PROVISIONALLY APPROVED by the Board of Directors of OJSC Rostelecom May 19, 2014 Minutes No 01 dated May 22, 2014

APPROVED by the Annual General Shareholders’ Meeting of OJSC Rostelecom June 30, 2014

Minutes No 02 dated July 03, 2014

ANNUAL REPORT

OPEN JOINT STOCK COMPANY LONG-DISTANCE AND INTERNATIONAL TELECOMMUNICATIONS ROSTELECOM

BASED ON YEAR 2013 RESULTS

President of OJSC Rostelecom s/s S.B. Kalugin

Acting Chief Accountant of OJSC Rostelecom s/s N.V. Lukashin

May 22, 2014

Moscow, 2014

ANNUAL REPORT TABLE OF CONTENTS CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS ...... 3 INFORMATION CONTAINED IN THIS ANNUAL REPORT ...... 4 ROSTELECOM AT A GLANCE ...... 5 THE PRESIDENT’S MESSAGE ...... 6 2013 HIGHLIGHTS ...... 8 OPERATING AND FINANCIAL RESULTS ...... 10 COMPANY’S POSITION IN THE INDUSTRY ...... 12 COMPANIES IN ROSTELECOM GROUP ...... 14 THE COMPANY AND THE BOARD OF DIRECTORS’ REVIEW OF THE YEAR 2013 ...... 16 COMPLETION OF THE SECOND REORGANIZATION PHASE ...... 16 PROJECT “OLYMPIC AND PARAOLIMPIC WINTER GAMES 2014 in SOCHI” ...... 17 INNOVATIVE DEVELOPMENT ...... 18 ELECTRONIC GOVERNMENT ...... 19 DEVELOPING RETAIL RELATIONSHIPS ...... 21 RUSSIAN OPERATORS’ MARKET ...... 22 TRADITIONAL TELEPHONY SERVICES ...... 22 MOBILE SERVICES ...... 23 BROADBAND INTERNET ACCESS ...... 23 PayTV SERVICES ...... 24 DATA SERVICES ...... 25 NETWORK INTERCONNECTION AND TRAFFIC ROUTING ...... 27 LEASED LINE SERVICES ...... 27 INTELLIGENT NETWORK SERVICES...... 27 ENHANCING COOPERATION WITH GOVERNMENT ENTITIES ...... 28 GUARANTEE OF HIGH QUALITY OF TELECOMMUNICATIONS SERVICES ...... 29 INVESTMENT PROGRAM IMPLEMENTATION ...... 30 SOCIAL RESPONSIBILITY ...... 34 THE COMPANY’S DEVELOPMENT PRIORITIES AND PLANS ...... 39 THE COMPANY TELECOMMUNICATIONS INFRASTRUCTURE ...... 41 RISK MANAGEMENT ...... 43 CORPORATE GOVERNANCE ...... 56 SHARE CAPITAL ...... 58 GENERAL MEETING OF SHAREHOLDERS ...... 62 THE BOARD OF DIRECTORS ...... 63 THE PRESIDENT AND MANAGEMENT BOARD ...... 68 THE AUDIT COMMISSION ...... 71 THE COMPANY’S SIGNIFICANT TRANSACTIONS ...... 71 INFORMATION ON THE ACTUAL EXECUTION RESULTS OF LAWS AND REGULATIONS OF THE PRESIDENT OF THE RUSSIAN FEDERATION AND ORDERS OF THE GOVERNMENT OF THE RUSSIAN FEDERATION ...... 72 GENERAL INFORMATION ABOUT THE COMPANY ...... 77

ANNUAL REPORT

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Certain statements in this Annual Report for Open Joint-Stock Company international and Long-Distance Telecommunications Rostelecom (hereinafter to be referred to as “OJSC Rostelecom”, “Rostelecom” or the “Company”) summarizing the results of 2013 (hereinafter to be referred to as the "Annual Report”) are so- called forward-looking statements. Those forward-looking statements include, but are not limited to:  The management’s assessment of the Company’s future operation and financial results, as well as forecasts of the present value of future cash flows and related factors;  The Company’s plans to participate in the charter capital of other organizations, associations of organizations and holding entities;  The Company’s anticipated capital expenditures and plans to develop, construct and modernize its network;  The Company’s expectations as to the growth of demand for its services and plans relating to the development of its existing services and promotion of new services, as well as to expansion of its range of services and their pricing;  The Company’s plans with respect to improving its corporate governance practices;  The Company’s expectations as to its position in the telecommunications market and the development of the market segments within which the Company operates;  Economic outlook and expected industry trends;  The Company’s expectations as to the regulation of the Russian telecommunication industry and assessment of the impact of regulatory initiatives on the Company’s activity;  Other Company’s plans and expectations regarding matters that are not historical facts. Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ from those expressed or implied by these forward-looking statements. These risks, uncertainties and other factors include:  Risks relating to changes in political, economic, and social conditions in the Russian Federation as well as changes in global economic conditions;  Risks relating to Russian legislation, legal control, and taxation, including laws, regulations, decrees and decisions governing the Russian telecommunication industry, securities industry, as well as currency and exchange controls relating to Russian entities and their official interpretation by regulatory bodies;  Risks relating to the Company’s operations, including the achievement of the anticipated results, levels of profitability and growth, ability to create and meet demand for the Company’s services, including their promotions, and the ability of the Company to remain competitive in a Russian liberalized telecommunications market;  Technological risks associated with the functioning and development of telecommunication infrastructure, technological innovations, and the convergence of technologies;  Other risks and uncertainties. For a more detailed discussion of these and other factors, see this Annual Report and the Company’s other public documents. Most of these factors are beyond the Company’s control or prediction. Therefore, given these and other uncertainties, readers are cautioned not to place undue reliance on any of the forward-looking statements contained herein or otherwise. The Company does not undertake any obligations to release publicly any revisions to these forward-looking statements (which are made as of the date hereof) to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as may be required under applicable laws.

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INFORMATION CONTAINED IN THIS ANNUAL REPORT This Annual Report presents consolidated financial (accounting) statements according to the International Financial Reporting Standards (the IFRS) unless it is expressly stated that financial (accounting) information is presented according to other reporting standards. Consolidated financial information is presented by Rostelecom and its subsidiaries registered in the Russian Federation according to consolidation of financial accounts as described in Section 4 Principal Accounting Policies of the Consolidated Financial Statements of the Company, prepared according to IFRS for the years ended on December 31 of the years 2013, 2012 and 2011. In order to ensure consistency and comparability of the information disclosure in this Annual Report, operation and other non-financial results are also presented with respect to Rostelecom and its subsidiaries for which the consolidated financial statements of the Company are prepared. The Group of companies (or Rostelecom Group) in this Annual Report refers to OJSC Rostelecom and its subsidiaries in accordance with section 9 "Subsidiaries" in the consolidated financial accounts of the Company prepared according to IFRS for the years ended on December 31 of 2013, 2012 and 2011.

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ROSTELECOM AT A GLANCE Rostelecom is one of the largest telecom companies on a national scale in Europe and Russia, which is present in all segments of the telecommunications services market, and covers more than 34 million households in Russia. The Company holds a leading position in the Russian market of broadband Internet access (BBA) and payTV: the number of subscribers of broadband services exceeds 10.6 million, and that of Rostelecom payTV is more than 7.5 million users, of which over 2.2 million subscribers watch unique federal product – Interactive TV. Consolidated revenue for the Group in 2013 amounted to 325.7 billion RUB, OIBDA reached 113.3 billion RUB (34.8 % of revenues) and net profit amounted to 24.1 billion RUB. Rostelecom is the undisputed market leader in telecommunications services to Russian government bodies and corporate users at all levels. The Company is a recognized technology leader in innovative solutions in the field of e-Government, cloud computing, health care, education, safety, housing and public utility services. Stable financial position of the Company is confirmed by credit ratings by Fitch Ratings at «BBB-», as well as by Standard & Poor's at «BB+».

