Dividend Policy

The Company

The Company’s dividend policy is pursued in accordance with the Regulations for Dividend Policy approved by the Board of Directors of the Company on September 8, 2010 (Minutes No. 43).

These regulations guarantee that any shareholder is entitled to minimum dividends of 5% of net profits, less asset revaluation, net of mandatory reserves. In addition, dividends may be increased to exceed the minimum amount if any net profits are in excess of what is needed to make investments and cover losses.

The Annual General Meeting of Shareholders of the Company decided on June 30, 2012, to pay dividends on preference shares out of undistributed profits of prior years in the amount of 0.07 ruble per preference share in cash.

The Company Subsidiaries

In defining its position on the payment of dividends by the Company subsidiaries, the Company’s management, as a shareholder of subsidiaries, relies on the regulations for dividend policy approved by the boards of directors of subsidiaries. The regulations for dividend policy of subsidiaries are based on the principles approved by the Board of Directors of the Company (Minutes No. 38 of June 22, 2010).

Following the approved principles of their dividend policies, subsidiaries pay dividends out of the remaining net profits, net of financial investment revaluation, after they are distributed to mandatory reserves, investment programs, and the settlement of operating losses of prior years. Furthermore, there are basic conditions that should all be fulfilled to allow a dividend payment decision to be adopted: net profits, net of financial investment revaluation; the debt to EBITDA ratio (as at the year end) of at most three; attained service reliability and quality indicators.

Since the inception of the Company, subsidiaries have shown an upward change in dividend payment. Specifically, the dividends payable by subsidiaries to the Company for 2008, 2009, and 2010 totaled 165,148 thousand, 728,950 thousand, and 1,623,659 thousand rubles respectively (exclusive of tax).

In 2012, the Company received 1,627,971 thousand rubles of dividends (exclusive of tax) for 2011 on subsidiaries’ shares held by the Company.