OREANDA-NEWS. On 31 March 2008 “COMSTAR – United TeleSystems” JSC, the leading combined telecommunications operator in Russia and the CIS, announced that its Board of Directors has approved the introduction of a long-term incentive programme for the Company’s management team.

The programme is set to run from April 1, 2008 with a two year vesting period. The programme participants are defined by the Board of Directors every two years starting from the launch of the programme. A total of 151 managers will participate in the scheme during 2008-2010, including the Company’s CEO and a wide range of parent and subsidiary company management team members.

So-called ‘phantom’ share options are to be granted to participants in the scheme. The programme participants will be entitled to receive bonuses at the end of the two year period. The bonus value will be calculated on the basis of the change in price of the Comstar Global Depositary Receipt. The base price will be calculated according to the trailing 60 day average trading price of the Comstar GDR prior to the granting of the phantom options, whilst the closing price will be calculated according to the trailing 60 day average trading price of the Comstar GDR on the exercise date. A total of 15,105,882 ‘phantom’ share options, representing 3.6% of Comstar’s share capital, will be granted to 151 Comstar managers.

The bonuses will be received under the scheme, provided that certain corporate performance criteria – Total Shareholder Return, revenue growth, OIBDA profitability and market share increases – have been achieved.

Yngve Redling, chairman of the Compensation and Remuneration Committee of the Board of Directors, commented: “The launch of this long-term incentive programme for a large number of key employees is intended to motivate our employees to implement the tasks aimed at increasing Comstar’s market value. We also intend to align executive remuneration with shareholders’ interests, creating a correlation between remuneration levels and the GDR price. The objective is also to maintain long-term relationships with those employees responsible for implementing the most challenging and important tasks.”

Under the terms of the new scheme, the granting of share options and bonuses in the form of shares under the 2007-2009 programme, will be discontinued. A total of 10 individuals currently have options under the 2007-2009 scheme, which are exercisable in November 2008 over a combined total of 0.575% of the Company’s share capital. According to the decision of the Board of Directors, these individuals will be able to sell the GDRs received under the option programme back to Comstar. Comstar will continue to hold the 1,970,004 GDRs, which were repurchased in the market for the share option programme between October and December 2006, as an efficient financial investment.

Yngve Redling added: Comstar’s Remuneration Committee also recommended that the Shareholder Meeting should change the currency of the exercise price for the participants in the 2007-2008 programme from Russian rubles to US dollars, in order to align the strike price with the currency in which the GDRs are traded on the London Stock Exchange and in which Comstar would repurchase the GDRs if required to do so by the programme participants”.