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THE PRESIDENT’S MESSAGE Dear shareholders, investors, customers, partners, and colleagues! In 2013 Rostelecom celebrated important events that lay the foundation for a new phase in the history of our Company, which is already more than 130 years from the time when Russia had launched the first telephone exchange. With the acquisition of Svyazinvest and a number of its subsidiaries in October 2013, Rostelecom completed the consolidation process, which was started in 2002, when regional telecommunications companies started to associate into macro-regional companies. Formation of a unified national telecommunication company provides the basis for the full realization of the economic benefits of the business scale. The Company has clearly defined its strategic benchmark for the coming years which is the fundamental transformation of the united Rostelecom into modern dynamic world-class company. The key components of the strategy are technology leadership in terms of network infrastructure, customer service at the best world practice levels, differentiated product line based on the package options and unique content-based offers, organizational transformation and maximum operating efficiency. We are very pleased that at the end of 2013, we reached an agreement to merge the mobile business of Rostelecom into a joint venture with Tele2 Russia. The merged assets complement each other, both in terms of geographical coverage and in terms of combining a successful operating model of Tele2 Russia with an extensive portfolio of Rostelecom frequencies. The transaction will allow the Company to significantly strengthen its presence in the rapidly growing market of mobile data through its participation in the capital of the large and rapidly growing operator. Our Company is a carrier of the best traditions of the Russian engineering telecommunication industry. We are proud of the role of telecommunications partner of the Olympic Games 2014 in Sochi. The preparation for this global event began in 2009, and the major works were completed in 2013. For the first time in Olympic history, the entire television signal transmission was performed via optical fibers. We have built the infrastructure, including media centers, and organized the channels with a total capacity of 140 Gbps for signal transmission worldwide. We continue to update and expand our network infrastructure across the country. In 2013, the network bandwidth of IP/MPLS data was expanded to 7.2 Tbps. We adopted the program of upgrading copper "last mile" networks into optic fibers. According to this plan, in 2016, 33 million Russian households will be able to access the Internet at a speed of 1 Gb per second. We also designed a project to address the digital divide – the construction of optic fibers in small settlements at the expense of the universal service fund. The efforts of the entire team to strengthen market positions in key segments for Rostelecom allowed achieving stable operating and financial results for the year. Thus, the number of subscribers of broadband access grew by 8% and amounted to 10.6 million subscribers by the end of 2013, while the number of the subscribers connected via optic fibers was increased significantly faster by 30% to 4.0 million subscribers, that is 38 % of the total subscriber base. The number of subscribers of payTV services was increased by 9% and amounted to 7.5 million subscribers. Of these, the number of the subscribers of one of the most popular and rapid-growing services, which is interactive TV, was increased by almost 38% amounting to 2.2 million subscribers. In 2013, the Company made its best efforts to enhance the attractiveness of its market offers. We extended not only functional part, but also the range of services through new and unique services. In particular, we have launched a separate line of optical tariffs Fast, which is fully compliant with the market and guarantees high-speed broadband Internet access. As part of our payTV options, the subscribers can connect an additional package «Amedia Premium HD»; our own promotional channel "All TV" appeared; we generally increased the list of the provided digital and HD-channels. We also significantly improved functional features of Interactive TV: 3D support, connection bandwidth control system, karaoke, content subscription, seasonal sales of series and much more appeared. Due to launch of such Android application as Zabava and SmartTV LG, we have expanded the OTT product line, as well as increased the number of channels for OTT-products from 89 to 131. In 2013, Single personal cabinet service became available to our customers throughout Russia. Starting from December, the subscribers of the retail segment obtained access to the loyalty program that allows them to accumulate points for the consumed services and exchange them for additional telecommunication services from Rostelecom. By improving the efficiency of procurement and optimizing relationships with vendors and contractors from April to December of the last year, the Company has saved more than 16 billion RUB. Taking part in a global operating costs benchmarking study by AT-Kearny, Rostelecom has received a detailed picture of the main

6 ANNUAL REPORT areas to improve operational efficiency. The considerable potential is localized in this area, which will be implemented by us, consistently moving through each of the available directions. Rostelecom continues to change, moving away from the traditional telephone operator model, turning into a modern service provider and a leading telecommunication company of the country. In this way, our main task is to raise revenue through the provision of quality and modern services, to maximize operational efficiency and, ultimately, to create additional value for all our shareholders. Sincerely, Sergey Kalugin President

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2013 HIGHLIGHTS January • Total bandwidth of client connections to the backbone IP/MPLS network of Rostelecom was 3.5 Tbit/s. • Rostelecom received a national award in the field of multi-channel digital television "Big Digit". February • Rostelecom, the General Partner of the XXII Olympic Winter Games in 2014, together with the Organizing Committee "Sochi 2014" completed the construction and equipment of the main communication hub in the coastal cluster of the Olympic Sochi. • Rostelecom celebrated the 10th anniversary of the Transit Europe-Asia (TEA) and 1 year from the beginning of the High-Speed Transit Cable Line – Transit Europe-Asia (HSTCL - TEA). The total contracted capacity of these transit projects in early 2013 exceeded 210 Gbit/s, and the customers included major global telecommunication operators. March • The launch of the third generation network (3G) in the Ulyanovsk region • The Company opened Russia's largest area of geographically distributed Common service center in Voronezh. • The number of households connected to "Interactive TV" from Rostelecom has reached 1.5 million. Thus, this year’s customer base of this federal product has been doubled (102%). • The Board of Directors of Rostelecom agreed to appoint Sergei Kalugin as the President of the Company. April • Rostelecom launched new federal package "all inclusive", connecting to which the user receives the most popular products: "Home Internet", "Interactive TV" and "Kaspersky Anti-Virus". • By the results of public procurement procedures, the Company has reduced the cost of TV-tuners for "Interactive TV" by 24% May • Rostelecom has introduced innovative technology of transaction routing when paying on a single portal of public services (www.gosuslugi.ru). The result has been a significant reduction in commissions involved in the conduct of all government payments on banks portal. • Within the second phase of reorganization, the transaction for the sale of 0.43 % Rostelecom stake to Svyazinvest was completed. June • Rostelecom placed bonds of series 16 worth 5 billion RUB with an interest coupon rate of 7.5% per annum. • The international rating agency Standard & Poor's affirmed long-term corporate credit rating of Rostelecom at “BB +” level with a stable outlook. Ratings of respective bond issues were also affirmed at “BB +” level with a stable outlook. • Rostelecom shareholders supported the reorganization of the Company in the form of joining Svyazinvest and a number of subsidiaries. July • Rostelecom passed the procedure of public discussion of the Social report in the Council on non- financial reporting of the Russian Union of Industrialists and Entrepreneurs (RUIE) and received the Certificate and Opinion on its public representation. • Rostelecom, the General Partner of the XXII Olympic Winter Games in 2014, signed a contract for the provision of telecommunication services to the Olympic Broadcasting Service (OBS) to the host broadcaster of the Games in Sochi. OBS provides television and radio broadcasting from Olympic events. August

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• Board of Directors approved additional issue of ordinary shares of Rostelecom within the second phase of reorganization. • The Company completed the construction of powerful and extensive CDN network (Content Delivery Network) and begins to provide services for the delivery and distribution of content. By means of CDN content providers can – with high quality, speed and reliability – provide their content to end consumers with high degree of reliability. • The international rating agency Fitch Ratings affirmed Issuer Default Rating ("IDR") to Rostelecom at level “BBB-” with a stable outlook. September • Rostelecom and Sberbank of Russia signed an agreement on strategic cooperation. • Video Surveillance System by the Company provided broadcast of election in a single day of voting in 5 regions. • An agreement on cooperation between Rossvyaz and Rostelecom was signed. • International cable system «Europe - Persia Express Gateway» (EPEG) was put into operation. • Rostelecom finalized and started commercial operation of the Unified System of payments. It simplifies the procedure of payment of all added services anywhere in Russia. October • Rostelecom completed the second stage of the reorganization. The record on termination of business of Svyazinvest was entered to the Unified State Register of Legal Entities, as well as of another 20 joint-stock companies in connection with the merger with the Company, which took over all rights and obligations of the associated companies in accordance with the transfer regulations. • Russian Direct Investment Fund (RDIF) and one of the leading international banks Deutsche Bank have jointly invested in Rostelecom. The investments amounted to 7.674 billion RUB were parity directed by the parties to the Company for the further development and strengthening of market positions. • Rostelecom affirmed corporate social responsibility (CSR) at level AA (s). The opinion of the independent Russian rating agency "REPUTATION" states that the Company has a high level of social responsibility and effectively implements the strategy in this area.

