Pursuant to the Joint Stock Companies Law, the Company’s Charter and 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’s annual results. Declaring and paying dividends on ordinary shares is a right of the Company, but not an obligation, while declaring and paying dividends on preferred shares is an obligation. The size of dividends and the procedure for paying them on preferred shares are set forth in Rostelecom’s Charter.
Annual dividends are proposed by the Board of Directors, based on the year-end statutory accounting reports prepared in accordance with the International Financial Reporting Standards (IFRS) in the case of ordinary shares and Russian Accounting Standards (RAS) in the case of preferred shares. They are approved by the AGM, 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 individuals and entities entitled to receive dividends, which is compiled as of the record date and is approved by the AGM at which the decision on the relevant dividend payment is to be made. The record date must be set not earlier than 10 days after the date of the AGM on which the decision on the relevant dividend payment is made and not later than 20 days after the date of the AGM.
The following table sets forth dividends per share paid by Rostelecom on its ordinary and preferred shares for the years ended December 31, 2013, 2012, 2011, 2010 and 2009, and the nine months ended September 30, 2010, as well as the estimated amount of dividends for the year ended December 31, 2014 that was proposed by the Board of Directors on May 15, 2015.
|Year ended December, 31||Nine months ended September 30|
|Dividend per Preferred Share||4.0500||4.8486||4.1022||4.6959||0.4344||2.1005||1.6667|
|Dividend per Ordinary Share||3.3411||3.1160||2.4369||4.6959||—||1.4002||1.1113|
The Board of Directors recommended that the AGM approves a 2014 dividend payment on both ordinary and preferred shares of of RUB 9,452 million, or 32% of the Company’s RAS net profit for 2014, which amounts to 25% of the IFRS net profit for 2014. It is proposed that the dividends are paid in cash as follows:
- RUB 4.0500 per Class A preferred share,
- RUB 3.3411 per ordinary share.
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, respectively, on their ordinary shares and in the aggregate amounts of RUB 2,344 million and RUB 2,275 million, respectively, on their preferred shares. 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 the 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 were 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 dividends payable, is adopted by the AGM.
Dividends payable on each preferred share are fixed by Rostelecom’s 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 issued shares. The formula for calculating dividends per preferred share is as follows:
DPSpreferred share = [10%*Net ProfitRAS]/[25%*(Number of ordinary shares + Number of preferred shares)]
The Company cannot 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, the dividend per preferred share must be increased to that payable per ordinary share. Failure to pay a dividend on preferred shares in full authorises holders of preferred shares to vote on all matters considered by the AGM until the date when dividends on preferred shares are paid in full.
The total amount of dividends paid on preferred shares by Rostelecom for the years ended December 31, 2011, 2010 and 2009 represented approximately 3.5%, 12.6% and 10.0% of the annual RAS net profits, 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 the Company’s RAS net profit following the reorganisation, coupled with the increase in the number of ordinary shares due to the reorganisation. During this same period, the number of preferred shares remained unchanged, meaning that existing preferred shares represented approximately 7.6% of Rostelecom’s outstanding shares in the year ended December 31, 2011, compared to approximately 25.0% in the year ended December 31, 2010.
Under Rostelecom’s dividend policy, which was adopted in December 2011 and has been approved by the Board of Directors, dividends payable on each ordinary share have 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 ordinary shares for the years ended December 31, 2010 and 2009 represented approximately 23.4% and 20.0% of the annual RAS net profits, 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 paid on ordinary shares for the year ended December 31, 2011 represented approximately 42.5% of annual RAS net profit and 30.0% of IFRS annual net profits.
The annual dividend, if declared, must be paid for the nominee shareholders and for the trustee shareholders that have accounts in the Company`s register within ten days following the record date approved by the AGM at which the decision on the relevant dividend payment is to be made. The annual dividend, if declared, for the other shareholders with accounts in the Company’s register, must be paid within twenty five days following the record date approved by the AGM at which the decision on the relevant dividend payment is to be made.
Dividends for 2008-20142 (RUB billion)
and share of the total amount of dividends paid to RAS/IFRS Net Profit (%)
 Subject to AGM approval on June 15, 2015.
 Dividends for 2008/2009 and 9 months of 2010 are presented as consolidated data on IRC and Rostelecom. Dividends for 2014 are subject to approval by the AGM on June 15, 2015.