5.10 DIVIDEND POLICY

Federal Grid Company’s dividend policy is based on Regulations on the Dividend Policy approved by the Board of Directors on 16 December, 2010. According to this document, the minimum dividend payout is 10% of RAS net profit after mandatory contributions to the reserve fund adjusted (reduced) for paper profits from assets revaluation, the reserve for recovering bad debts and non-recurring income from the sale of securities and other property planned to finance the Company’s investment program.

The General Shareholders Meeting makes dividend payout decisions in accordance with the dividend size recommended by the Board of Directors, based on the Company’s posted financial results, while balancing the interests of the Company and its shareholders.

2008

To maintain the Company’s financial stability amidst the ongoing financial crisis, the Board of Directors recommended that the General Shareholders Meeting channel the Company's 2008 net profit to corporate development. The resolution of the General Shareholders Meeting (30.06.2009) approved the allocation of RUR4,242,201,000 (95% of 2008 net profit) to development and RUR223,201,000 (5% of 2008 net profit) to the corporate reserve fund. The money allocated to corporate development was used to finance specific projects to the extent determined by a separate Board of Directors’ resolution as part of the Company’s priority activities.

2009

For FY 2009 the Company posted a loss of RUR59.866 million. The principal reason for the 2009 operating loss was the effect of the global financial crisis. The loss resulted from writing off negative differences from the market-price-based revaluation of assets on the Company’s balance sheet. The source for reserve fund allocations and dividend payments is the Company’s net profit after tax (net profit), based on accounting reports. In 2009 the Company had no base (source) to pay dividends. The Annual General Meeting of Shareholders decided not to pay dividends on ordinary shares for 2009.

Dividend History

Total dividend accruals, RUR thousand. Per ordinary share, RUR
2006 587 847,4 0,001626664
2007 380 000 0,0007977370096
2008 0 0
2009 0 0

2010

For FY 2010 the Company posted a net profit of RUR58,088,388,000.

The net profit for dividend calculations, excluding financial results from securities revaluation and the creation of provisions not backed by monetary funds, was RUR25,776,639,000.

The decision on 2010 dividend payments will be made by the Company’s Annual General Shareholders Meeting in 2011.

Dividends, RUR thousand 2 577 664
Number of shares, units 1 255 948 128 393
Dividend per share, RUR 0,0020523650155