November • Rostelecom completed the implementation of the Single personal account in all regions of the country. December • The Board of Directors has approved the updated strategy of the Company up to 2018.

• The Board of Directors of Rostelecom approved association of cellular assets with Tele2 Russia. • Ministry of Communications of Russia and Rostelecom signed the contracts for the operation of eGovernment and development of SPSS in 2014. • The Company's shareholders supported the reorganization in the form of allocation of JSC "RT- Mobile".

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OPERATING AND FINANCIAL RESULTS In this section, the consolidated data for the Group companies are presented in accordance with International Financial Reporting Standards, unless otherwise indicated.

Key operation indicators 2012 2013 2013/2012 Description RUB in millions RUB in millions % Revenue from sales of goods, products, works, services 332,435 325,704 -2.1 Net operating expenses 278,604 280,836 0.8 Operating profit 53,831 44,868 -20.0 Profit before taxes 42,503 32,119 -32.3 Net profit 33,202 24,131 -37.6

Revenue breakdown 2012 2013 Type of services RUB in millions RUB in millions Local telephone service 89, 504 87,436 Intra-NP area telephone service 19,634 17,171 Domestic and International Long-Distance telephone service 20,562 17,101 Interconnection and traffic routing services (except Internet) 21,991 24,864 Mobile telecommunications services 41,161 38,902 Circuit lease services 11,433 9,486 Broadband Internet access 51,619 55,938 PayTV services 9,208 11,906 Data services (VPN, data centers), supply of Internet traffic to 20,872 23,025 operators Cloud services 6,004 5,422 Other services 40,447 34,453 Total 332,435 325,704

Revenue breakdown by customer groups 2013 2012 RUB in RUB in millions millions Individuals 167,330 165,884 Entities 70,794 73,827 Budgetary organizations 54,159 45,604 Operators 40,152 40,389

Operating expenses 2011 2012 Item RUB in RUB in millions % % millions Payroll, other compensations and social benefits 88,815 31.9% 91,002 32.4% Amortization and loss from current asset depreciation 66,511 23.9% 68,414 24.4% Expenses for operators services 48,858 17.5% 49,746 17.7% Material, repair and maintenance, utility services 28,483 10.2% 28,495 10.1% Loss from retirement of fixed assets and intangibles 752 0.3% 344 0.1% Expenses on doubtful receivables 1,389 0.5% 2,140 0.8% Other operating income -14,749 -5.3% -15,929 -5.7% Other operating expenses 58,545 21.0% 56,624 20.2% Net operating expenses, total 278,604 100.0% 280,836 100.0%

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Efficiency Indicators 2013/2012 Indicator Measurement unit 2012 2013 % Operating margin % 16.2% 13.8% - Net margin % 10.0% 7.4% - Costs per 100 rubles of revenue RUB 84 86 2.8% OIBDA RUB in millions 120,342 113,282 -6.2% OIBDA margin % 36.2% 34.8% -

Net Assets Description 2012 2013 mln RUB mln RUB Net assets, total 238,832 199,756 Net assets to charter capital ratio 2,462 2,059

Key figures for the principal activity of the Company * Measurement Indicator 2012 2013 unit Number of subscribers Local communication million 28,2 26,5 Individuals million 24,1 22,5 Entities million 4,1 4,0 Mobile communication million 13,6 14,8 Broadband access million 9,7 10,6 Individuals million 9,0 9,8 Entities million 0,7 0,7 Subscribers connected via FTTx % 32 38 PayTV million 6,9 7,5 IP TV share % 23 29 Traffic generated by individuals and entities Intra-areal billion min 10,0 9,1 IC billion min 4,7 4,0 IN billion min 0,5 0,4 ARPU Via broadband access RUB 453 448 Via fixed telephony RUB 241 249 Via payTV RUB 116 133 Via mobile communication RUB 263 239 * Data are presented in terms of joining of Svyazinvest and its subsidiaries to Rostelecom on 01.10.2013. Data for 2012 also reflect performance of listed companies.

Distribution of 2012 Net Profit Figures in the table below are shown in accordance with the Russian Accounting Standards (RAS) RUB in thousands as % of net profit Net profit for 2012, RUB in thousands 32,674,394 Net profit allocation Dividend payments, RUB in thousands, 8,168,569 25% of which: to the federal budget 532,757 1.63% To finance the increase of the charter capital in terms of the 24,505,825 75% undistributed 2012 profit Allocated to reserves 0 0.00% Allocations to other funds 0 0.00% Other net profit allocations 0 0.00% For reference only: Allocations to investment projects (programs) 68 487 000 209.6% implementation*

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Report on the investment project implementation is presented in Investment Programs Implementation section of this Annual Report * Money outflow due to purchases, creation, upgrades, reconstruction and preparation for usage of non-current assets

Consumption of energy resources in 2013 Cost, RUB in Measurement Energy resources Consumption volume thousands unit (excluding VAT) 1. Fuels and process liquids 1 474 446 For boilers 172,725 thousand m3 9 Other 16,401 ton 7,433 Coal ton 18,796 51,795 Diesel fuel/oil ton 2,445 95,862 Gas (including gas condensate) thousand m3 6,394 7,639 Black oil fuel ton 83 908 Kerosene ton 5 120 For transport and mechanisms 1,188,257 thousand Fuel 46,611 1,133,408 liters thousand Oil and process liquids 582 54,849 liters For production equipment 110,265 thousand Fuel 3,428 103,059 liters thousand Oil and process liquids 74 7,206 liters For floating craft 3,199 thousand Fuel 109 2,939 liters thousand Oil and process liquids 2 260 liters 2. Utility services 8,359,370 thousand Electric power supply 886,092 6,180,195 kW/h Gas supply m3 39,950,453 179,689 Heating gCal 1,345,566 1,999,486

COMPANY’S POSITION IN THE INDUSTRY OJSC Rostelecom has been operating in the telecommunications industry since its state registration on September 23, 1993. Nowadays, the major players in the Russian telecommunications market are the “big four” operators: Rostelecom, MTS, VimpelCom, and Megaphone. These are companies that provide a full range of basic telecommunications services and account for over 80% of all revenue generated in the Russian telecommunications market. Despite a potential for emerging of alternative operators, the four key players occupy the major share of the earnings in the industry as a result of geographic expansion, growth in the regions, and mergers and acquisitions transactions. OJSC Rostelecom is the undisputed market leader in fixed-line services. As a result of the merger of Inter- Regional Companies into Rostelecom, the Company managed to expand the range of services it delivers and enter new market segments. In this way, the Company significantly increased its market shares and became the country’s largest universal telecom operator. In the past year, the consolidated company remained the dominant provider of telecommunication services in the traditional markets of local and long-distance communication. It also achieved sustainable growth and prosperity in high technology sectors, developing broadband Internet access and data transmission services, as well as interactive paid television, provisioning of VPNs, video conferencing, and intelligent network services. In addition the Company started provision of mobile data services based on 3G+ (HSPA+) technology, thus expanding its product line offered to existing and potential customers. The Company managed to capture undisputed leader positions in the sector of telecommunication services provided to Russian state authorities of all levels, public entities and institutions. Local telephony

