Annual Report 2013

Dividend Policy

IDGC of Centre has been maintaining a positive dividend history for the past three years. 2013 became a special year for the Company: the Annual General Shareholders’ Meeting decided to allocate 25% of the Company’s net profit under RAS for the payment of dividends.

The Company’s dividend policy consists in transparent determination of the dividend amount and its payment procedure and is regulated not only by the Russian laws and the Company’s Charter but also by the relevant Regulation approved by the Company’s Board of Directors in 2010.

We believe that dividends are an integral part of shareholder’s income along with the increase in the Company’s share value, and strive to increase their size.

For details on the Regulation on the Company’s Dividend Policy, please visit our corporate website.

DIVIDEND HISTORY IN 2011-2013:

Indicator (under RAS) 2011 2012 2013
Total dividends, thous. RUB 610 932 422,179 862,935
Dividend per share, RUB 0.01447 0.01 0.02044
Share of net profit under RAS used for dividends, % 12.96 8.11 25.00
Date of the GSM, on which the decision on dividend payments was made June 17, 2011 June 15, 2012 June 14, 2013
Share of dividends paid, %* 99.0 99.01 99.0

The amount of dividend payment in 2013 will be established by the Annual General Shareholders Meeting in June 2014.

THE DECISION TO PAY DIVIDENDS IS MADE PROVIDED THAT THE FOLLOWING CONDITIONS STIPULATED BY THE CHARTER AND THE REGULATION ON THE IDGC OF CENTRE DIVIDEND POLICY ARE FULFILLED:

Fulfillment
Condition 2011 20122013 (Plan)Notes
Main
Receipt of net profit for the financial year + + + Not including revaluation of financial investment
Debt/EBITDA < 3 + + + Calculated based on the current Regulation on the Company’s Borrowing Policy. If this condition is not met, debt payment takes priority over dividend payment.
Additional
Absence of major technical violations + + + The limit for failures described in Clause 2.1 may not be exceeded. Instructions for investigating and reporting technological violations associated with power grids, power plants, boilers, power and heating grids RD153-34.0-20.801-2000 approved by the Ministry of Energy on 29.12.2000.
Meeting reliability target in the Company’ KPI + + +

Formula for calculating dividends stipulated by the Regulation on the IDGC of Centre Dividend Policy:

DIV = ЧП — PROV RF’ — PD — PL,,

where:

  • DIV – total amount of net profit used for dividends;
  • NP – net profit for the financial year (not including revaluation of financial investment) received in accordance with the long-term regulatory indicators established for the Company;
  • PROV RF’ – mandatory provisions to reserves and other funds under the Company’s Charter; correlation with the total provisions matches the share of profit not including revaluation of financial investments in total net profit;
  • PD – a part of profit used for investment and development of the Company;
  • PL – a share of profit used to cover operating losses of the previous years, if any (not more than 0.5*(NP — ProvRF’— PD)).

TAXATION OF DIVIDEND PAYMENTS

The dividends paid by the Company are taxable under Articles 224 and 284, Part 2 of the Russian Tax Code at the following rates:

Corporate income tax Personal income tax
Russian resident* Russian residentForeign residentRussian residentForeign resident
0 % 9 % 15 %** 9 % 15 %

A 30% tax rate is applied to the income of persons whose information has not been submitted to the tax agent according to the requirements of Articles 214.6 and 310.1 of the Russian Tax Code, whose shares are included in a securities account of a foreign nominee holder, a securities account of an authorized foreign holder and/or a securities account of depositary programs.

In the cases where a double taxation treaty applies, tax payments are made at the rate specified therein.

For details on the dividend policy and the dividend history, please visit our corporate website.