved by the Board of Directors adopted in September 2010, dividends payable on ordinary shares had to amount to at least 20% of our 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 by us on the ordinary shares for the years ended December 31, 2011, 2010 and 2009 represented approximately 42.5% 23.4% and approximately 20.0% of our 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 our net profit for the past fiscal year based on the year-end IFRS financial statements.

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

We anticipate that any dividends we may pay in the future with respect to the shares represented by the DRs will be declared and paid to the Depositary in roubles and will be converted into US dollars by the Depositary and distributed to holders of the DRs, net of the Depositary’s fees and expenses. Accordingly, the value of dividends received by holders of the DRs will be subject to fluctuations in the exchange rate between the rouble and the US dollar. In addition, dividends that we may distribute to the Depositary will be subject to applicable Russian withholding taxes.

Recommendation of the Board of Directors on any dividends for the year ended December 31, 2011


  Year ended
December 31,
Nine months ended
September 30,
  20111
(RUB)
2010
(RUB)
2009
(RUB)
2010
(RUB)
1 Subject to AGM approval on June 14, 2012
Dividend per Preferred Share 4.6959 0.4344 2.1005 1.6667
Dividend per Ordinary Share 4.6959 - 1.4002 1.1113

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