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Rostelecom is the domineering player in the local telephony sector with a 69% market share by subscribers. Local telephony services offered by Rostelecom are available to a vast majority of households in the country, small and medium businesses, large corporations, and government agencies and entities. The number of active subscriber lines exceeds 27 million lines. Historically, local telephony services are traditionally provided by Rostelecom and account for a considerable share of its business. Some key strengths like possession of a modern and widespread network, access to the last mile connections, and support from the public sector, allow Rostelecom to dominate the market of local telephony services. The table below illustrates Rostelecom positions in this market and market shares of its major competitors as on December 31, 2012. Local telephony operators Market share by revenues in 2013 Rostelecom 63% MTS (including MGTS) 14%` Others 23% Source: iKS-consulting, the Company’s data The Company’s share in the local telephony market amounted to 66 and 65% by the end of 2011 and 2012 respectively. Broadband Internet access OJSC Rostelecom is both a traditional market leader in the local and long distance telephony markets and an undisputed leader in the Russian Internet market, which is considered to be one of the most competitive of all the markets where the Company operates. While the markets in Moscow and St. Petersburg have already reached a point of saturation with over 80% of the market being controlled by five principle players, the regional broadband Internet markets are in the most dynamic phase of their formation. In order to further strengthen its position in rapidly developing regional markets, Rostelecom focused its efforts on reinforcing its competitive advantages and consolidating regional assets. The Company’s competitors in this market are both major mobile players which recently merged with alternative fixed-line operators, and regional providers. Rostelecom, however, has a significant advantage: its share of the market is nearly four times greater than that of its nearest competitor. The Company plans to further strengthen its leadership position. The table below illustrates Rostelecom’s position in the broadband Internet market as well as market shares of its major competitors as of December 31, 2013. Broadband Internet access providers Market share by subscribers in 2013 Rostelecom 36.4% ER-Telecom 9.4% VimpelCom 8.3% MTS 8.2% Others 37.7% Source: iKS-consulting, the Company’s data As of the end of 2011, the Company’s share in the broadband Internet market in terms of number of subscribers was 35.4%. PayTV PayTV segment is one of the key drivers of the telecommunications market growth. With a 22% market share by the end of 2013, Rostelecom is among top three market leaders of PayTV services in terms of number of subscribers. As of the end of 2012 and 2011, the Company’s share amounted to 22% and 23%, respectively. The growth of Rostelecom market share in PayTV can be attributed to the acquisition of NTK Group in February 2011 and their subsequent acquisition in October 2013. As a result of this acquisition, Rostelecom gained a substantial subscriber base of interactive television services. Rostelecom major competitors in the paid TV market are Tricolor and OJSC MTS. The following table represents the principal competitors of Rostelecom in the PayTV market as of December 31, 2013. PayTV operators Market share by subscribers Tricolor 30% Rostelecom 22% MTS 10% ER-Telecom 8% Akado 3% VimpelCom 3%

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Others 26% Source: iKS-consulting, based on information about the number of cable, satellite, and IPTV subscribers Mobile Communications services During 2013, the Company, through its own subsidiaries and affiliated companies has been providing mobile telephone service in GSM and CDMA in 59 regions of the Russian Federation. The Company’s mobile business is concentrated mainly in the Urals, Siberia, the Volga region and the Far East. As of the end of 2011, 2012, and 2013, Rostelecom’s market share in the mobile communications market in terms of number of subscribers amounted to 6%. In 2013 it was decided to establish a joint venture with Tele2 Russia, thus allowing to form a federal mobile operator which will bring significant benefits to both sides of the transaction and will be beneficial to both consumers and the Russian telecommunications market. The joint venture plans significant investments in network 3G/LTE and innovative mobile services of high quality in the interests of Russian consumers and corporate clients. The following table shows the shares of the main competitors of Rostelecom in the market of mobile telecommunication services in Russia as of December 31, 2013. Mobile operators Market share by subscribers in 2013 MTS 29% Megaphone 29% VimpelCom 24% Tele2 10% Rostelecom 6% Others 2% Source: ACM-Consulting, the Company’s data

COMPANIES IN ROSTELECOM GROUP At the beginning of 2013 Rostelecom was a member/shareholder of 75 economic entities, 48 of which are its subsidiaries and 6 are its dependent entities. The book value of financial investments as on December 31, 2013 was over 53 billion rubles. Dividends received by the Company in 2013 from interest in other entities totaled over 1.43 billion rubles. In 2011 Rostelecom’s Board of Directors (according to Minutes No. 23 of 08.12.2011) approved the Company’s non-core assets disposal program. Implementing measures aimed at terminating its interest in non-core and non-operating assets Rostelecom during 2013 discontinued its participation in 13 companies, 8 of them were sold to third party as follows: PSC "Rostelecom-security", excluded from the USRLE on 10.06.2013 in connection with the liquidation; OJSC Central Company "Business Network", excluded from the USRLE on 17.06.2013 in connection with the liquidation; OJSC "Telecommunication Company "RINFOTELS", ceased its participation on 24.07.2013 in connection with the sale of stake for 1,000.00 RUB by the decision of the Board of Directors (Minutes No 51 dated 10.06.2013); LLC "Factorial- 99", ceased its participation on 01.08.2013 in connection with the sale of stake for 1,000.00 RUB by the decision of the Board of Directors (Minutes No 51 dated 10.06.2013); LLC "UTK-Finance", ceased its participation on 01.08.2013 in connection with the sale of stake for 1,000.00 RUB by the decision of the Board of Directors (Minutes No 51 dated 10.06.2013); CJSC "Communication Trading House", excluded from the USRLE on 12.08.2013 in connection with the liquidation; CJSC " TV-Inform", excluded from the USRLE on 02.09.2013 in connection with the liquidation; LLC "MobilCom" excluded from the USRLE on 30.09.2013 in connection with the liquidation; CJSC "People's Telephone Saratov", ceased its participation on 23.10.2013 in connection with the sale of stake for 1,000.00 RUB by the decision of the Board of Directors (Minutes No 51 dated 10.06.2013); CJSC "STARTCOM", ceased its participation on 23.10.2013 in connection with the sale of stake for 1,000.00 RUB by the decision of the Board of Directors (Minutes No 51 dated 10.06.2013); CJSC "Vladimir Teleservice", ceased its participation on 15.11.2013 in connection with the sale of stake for 1,000.00 RUB by the decision of the Board of Directors (Minutes No 51 dated 10.06.2013 );

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LLC "Kamalyaskom", ceased its participation on 25.11.2013 in connection with the sale of stake for 1000 RUB by the decision of the Board of Directors (Minutes No 51 dated 10.06.2013); LLC "Telecom-Terminal", ceased its participation on 25.11.2013 in connection with the sale of stake for 1,000.00 RUB by the decision of the Board of Directors (Minutes No 51 dated 10.06.2013). On June 26, 2013 by a vote at the Extraordinary General Meeting of Shareholders of the Company it was decided to reorganize the Company in the form of acquisition of Open Joint Stock Company "Investment company of communication", Open Joint Stock Company "NATIONAL COMMUNICATIONS", Open Joint Stock Company "National Cable Networks", Open Joint Stock Company “TV St. Petersburg cable TV", Closed Joint Stock Company "ELKATEL" open Joint Stock Company "National Cable Networks – EuroAsia", Closed Joint Stock Company "Novosibirsk antenna- cable television broadcasting", Closed Joint Stock Company " Television Network Service", Closed Joint Stock Company "ELTELEKOR", Open Joint Stock Company "Mosteleset", Open Joint Stock Company "Mostelecom", Closed Joint Stock Company "TELESET", Closed Joint Stock Company "TELESET INVEST", Open Joint Stock Company "TNPKO", Closed Joint Stock Company "Simbirsk telecommunication systems", Closed Joint Stock Company "Svyazinvest", Open Joint Stock Company "Russian Telecommunication Network", Closed Joint Stock Company "Novgorod Datacom", Closed Joint Stock Company "Parma- Inform", Closed Joint Stock Company "Enter"and Open Joint Stock Company "Ingushelektrosvyaz". On 01.10.2013, the company's data were excluded from the register due to the merger with Rostelecom as a result of the reorganization. In addition, as a result of universal succession Rostelecom became a member of 14 business entities, among which are the following main ones: OJSC "Central Telegraph", OJSC "Giprosvyaz , OJSC "Chukotkasvyazinform", OJSC KGTS, LLC "NKS Media", CJSC "TKT-Story", LLC "ArtMedia Group", CJSC"Macomnet" and CJSC "St. Petersburg payphones". As a result of the above activities, as well as a series of transactions in shares and interests in other companies by the end of the reporting year, the Company was a party/shareholder of 75 business entities, including 47 subsidiaries and seven affiliates. Information on all forms of Rostelecom participation in commercial and non-profit organizations is provided in Appendix 4 of this Annual Report and is an integral part thereof. The companies acquired in 2013 Acquisition of shares of CJSC "Sky Link" from a subsidiary of LLC “Mobitel" On December 19, 2013 in accordance with the decision of the Board of Directors dated 12.12.2013 Rostelecom completed the acquisition of 50% (effective - 100%) of the authorized capital of CJSC "Sky Link" from a subsidiary of LLC “Mobitel". The transaction price amounted to 9.4 billion RUB. Sky Link Group provides high-speed mobile Internet access, voice and data communication (using 3G/EV- DO third generation technology and 2G/GSM technology). Currently, the territory of license coverage of Sky Link Group includes 76 regions of Russia, with more than 90 percent of the population, including Moscow, St. Petersburg and other major Russian cities; the territory of 3G services under the brand name "Sky Link" includes more than 10,300 settlements in 36 regions of Russia.

