Dividends for Russian local shares and

GDRs/ADRs issued on Russian local shares

BCS FINANCIAL GROUP

Payment of dividends - Legal background for local shares

According to the Federal Law on Joint-Stock Companies (NO. 208-FZ OF

DECEMBER 26, 1995)

1. A company may, as per the results of the first quarter, half-year or

nine months of the financial year and/or as per the results of the

whole financial year, announce the payment of dividends on the placed

shares.

2. Dividends shall be payable out of the company's net profit.

3. The decisions on the payment (announcement) of dividends including the

decisions on the rate of the dividend and the form of its payment on the

shares of each category (type) shall be taken by a general meeting of

shareholders. The rate of dividends may not exceed the one

recommended by the board of directors (the supervisory board) of the

company.

4. Dividends are to be paid in cash or in any other assets if such condition

is specified in Memorandum of the company.

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Payment of dividends - Legal background for local DRs

o Depository receipts are regulated by the Deposit Agreement which is

concluded between the issuer of shares and the issuer of Depository

receipts. Transmission of rights assigned to the owner of local shares to

the holders of DRs is regulated by this Agreement though it is usually not

disclosed. Terms of Agreements could be different for the different DR

issues, but mostly all rights given to the owners of local shares are

passed to the DRs holders.

o All Depository receipts for all DRs issued on Russian local shares

conclude obligation for the issuer of DRs to pass dividends paid to

underlying local shares to the DR holders.

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The following corporate actions are not usual for Russian equities :

Distribution of subscription rights

Stock dividends

Dividend reinvestment plans (SCRIP / DRIP)

Dividend currency options

Dividends on Russian local shares are paid in cash – RUR.

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Market practice for dividends on Russian local shares

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Service FEEs for DRs

o Pursuant to the terms and conditions of the Deposit Agreement the

Depositary (Issuer of DRs) may collect and receive service fee per DR.

o DR FEEs are mandatory for the DR holder but optional for DR issuer.

o DR FEEs are of the following two types:

Annual fees – to be collected to cover depository services,

expenses of Depository for inspection of the Russian share

registrar, other general expenses.

Special Fees – to be collected for execution by the Depositary of

any special action (DR creations / cancellations; participation in

Voluntary corporate actions; Income distributions)

EXAMPLE

Table of FEEs for Rule 144A and Regulation S GDRs issued by

The Bank of New York on Sberbank of Russia local shares *

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* Complete Prospectus of Sberbank, Offering of 1,712,994,999 Ordinary Shares in the form of Ordinary Shares and Global

Depositary Shares, Page 214

o Annual fees:

Usually not more than USD 0.03 a year;

Could consist of f.eg. $0.01 depositary share annual fee, $0.01

service fee, $0.01 custody fee;

Could be withdrawn on the annual, semiannual, quarterly basis;

Could be withdrawn together with distribution of annual dividend;

No EX DD is applicable for DR Annual fees;

Annual fee is debited from clients account by custodian on a

settled position as at the Record Date;

Record Date and amount of fee is announced by the Depositary

(Issuer of DRs) a month before RD;

New information about DR Annual fee is distributed via clearing

systems where DRs are trades – DTC, Euroclear.

Service FEEs for DRs – Market Practice

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o Cash distribution fees:

Usually not more than USD 0.02 per DR;

Is applicable for Dividend distribution, Buy-back proceeds

distribution, Spin off or Liquidation proceeds distribution;

Dividend notification distributed by the Depository contains

information about Cash distribution fee, Dividend is paid by

Depository less cash distribution fee;

Service FEEs for DRs – Market Practice

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o Local shares:

Dividends are distributed in RUR; no FX conversions, fees are not

applicable.

o DRs:

Within max 2 days since receipt of Dividends from the issuer

Depository should convert them into USD at the current market FX

rate and transfer to the DRs holders less cash distribution fee.

Dividend distribution for local shares and DRs

Dividend Taxation for Russian locals and DRs

Instrument / Market Shareholder - resident

of Russia

Shareholder - non

resident of Russia - no

Tax treaties

Shareholder - resident

of Cyprus - Tax treaty

Shareholder - resident

of UK - Tax treaty

Local shares 9% 15%

5 % (position cost

more than 100000

EUR), 10 % for all

other cases

10%

ADRs/GDRs on

Russian local shares 15% 15% 15% 15%

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Dividend Taxation for Russian locals and DRs hold by BCS

in name of its Clients

Shareholder – BCS Cyprus - resident of Cyprus

Local shares 10 %

ADRs/GDRs on

Russian local shares 15%

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BCS could not guarantee 10 % Dividend taxation rate for its Clients because:

Decision about which dividend rate is to be used is taken by Tax Agent which is

the Issuer in case of Dividend distribution;

Documents proving status of BCS as Tax Resident of Cyprus are submitted to

the issuer via the chain of nominal holders what could cause delays or losses of

documentation.

Status of BCS as Tax Resident of Cyprus could be subject of different

interpretation by the BCS, Issuer, Tax Authorities and could be disputed;

If applied Higher Dividend Tax rate could be disputed by BCS in court or to

the Tax Authority but BCS could not guarantee TAX difference is reversed.

Comparing of costs to receive dividends

on Russian local shares or DRs

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ADRs/GDRs Russian Local Shares

Currency USD at market FX rate RUR, no FX conversion

TAX - Resident of Russia 15% 9%

TAX - Resident of Cyprus 15% 10%

Cash distribution fee up to USD 0,02 per DR No

Annual service fee up to USD 0,03 * per DR No

* Subject to the Depository Agreement could be more

THANK YOU

In case of any questions regarding Dividends

or any other Corporate actions

please address them to

Anton Kashkin

Head of Corporate Actions

Investment Bank

BCS Financial Group

phone: +7 (495) 785 53 36 (ext. 7891)

mob: +7 (916) 564 63 58

akashkin@msk.bcs.ru