Rostelecom’s Board of Directors approves a new stock option plan for its management team

Moscow, Russia – March 31, 2014 –Rostelecom OJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), Russia’s national telecommunications operator, today announces that at its meeting on 31 March, 2014, Rostelecom’s Board of Directors approved the Company’s long-term incentive plan for its management.

The programme provides for the launch of a share option plan for ordinary shares, which can be purchased by the programme’s participants through an annual bonus payments system. Annual bonuses are paid in accordance with performance.

The programme will last for three years and approximately 200 senior and mid-ranking managers will participate in the programme, including the heads of regional branches.

The long-term key performance indicators (KPIs) used to determine awards within this programme are as follows: free cash flow (FCF), net profit and return on invested capital (ROIC).

The collective base package of all the participants of the programme will consist of ordinary shares amounting to 1.5% of the company’s share capital. The total size of the package depends on how well key performance indicators (KPIs) are met and is limited to 200% of the total block of shares in the event that KPIs are significantly over-fulfilled. If there is a significant failure to meet specified KPIs, programme participants will lose the right to exercising the option in the reporting period in question.

Shares will be sold to each participant in the option programme on an annual basis as a percentage of the collective share package making adjustments for whether or not KPIs are met: 30% for 2014, 30% for 2015 and 40% for 2016. Vesting also occurs in stages: 50% upon completion of the financial year and 50% twelve months afterwards.

In order to implement this stock option plan, a close-ended mutual fund will be created and run by a professional employee stock option plan manager. Treasury shares amounting to 3% of the company’s share capital will be added to the fund.

Sergey Kalugin, President of Rostelecom, commented: “The long-term incentive programme that has been approved by the Board is primarily aimed at attracting talented and professional managers. It is also designed to make managers more interested in raising the Company’s fundamental value and capitalisation and this brings the expectations of shareholders and potential investors in line with the interests of Rostelecom’s key employees.”