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THE COMPANY AND THE BOARD OF DIRECTORS’ REVIEW OF THE YEAR 2013 During the last years, from the operator providing mainly fixed-line services, Rostelecom was transformed into a modern service provider that meets the needs of all groups of consumers throughout the country. Continuing to develop and improve the services provided, the Company also focused on improving corporate governance practices and optimizing operational efficiency in 2013. Acquisition of Svyazinvest and a number of its subsidiaries, which was held in October 1, 2013, was a continuation of the reorganization in 2011. Elimination of cross-ownership of share capital between Rostelecom and Svyazinvest contributed to simplification and increase of the transparency of corporate governance of the Group companies, as well as an increase in direct proportion to the state capital of the Company. Improving operational efficiency during the year was carried out by optimizing multiple business processes, eliminating duplication of functions, as well as applying the best domestic and foreign procurement practices. For example, thanks to the public procurement procedures the Company was able to reduce the cost of TV- tuners for "Interactive TV" by 24%, and due to centralization and effectiveness of procurement activities in the second half of the year, the Company saved more than 16 billion RUB. A striking example confirming the leadership of Rostelecom in the Russian telecommunications industry was Sochi 2014 Project. The Company has completed the construction of a large-scale network infrastructure, organized modern telecommunications services to the organizers, broadcasters, athletes and spectators of Olympics and Paralympics Games. The basic infrastructure for the implementation of any international projects, organization of television and video broadcasting was created in Sochi and the foundation for the use of wireless technology and the active development of broadband access in the region was laid for the next coming years. In the past year, Rostelecom remained committed to maintain its leading position in the telecommunications industry, using the competitive advantages of the combined operator and creating single strong brand. Considerable efforts of Rostelecom have been directed to keep the subscribers in the mass segment and to accumulate the customer base in the market of broadband services and payTV. Furthermore, Rostelecom continued improvement of its backbone network, developing the potential of which, the Company provides the basis for the growing demand for modern and high quality telecommunications products and provides the users with the ability to access to Rostelecom services in all regions of the country.

COMPLETION OF THE SECOND REORGANIZATION PHASE On October 1, 2013 in accordance with Presidential Decree No 340 dated 24 March 2012 "Reorganization of OJSC "Rostelecom", the entry on merger of Svyazinvest to Rostelecom and 20 subsidiaries and affiliates was entered to the Unified State Register of Legal Entities. This reorganization was a logical and consistent continuation of the reorganization of 2011, when seven regional telecommunications companies and Dagsvyazinform were acquired by the Company. Due to the completion of the second stage of the reorganization direct state share in the charter capital of the Company was significantly increased and cross-shareholding between Rostelecom and Svyazinvest was eliminated, which increased transparency and simplified control system within the Group. In addition, Rostelecom obtained shares of telecommunications companies previously owned by Svyazinvest and simultaneously the Company acquired 20 subsidiaries and affiliates held by 100% directly or through other 100%-owned subsidiaries by Rostelecom and Svyazinvest. Most of the acquired companies were core operating companies, and a number of them, such as NTK Group or Teleset group, represented a significant asset for Rostelecom and occupied leading positions in large and strategically important regions of Russia. Ownership and managing of such subsidiaries and affiliates and the distribution of business between separate legal entities: • caused additional operating costs due to the existence of overlapping functions; • did not allow to fully realize the synergy potential from the reorganization of the Rostelecom Group of companies and creation of value for the shareholder ; • created a significant undesirable load on the Company and management, as well as it led to the need to enter into a significant amount of intercompany agreements;

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• significantly impeded implementation of the agreed investment, technical, commercial and marketing policy; • created an emergency internal competition between different business units. Thus, acquisition of the companies involved in the reorganization, represented the best way to integrate, assuming the acquisition of subscribers, network infrastructure, property and equipment complex of the companies merging by universal succession, as well as made it possible to eliminate duplicate functions, to reduce expenditure component and to create the preconditions for profitable growth of the Company. Completion of the second reorganization phase has brought the legal structure of the Group of companies Rostelecom to a "target one" – with minimum of separate legal entities and maximum consolidation of businesses and assets. In addition, it is expected that the acquisition will allow to more fully realize the potential number of tactical advantages in the future, such as: the possibility of a common technical, technological, contractual and procurement policy, the expected improvement in interaction with major customers, suppliers of equipment and services, the possibility to enhance the capability of debt liabilities service due to the consolidation of cash flow and the ability to concentrate resources on priority areas.

PROJECT “OLYMPIC AND PARAOLIMPIC WINTER GAMES 2014 IN SOCHI” In January 2009 Rostelecom won a contest conducted by the Organizing Committee of the XXII Olympic Winter Game 2014 in Sochi, and alongside MegaFon was announced a General Telecommunications Partner of the XXII Olympic Winter Game 2014 in Sochi and holds an official right to use the designations of Telecommunications Partner/Telecommunications Operator of the XXII Olympic Winter Game 2014 in Sochi. It is not simply accidental that Telecommunications was the first category where General Partners were designated. Organizing of the XXII Olympic Winter Game 2014 in Sochi pronounced the Games innovative, and telecommunications is an infrastructural and innovative sector of the economy. For the Company as Russia’s national telecom operator telecommunications is evidently the starting point for implementation of huge scale projects. The primary strength of Rostelecom is its ability to deliver complete turn-key technological implementation of the project. The Company’s unique capabilities enables it to deploy in south of Russia a groundwork for offering state-of-art telecommunications services before, during and after the Olympic Winter Games 2014. On November 27, 2013, 100 days before the Paralympic Winter Games in Sochi, Rostelecom supported the Paralympic movement and signed Memorandum of cooperation with the Organizing Committee "Sochi 2014" in the "Telecommunications" category. The Company has prepared infrastructure and provided the organizers, participants and guests of the XI Paralympic Winter Games of 2014 in Sochi with modern telecommunications services. The Company’s specialists have been performing huge amounts of work to prepare and construct the infrastructure for the forthcoming Olympic and Paralympic Winter Games in Sochi’2014. The principal investment policy goal in the Southern Federal Administrative District is deployment of the core network for the Common Information and Telecommunications Infrastructure for Olympic Games 2014. Another primary goal is upgrade and modernization of the existing digital backbone links to increase the network throughput by tens times, improve the network resilience and optimize backbone performance. Altogether within the Sochi’2014 Project Rostelecom will provide connection links to network infrastructure and telecommunications services at 35 various Olympic sites, including the place of the medal ceremony at the Paralympic Winter Games and television center OBS TV Tower. In order to held the Games and to ensure TV-broadcasts, the bandwidth of Rostelecom backbone network has been increased up to 140 Gbps and that of the multi service network – up to 40 Gbit/s, and in order to ensure reliability of communication networks in the area of the Games laid 500 kilometers of fiber-optic lines for geographically redundant spaced routes. The key phase of "Sochi 2014" was the creation of the Olympic Center for Information Technologies (OCIT), which is the largest IT-infrastructure facility of the Games in Sochi with an area of more than two thousand square meters. OCIT is equipped with high-performance equipment: 329 servers with multi-core processors (3372 cores), 6 storage systems (620 TB), 2 tape libraries (180 TB). About 50 different information and technological systems has been implemented there. The main task of the center is the processing Olympics information flows, the unified network management, the integration of special solutions for each sports event. Within the agreement with the Olympic Broadcasting Service (OBS), the host broadcaster of the Games in Sochi, Rostelecom has provided the data channels with a total capacity of 110 Gbit/s to all broadcasters which were the holders of the Olympic content; the broadcast of the XXII Olympic Winter Games was performed by 90 broadcasters in 159 countries. And international broadcasters received a total of 1112 optic fibers for their use.

