28. Share-based payments

Share-based program started in 2014 (ordinary shares)

In March 2014 the Board of Directors approved employee motivation program. The program provides grant of ordinary shares which are purchased by program participants at fixed price, using proceeds from the annual bonus, which is paid depending on achievement of the KPI, based on FCF, net profit and ROIC.

Duration of the program is three years, starting from 2014. About 200 people are expected to take part in the program - senior and middle managers, including directors of regional branches.

The total target package of all participants of the program consists of ordinary shares equivalent to 1.5% of the share capital of the Company. The maximum size of the package depends on meeting the KPI requirements and is limited to the 200% of the target shares in the event of a significant overperformance. In the event of a significant non-compliance with the KPI, program participants lose the right to the option in part attributable to the reporting period.

Shares are granted to participants in stages: 2014 – 30%, 2015 – 30%, 2016 – 40% whereas target package is adjusted to reflect achieved level of KPIs. Annual vesting also occurs in stages: 50% on the year end and 50% 12 months later.

To facilitate the program, the Company establish a closed fund «RTK-Development» managed by VTB Capital AM.

Total amount of 1,850 including social taxes was recognized as an expense in wages, salaries, other benefits and payroll taxes in this Consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2014 in relation to the program (Note 21).

The following share-based payment arrangements were introduced during 2014:

Grant series Number of shares granted Grant date Exercise date
Grant contracts signed in 2014 9,771,882  Year 2014  Year 2015
Grant contracts to be signed in 2015 900,000  Year 2014 Year 2015
Grant contracts signed in 2014 9,771,882  Year 2014  Year 2016
Grant contracts to be signed in 2015 900,000  Year 2014 Year 2016
Grant contracts signed in 2014 13,029,176  Year 2014  Year 2017
Grant contracts to be signed in 2015 1,200,000  Year 2014 Year 2017
Total 35,572,940    

The weighted average fair value of the shares granted as of the grant date is 90.89 RUB.

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