OREANDA-NEWS. Open Joint Stock Company “MegaFon” (LSE: MFON), a leading Russian telecommunications operator (“MegaFon” or “the Company”), announces that the Annual General Meeting of Shareholders (“AGM”), held in Moscow on June 30 2014, approved the payment of a dividend based on the results for the 2013 financial year in the amount of 64.51 rubles per ordinary share (or GDR) to holders of record as of 11 July 2014 (the “Record Date”).

Given the final dividend of 64.51 rubles and the interim dividend for Q1 2013 already paid out in July 2013, the aggregate amount of dividends for 2013 is equal to 74.85 per share, and the total dividend payout amounts to RUB 46.4 Bn with the dividend payout ratio for 2013 totaling c. 90%1.

However, the Company wishes to alert shareholders to the fact that the regulatory framework for the payment of dividends by Russian issuers was changed on 1 January 2014. As a result of these legislative changes, the procedures whereby dividends are paid to and received by the ultimate beneficial holders of shares and GDRs (“UBOs”) are now as follows:

MegaFon pays the dividend to the parties actually appearing as shareholders on its share register being either registered shareholders or registered nominees holding shares as nominees for other sub-nominees, trustees and direct shareholders, and the Company's responsibility to pay these other entities is deemed duly fulfilled when it transfers the dividend to such registered shareholders and registered nominees.

Thereafter, these registered nominees are responsible for forwarding the dividend to the holders on their books which include direct shareholders and sub-nominees such as Bank of New York Mellon, the depositary for the Company's GDR programme (“BNYM”). Sub-nominees, including BNYM, are then responsible for payment to parties on their books as holders (this system is referred to as a “cascade” system).

Nominees and sub-nominees are required to forward the dividend to further sub-nominees within one business day after receipt of the dividend amount, whereas payments to BNYM and all UBOs must be forwarded within 7 business days after receipt by relevant payor.

BNYM will process dividend payments due to GDR holders in accordance with its GDR Terms and Conditions and other internal procedures. Processing may also be affected by additional DTC and Euroclear/Clearstream clearance requirements.

Shareholders are also advised that the regime for the withholding of tax on dividends paid to shareholders has also changed recently. Accordingly, the procedure for the taxation of dividends will be as follows:

Dividends paid to residents of the Russian Federation are subject to withholding tax at the rate of up to 9%. Dividends paid to non-Russian residents are generally subject to withholding at the rate of 15%.

If shares are held through a Russian custodian, the custodian is charged with determining the applicable tax rate, based on the circumstances of the underlying holder, and with withholding and paying over to the Russian Federation the requisite amount of tax.

In the case of GDR holders, Sberbank, in the capacity of custodian for BNYM, will act as a tax agent and withhold taxes based on the information provided by BNYM on the Record Date. Please note that failure to provide the information requested by BNYM in a timely manner will result in a penalty 30% withholding tax rate being applied.

Because of the complexity of these recent legislative changes, shareholders and holders of GDRs are strongly urged to consult with any parties through which their shares or GDRs are held, as well as their legal and tax advisers, as to the procedures for receiving dividend distributions and the applicable tax treatment, the GDR holders are strongly urged to comply timely with the requests for information to be sent by BNYM on or about the Record Date, and direct shareholders appearing on the Company's Share Register as of the Record Date are urged to consult with the Company.