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More than 20,000 hotel rooms and apartment buildings to house temporary staff, volunteers and security forces were provided with broadband Internet access at speeds up to 100 Mbit/s, Rostelecom Interactive IPTV and fixed telephony. The Company organized Internet cafes in the Olympic Village, the Main Media Center and Media Center "Hills". Thus, free access to the Internet at these sites could be used by all accredited journalists, athletes and team members from 85 countries. Rostelecom assured production and broadcasting of unique video content on the screens installed in 13 venues Live Sites Sochi 2014 in 8 cities of Russia. Sports event broadcast program was formed in the interests of the Russian audience. The project goal was to expand the territory of the Games, to involve maximum number of spectators in the unique atmosphere, to give the opportunity to anyone to become a part of the Games. The amounts of the specialized communication services such as DLD/ILD telephony, local and intra-zone telephony, dedicated Internet access, IP VPN services, ISS services, provided to the Organizing Committee "Sochi 2014", have been increased significantly. Communications infrastructure successfully passed the procedural tests TR1 and TR2 (Technical Rehearsal) in October and December 2013. As part of these tests, real actions of every specialist were worked out under different scenarios for a few days. Together with the Organizing Committee "Sochi 2014", Rostelecom has created telecommunications infrastructure for 47 international test events of the season 2012-2013; moreover, supported by the Company, the Russian Cups and Championships were held in the Olympic Sochi in 2013; it is the most extensive program over the entire history of the Games. While creating the infrastructure the Company employed most advanced solutions paying due attention to protection of environment and using state-of-the-art technologies preserving the ecological balance in the region and the natural beauty and variety of Krasnodar region. The motto of Rostelecom while preparing for the Games was "2014 Olympics to everyone!" and "It is you who participate in the Games!”. In other words, thanks to the infrastructure created by Rostelecom every citizen of our country and around the world could become a direct participant in this unique sporting event. Humanitarian legacy of the Games in Sochi will be innovative system of remote Olympic education developed in conjunction with the Organizing Committee "Sochi 2014” and the Russian Olympic Committee, the first Olympic lesson was held in the Knowledge Day on September 1, 2012. Based on the established infrastructure Rostelecom intends to provide a variety of advanced telecommunications services for the residents of the city of Sochi, Krasnodar Region and the interests of other regions of the country. The solutions developed in preparation for the Olympics will be used by the Company throughout the Russian Federation. All this, of course, will give a new impetus to the development of all domestic telecommunications industry. The success of the project depends on the availability of single high-tech telecommunications infrastructure covering the whole territory of Russia, and enhanced international cooperation and experience in providing high-tech services of the Company leverage advanced technologies for high-quality implementation of such projects on a national scale.

INNOVATIVE DEVELOPMENT As part of the Innovation Development Program in 2013, the Company continued to implement a number of research and development activities, in particular, the project to establish and develop a national cloud platform O7. The aim of this work was to increase the quantitative characteristics of the platform, increasing reliability and disaster recovery, as well as the development of its functionality for the Company's customers – administrations of subjects of the Russian Federation (using the facilities for the placement of regional cloud services of the Company: Regional Medical Information Systems, "Education", "Culture" services, multifunctional centers , etc.), the Ministry of Communications (using the facilities of the platform for e- government infrastructure information systems), the Information Democracy Fund (providing facilities for placement of "Russian Public Initiative"). During the reporting year, the active work to expand the functionality of innovative services developed in the previous year was carried on, such as GIS "Housing", "Education", "Distance learning", "Multiplex –TV tuner". The number of regions of the country, where implementation and interface with existing regional systems was performed, increased. The project of interface of ERA- GLONASS system with call emergency services system on a single number "112" and a unified software solution was developed for scheduling function of the sanitary vehicles, appropriate test systems interface was implemented in several regions of the Russian Federation. The

18 ANNUAL REPORT above decision will automate the process of monitoring the use of sanitary vehicles, reduce waiting time of arrival of ambulance crews, ensure the effectiveness of budget expenditures on fuel and vehicle use. The development of new services has been initiated in the Company's Innovation Center and this will allow the Company to expand into new markets. The first samples of promising services will be introduced into trial operation in 2014-2015. In 2013, cooperation with regional innovation clusters country was settled down. Several meetings were held with representatives of the Novosibirsk cluster of information and biotechnologies, and the Company also acquired the newly established IT cluster in the Kaluga region. The result of these activities was the establishment of a stable channel of receipt of ideas and development of innovative companies of small and medium business segment. The result of the research work was an experimental piece of distributed university and research laboratory (DURL) based on dedicated network of inter-university cooperation. The creation of DURL was conducted by combining separate fragments of laboratory telecommunications networks of the specialized universities into a single dedicated network with information virtualization, communication and control resources. The combination of individual fragments of laboratory telecommunications networks into a single selected geographically distributed network was aimed at solving the problem of full-fledged teaching of telecommunications disciplines using the widest range of modern camera equipment, as well as research using remote access. The created DURL will provide the possibility of adapting in the expansion of the subjects of the educational process and/or the emergence of new areas of use. During the implementation of the program of energy conservation and energy efficiency, the implementation of previously developed energy management system at the Company was carried on. In order to collect the data needed to predict the energy consumption, the works on the installation of accounting systems for heat, water and energy in the pilot sites were performed. First results of forecasting and identification of best practices in energy efficiency will be obtained in 2014.

ELECTRONIC GOVERNMENT In order to improve performance of governmental and public authorities the Russian Government since 2002 has been implementing the Federal Special Purpose Program called The Electronic Russia. The E- Government project within the framework of this program is aimed at ensuring the rights of people and organization for access to public services, including the right to obtain information regarding the structure and functions of public authorities and state institutions. According to the Resolution of the Russian Government No 238-r of February 22, 2012 Rostelecom was designated the sole contractor for E-Government project for 2012-2014. In furtherance of the Electronic Russia Program the Russian Government Resolution 1815-r of October 20, 2010 established and approved another Federal Special Program called the Information Society. This Program was developed for 2011-2020 and covers in particular development of a public services portal, development of common trusted environment of digital signatures, enhancement of e-workflow between authorities, common authentication system. Rostelecom is also engaged in development of tools enabling usage of mobile devices to access e-government services and state e-mail to be employed for interactions between citizens and state authorities. The Company’s responsibilities and roles as the contractor additionally include creation of common reference information/directories and classifiers for state information systems, and development of other projects like electronic civil registration office, electronic region and electronic democracy. The Nationwide cloud platform being designed and deployed by the Company became the framework for implementation of the above systems. In 2013 Rostelecom ensured completion of the following key federal level projects under the Information Society Program: • State information system "Single Portal of State and Municipal Services" (hereinafter - SPSS, portal) is successfully developing, within which the provision of 643 public services in electronic form is supplied on the basis of the federal executive bodies, 6876 regional services, as well as 11,844 municipal services for both individuals and legal entities. • Over 7 million users are registered (of which 3.5 million in 2013). Number of services rendered in 2013 exceeded 13 million, which is 2 times more than the same indicator in 2012. SPSS integration with external eGovernment systems, modernization of subsystem "Personal account of SPSS user" was assured in order to improve convenience for users to interact with public authorities. Information content of SPSS was harmonized with the relevant legal acts.

