Description of share capital

General

Pursuant to our charter, we have the right to issue ordinary shares, preferred shares and other securities provided for by the legislation of the Russian Federation with respect to securities.

Our charter capital is currently RUB 7,965,224.3450 and consists 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. All of our shares have been issued and registered in accordance with procedures set out in the Federal Law №39-FZ “On the Securities Markets” of April 22, 1996 (the “Securities Market Law”), and other applicable securities regulations. The ordinary shares and the Preferred Shares are in registered, book-entry form. The entity responsible for keeping book-entry records is OJSC United Registration Company (Leninskaya Sloboda Street 19, Moscow, Russia). We are 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, 2011, 80,904,349 of the ordinary shares and 34,477,106 of the preferred shares are subject to the Incentive Programme providing for our employee’s options in respect of these shares. MOBITEL held 6.6% of the ordinary shares and 12.6% of our preferred shares acquired by us, the IRCs and Dagsvyazinform as a result of the statutory share buy-out procedures during Reorganisation and then contributed to MOBITEL. The Joint Stock Companies Law requires us to dispose of any of our shares that we acquire within one year of our acquisition or, failing that, reduce our charter capital.

In accordance with the Joint Stock Companies Law and our 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.

The amount of our charter capital significantly exceeds the minimum requirement established by the laws of the Russian Federation for open joint stock companies. If we adopt a decision to decrease our charter capital in accordance with the Joint Stock Companies Law, we must notify the authority which carries out state registration of legal entities of the decision the decision to reduce our charter capital within three business days and we must publish this decision twice with a monthly interval between publications. Within 30 days of the last of such publications, our creditors, whose claim rights had occurred prior to the publication, would then have the right to accelerate our indebtedness and to demand reimbursement of applicable damages.

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

Rights of shareholders

Shares of each category (ordinary shares and preferred shares) grant equal rights to holders of shares of each respective category.

Ordinary shares
As required by the Joint Stock Companies Law and the Company’s charter, all ordinary shares grant identical rights to each holder. Each fully paid ordinary share, except for certain circumstances expressly provided for by law (e.g. when a shareholder acquires shares in excess of certain threshold and is required to make a mandatory offer to purchase shares of other shareholders), gives its holder the right to:

  • transfer such ordinary share freely without the consent of other shareholders;
  • participate in the Company’s management as provided by the Joint Stock Companies Law and the Company’s charter;
  • participate in the general shareholders’ meeting with the right to vote on all matters within the shareholders’ competence, including through a representative acting on the basis of a power of attorney;
  • receive dividends in accordance with the Joint Stock Companies Law and the Company’s charter if the general shareholders’ meeting resolves to pay such dividends (always subject to the Board of Directors’ recommendation);
  • upon the Company’s liquidation, receive a proportionate amount of the Company’s property after the Company’s liabilities are discharged;
  • demand repurchase of all or some of the shares owned by such holder if the holder votes against or does not participate in voting on the decision of the shareholders meeting approving any of the following:
    - any reorganisation;
    - entering into a major transaction, as defined by the Joint Stock Companies Law; and
    - amendment of the Company’s charter or approval of a new addition to the Company’s   charter that limit shareholder’s rights;
  • exercise statutory pre-emption rights to acquire our ordinary shares in accordance with applicable Russian law;
  • have access to certain of the Company’s documents, receive copies for a reasonable fee and, if holding alone or with other shareholders 25% or more of the voting shares, have free access to accounting documents;
  • if holding, solely or with other holders, 1% or more of the voting shares, file a lawsuit against a Director or member of any of our executive bodies (including the chief executive officer) to reimburse damages suffered by us due to their fault;
  • if holding, solely or jointly with other shareholders, not less than 1% of the Company’s voting shares, obtain a list of persons entitled to participate in the general shareholders’ meeting;
  • if holding, solely or jointly with other shareholders, not less than 2% of the Company’s voting shares, may, not later than 60 days after the end of the relevant financial year, propose matters for the agenda of the annual shareholders’ meeting and nominate candidates to the Board of Directors, the Audit commission, the ballot committee and a candidate for the President;
  • if holding, solely or jointly with other shareholders, not less than 10% of the Company’s voting shares, demand that the Board of Directors call an extraordinary general meeting of shareholders or an unscheduled audit of the Company by the Audit Commission or an independent auditor; and
  • exercise other rights of a shareholder provided by the Company’s charter, under Russian law or by decisions of a general shareholder’s meeting.

Preferred Shares (or type “A” preferred shares)
Our preferred shares generally confer on their holders the following principal rights:

  • to receive a fixed dividend, except in certain cases envisaged by the Joint Stock Companies Law and our charter; and
  • to enjoy preference over ordinary shares in any distribution of profits and any proceeds from our liquidation.

While there are no limits on admission of shareholders to shareholders’ meetings, in accordance with our charter and the Joint Stock Companies Law, only holders of our ordinary shares have the right to vote on any matter within the competence of the meeting. The preferred shares confer no voting rights unless our charter and the Joint Stock Companies Law provide otherwise. Holders of preferred shares are entitled to vote on:

  • the adoption of amendments to the charter that would adversely affect their rights as preferred shareholders, including the issuance of any other type of preferred shares that would enjoy a priority in right of payment of dividend, a preference in respect of liquidation value over the preferred shares, amendments to the formula for calculating dividends and/or the liquidation value attached to the Preferred Shares; or
  • our reorganization or liquidation.

They may also vote at shareholders’ meetings following the shareholders’ meeting at which a decision was adopted not to pay dividends on preferred shares or to pay them only in part. Such right to vote continues until the dividends to which the holders of preferred shares are entitled are paid in full.

Holders of ordinary shares and preferred shares may:

  • freely transfer the shares without the consent of other shareholders;
  • participate in the distribution of our net profits (as reported under RAS) in the form of dividends (see “Dividend Policy”) and in the distribution of our assets in the event of liquidation;
  • enjoy the right of first refusal in respect of additional shares being placed by us through an open subscription and, in certain circumstances, by way of a closed subscription; and
  • have access to certain company documents, receive copies for a reasonable fee and, if holding alone or with other holders, 25% or more of the voting stock, have access to accounting documents and minutes of the management board meetings.

Our shareholders may also exercise other rights provided by Russian law and our charter.

History

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