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• The Company also provides information support to the users of the Single portal. 78 regions of Russia are connected to the system, 125 points issuing activation codes and centers issuing digital signature are opened, more than 800 eGovernment informants are installed. • Using public services portal, the users are able to pay utility bills and traffic police fines. In 2013, 527,620 successful payments totaling more than 500 million rubles were carried out. • Portal applications for mobile devices available for download in Google Play, App Store, Windows Phone Store and Windows Store were released. The number of mobile version of the portal of public services installed by the users in 2013 amounted to 508,204. The users ordered over 800,000 services via mobile version of the portal of public services in 2013. • Single system of identification and authentication infrastructure has been further developed, providing information technology interaction of information systems used for the provision of public and municipal services in electronic form (hereinafter - SSIA). By the results of 2013 the number of the users registered on SPSS using SSIA was 3.5 million, which is comparable to the total number of the users registered in 2011 and 2012. Within the user registration in SSIA the possibility of registration via mobile phone number and email address was implemented, technology of use of a simple electronic signature was debugged, technology that allows authorized authorities (Russian Post, Rostelecom, hereinafter MFC) to confirm the identity of the citizen on passport data was created . • As part of the research work on the topic: "Implementation of solutions for coordination of expenditures of public authorities for the use of information technology", an examination of more than 500 documents on informatization of the agencies and of the Government was performed, a concept for improving coordination of informatization was developed. • In the event of the state program "Information Society" "Implementation of solutions for coordination of expenditures of public authorities for the use of information technology" based on the RF Government Decree dated 30.01.2013 No 62 "National fund of algorithms and programs for computers", the Federal state information system "National Fund of algorithms and programs for computers" was created for the collection, processing and storage of algorithms and programs for electronic computers, preparatory (project ), technical, and procedural documentation accompanying programs for electronic computers, created or acquired with funds from the federal budget and the budgets of state extra-budgetary funds. "Guidance on the formation and use of information resource fund” was prepared, approved and registered with the Ministry of Justice. • The functionality of the automated information system "Managing the departmental and regional informatization" has been further developing including new system interfaces for a better user experience which have been developed and implemented. • Single space of electronic signature trust is supported. Now it is possible to view and sign electronic documents in accordance with Russian legislation. • During the reporting period Single system of interagency electronic interaction (SSIEI) has been actively developing, which allows providing state and municipal services on a new level. Connecting to the system, government institutions exchange information, as a result of which the citizens do not have to bring additional documents from other departments – authorities send the requests by themselves. The system is connected to all federal executive authorities of Russia, and the intensity of the system (the peak load during the reporting period) amounts to 7 million requests per day. In 2013, the total number of requests sent via SSIEI exceeded 1.5 billion requests. • In 2013, 718 banks were connected to SSIEI in order to transfer information about payments made in Public information system for regional and local payments. • On the basis of the National cloud platform in which computer resources and capacities are available to the user as an online service, more than 150 services for both public authorities and commercial structures have been created and operated. • Web project "Russian community initiative" was deployed on the technical means of e-Government infrastructure in 2013. The Company provides technical support for the expanded information system and also handles calls from the citizens related to the work of the portal. In 2013, 2964 initiatives were placed in the portal; over 4 thousand complaints of citizens were processed. • As part of the public contract for the creation of Data Center of the Single State Health Information System (SSHIS), Rostelecom placed Basic, Reserve and Test platform of SHIS on its technical resources of National cloud platform, providing a total of 1,200 vCPU, 2800 Gb vRAM, 150 000 Gb vHDD to accommodate 7 information systems of the Russian Ministry of Health. 83 SSHIS links to access nodes of Russian Ministry of Health infrastructure in the regions was created.

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• In August 2013 functioning e-government system was inspected, which resulted in the purchase of the necessary licenses and equipment to build the network infrastructure and modernization of backup systems amounting to 269 million RUB. • By order of the Ministry of Communications and Mass Communications of the Russian Federation, a project on creation of a stand of e-Government Infrastructure Chief Designer was implemented within in the activity on development of interagency electronic interaction. • In 2013, works on the development of single system of reference information (SSRI) were continued. Due to the works conducted, the SSRI system represented a powerful tool for storing and organizing information of its components. The performance of the system was increased, which allows the use of the SSRI system not only to work with the basic state information resources , but also for the storage and distribution of multiple internal reference (more than 800) information systems included in the Information Society Program, which allows the systems to communicate in a single information field. Moreover in 2013 Rostelecom completed the following regional projects of the Federal Special Purpose Information Society Program:  The customers are provided with the service of process automation of interagency cooperation within Process flow chart of interagency cooperation at the regional level. The system solves two main functional tasks: providing the possibility of organizing single electronic interaction between the regional authorities and enabling automated use in the processes of information resources interagency cooperation of the regional authorities and web services of the federal bodies of executive power.  Development of software and hardware solution Electronic municipal government for automating operations of local self-government authorities and provision of municipal services. This SW and HW solution is incorporated into E-Government Project in the regions implementing it and enables improvement of efficiency of execution of state and municipal tasks and functions  Development of a cloud-based solution for provision of library directory services and information about large scale events. This is designed to alleviate the problem of significantly declining library attendance. The primary function of this service for people is accessibility of information regarding the library stock, while for authorities in the implementing regions it is automation of maintaining a single catalogue of publications and cost cutting. In addition the service ensures accessibility of information about holding large scale events.  Development of the regional segment of the E-Government Project infrastructure (Stage 3) related to portal-based solutions for interactions with regional executive bodies and local municipal governments.

DEVELOPING RETAIL RELATIONSHIPS In the reporting year, Rostelecom developed relations with corporate and residential customers through the expansion of its offer portfolio, provision of a full range of telecommunication services, and introduction of federal offers guaranteeing high parameters of services across the entirety of its network. An extended network of sales and servicing that consists of about 2100 offices located in regions throughout the Russian Federation allows the Company to sell services efficiently, to provide customers with assistance in the use of services, as well as information on existing services. To deliver more comprehensive service the Company works hard so as to perfect remote sales and service channels. To simplify the procedure of negotiating contract conditions, the Company drew up a universal agreement that permits subscribers to access information pertaining to all of the Company’s services within a single contract. In order to develop relations with individual customers the Company proceeded with operational management of customer retention, developed measures aimed at reducing churn, at classification and elimination of causes for customer contracts termination. Also, steps were initiated to standardize and improve quality of connection of users – individual customers. To enhance relations with corporate customers the Customer primarily focused its efforts on implementation of common standards of sales and customer service in order to built-up sales volumes and reduce churn. Earlier a unified segment-oriented system of sales and customer service was put in place alongside general common standards of relations with corporate customers on the federal level based on this system, and common principles of interactions with agents were developed in order to improve efficiency of the indirect sales channel. In the reporting year the Company improved sales efficiency through diversification of product portfolio, creation of service bundles, development of comprehensive services based on the National Cloud Platform.

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Service federalization and unification was underway, and implementation of the complete service portfolio throughout Russia continued, measure were undertaken to improve quality through distribution network modernization. Streamlining relations with corporate federal customers the Company centralized interactions with head companies from TOP-400 major companies list, introduced centralized billing for such customers and single invoice issuing for all services being rendered in all Russian constituent entities. Structural hierarchy and process management enabled prompt handling of centralized tasks in the field and ensured implementation of “one-stop shopping” principle for corporate customers. In order to improve customer service the Company extensively enhances channels of distant interactions with customers. The Company also continues to work for service and tool integration by enhancing bundled and packaged solutions for all customer segments. Introduction of new services continued quite actively, while customized and customer specific solutions were designed for key accounts.

RUSSIAN OPERATORS’ MARKET Provision of telecommunication services to Russian and foreign operators is Rostelecom traditional specialty. Long-standing operator experience, as well as the unique advantage of possessing its own digital transport network with extensive geographic coverage enable the Company to provide high quality telecommunications services both in the Russian Federation and abroad. Today Rostelecom has direct connectivity with network operators in 70 countries. It provides telecommunication services to over 2500 fixed-line and mobile operators and Internet and content providers. Rostelecom products portfolio includes options for voice, data, and video transmission and offers service at different levels corresponding to operators’ individual requirements. In 2013 the Company continued to reinforce partner relations with international operators and telecommunications service providers of other countries in order to maintain its position on the market of international traffic, in particular, new routes were established with the purpose of penetrating new geographic markets. In particular, Transit Europe-Asia was upgrade up to 660 Gbps by line TEA-2 Khabarovsk - Stockholm power rising up to 400Gbps and through the organization of a new line TEM -3 Khabarovsk – Ukraine – Frankfurt with an initial capacity of 200Gbps with international output ports in Japan/China/Mongolia. Also in 2013, a premium China-Europe transit TEM-4 was launched through Mongolia with the shortest signal delay among all routes on the market. The initial capacity of TEM-4 through Mongolia, connected by trunks TEM-2 and TEM-3 is 80Gbps. Total revenue from these projects in 2013 amounted to about 50 million USD. In September 2013 FastLine project connecting Moscow to Frankfurt via Belarus was implemented. The total capacity of the activated lines is 500GB.

TRADITIONAL TELEPHONY SERVICES Fixed-line telephony services are also a traditional venue for Rostelecom and account for a considerable share of its business. Approximately 37% of the Company’s revenue in 2013 was generated by provision of fixed-line telephone services:

Russian rubles in millions Urban and rural telephone service 87,436 Domestic and international long-distance calls* 17,171 Intra-area telephone service * 17,101 Total 121,707 In order to maintain the subscriber base for long-distance telephony and localization of long-distance traffic, in the 4th quarter on-net tariff plans were first introduced in all macro-regional branches relating to long- distance telephone service, allowing the subscribers of Rostelecom local telephone communication to significantly save on long distance calls made to both fixed and mobile numbers of the Company regardless of the direction of the call. Rostelecom is actively developing new technology to replace the traditional services in the corporate segment. In 2013, the legal entities (including for participation in tenders/bids/auctions) in Moscow, the

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Moscow Region, St. Petersburg, Novosibirsk and the Central Federal District had the opportunity to use a new service "New Telephony" (Cloud PBX). "New Telephony" is an innovative service of office telephone system, allowing access to corporate telephony from anywhere where internet access is available. Order of service can be made from the Rostelecom site. To get an idea about the quality of services and opportunities it is possible to arrange a free trial access to the service on the Rostelecom site. Introduction of the new service was accompanied by marketing activities aimed at creating an information space around the service and attraction of potential customers. In 2013, additional tariff plans for both legal entities and the public were approved at the federal level. Special offers on tariff plans allow the customers to choose the most profitable option and optimize the cost of long distance and international calls. During the past year about 80 thousand users of long-distance and international telephone services were connected according to additional tariff plans. In 2013, Rostelecom continued to develop federal package offers for small and medium-sized businesses under a single brand. Under this offer, in 2013, an updated package "Optimizer” was released, which includes an optimal set of services and benefits on favorable terms. Service package "Optimizer" consists of basic services: landline number with unlimited local traffic and access to the Internet. The offer allows connecting additional services: long distance calls in Russia with included traffic of 300, 600, 2000 minutes, Interactive television, audio conferencing, video conferencing, toll-free calling with code 8-800, office applications. Advantage of package offers is a single contract and a single bill, the optimization time of services booking online. By the results of 2013, this package offer was connected by 42,000 subscribers.

MOBILE SERVICES During 2013 Rostelecom independently provided mobile telephone service in 17 regions of the Russian Federation and in 59 regions of the Russian Federation with regard to subsidiaries – HCC, BVK, ETK, SkyLink Group of Companies, Volgograd GSM, AKOS, BIT. In the reporting year, the Company earned 38 902 mln RUB in the market of mobile services, which accounted for 12% of total revenue. By the end of 2013 mobile services of the Company were exploited by 14.8 million subscribers. Mobile business has been mainly concentrated in the Urals, Siberia, the Volga region and the Far East. On December 30, 2013 the shareholders of the Company approved a reorganization of Rostelecom in the form of allocation to CJSC "RT-Mobile", which will receive Rostelecom mobile assets, as well as CJSC "RT- Mobile" should receive all licenses, frequencies and other authorizations necessary for provision of mobile services. This reorganization has become one of the steps towards the creation of a joint venture with Tele2 Russia on the basis of "T2 RTC Holding". Creation of the joint venture offers a unique opportunity to implement a strategy of Rostelecom in mobile business while maintaining management focus on the development of fixed-line segment, and also contributes to the optimization of related capital investments, which in combination with the potential to produce substantial synergies can positively affect the financial position of the Company in both the short and in the long run.

BROADBAND INTERNET ACCESS Broadband Internet access services are traditionally offered by the Company to the residential and corporate customers’ segments and account for a substantial part of the Company’s business. The Company’s revenue generated by provision of broadband Internet access services in 2013 totaled 55,938 million RUB (VAT not included), accounting for 17% of Rostelecom total revenue. In 2013 the Company continued to adhere to access network modernization plan in order to support introduction of new services and a multiservice model. Over the entire year of 2012 the Company was phasing out xDSL access technology and switching to FTTB and PON. To improve grade of services in all points of presence and drive demand for the Company’s offerings among general population Rostelecom in 2013 introduced a common federal offer “Home internet” (Unified broadband Internet 2.) with a consistent structure and common charging policies. The revamped offer has 4 pricing plans with pre-set speeds and pricing enabling segmented offerings for different users’ groups

23 ANNUAL REPORT depending on income brackets. Also, in order to increase demand for package offers, the Company launched federal offer TVIn Fast (Home Internet + Interactive offer). In addition, in order to increase the subscriber base, as well as to increase ARPU for broadband services, a number of federal promotions were held in 2013: • "Broadband + TV Live" package which includes broadband Internet and TV Online; • "Summer Internet", which includes a package of broadband services and antivirus at the price starting from 295 RUB; • "All Inclusive" package which includes broadband Internet, Interactive TV and antivirus at the price starting from 395 RUB; • "Non Stop", which includes a package of broadband services and interactive TV at the price starting from 390 RUB (xDSL) and 490 RUB (FTTx); • "Everything is real” which includes a package of broadband services and interactive TV with discount for 12 months. Thanks to all of the above events by the results of 2013, subscriber base of broadband services in the B2C segment amounted to approximately 9.3 million subscribers (increase by 2012 is 20.2%), including 3.6 million on optical technologies (increase by 2012 is 81.2 %). The quality of services of Rostelecom is confirmed by certificate of conformity of Internet access service with the requirements of voluntary certification of communications services, communications systems and quality management communication by "Svyaz-quality". In the segment of corporate users and budgetary institutions, the Company continued to follow previously adopted course of comprehensive satisfaction of demand, as well as the establishment of mechanisms to provide flexible and unique tariff proposals and options. To implement the service delivery double- & triple- play principally new package offers of "Basis" series were developed in August 2013. As a part of meeting the needs of corporate clients at the federal level, as well as large government customers in the consumption of high-quality and secure services, the Company developed a fundamentally new products satisfying all the latest customer needs. In 2013, option «Cloud-signaling» for “Traffic monitoring and protection from DDoS-attacks’ was commissioned. The service with additional option allows the client to get immediate protection of its network from the most powerful DDoS-attacks. For customers in the corporate segment "Doubling the speed" promotion started in 2013. The Company offers the customers double increased speed access to the Internet at the fare increase by 20%. By the results of the year about 11 thousand subscribers connected to the service. Rostelecom continued to actively develop projects for connecting commercial real estate and public authorities by GPON technology. Thus, over the past year, the share of commercial real estate facilities, connected via optical cable, has increased to 36%. Also in the corporate sector in 2013 Rostelecom started to deliver the services and content distribution on the basis of the constructed CDN network. The services allow optimizing the delivery of content from the client to the end users to the Internet.

PAY-TV SERVICES In 2013 Rostelecom continued to develop pay-TV services based on a single technical solution. The federal platform that delivers digital content to different types of screens available both for subscribers of its own network, and for general Internet users, 90 % of subscribers of regional products were connected. In 2013 the new federal product "Interactive TV for legal entities" was introduced as well as functionality to support interactive TV 3d, subtitles, poll services, media player, connections bandwidth control system was expanded. Upon results of 2013 the Company’s revenue from provision of PayTV services amounted to 11,906 million rubles or 4% of the total income. Rostelecom continued development of OTT products: Zabava.ru portal is now available on Android applications and Smart TV LG, authorization through social networks is introduced, the number of channels is increased from 89 to 131, the regional anti-virus migrated to a single federal solution. As part of the development of content promotional channels "All TV" within Interactive TV and DTV network were launched as well as new TV-channels.

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In addition, implementing the concept of Double Play, Rostelecom offers its customers packaging interactive TV services with broadband internet access. The result in 2013 was the growth of revenue of pay-TV services by 132 % (IPTV by 88%).

DATA SERVICES Widening its lines of business in 2013, OJSC Rostelecom assigned a special priority to the development of data transmission and telematic services, including Internet access and data center services, as well as the provision of virtual private networks (VPNs). Easy access to the high-speed Rostelecom network in all regions of the Russian Federation, flexible tariff options and guaranteed superior quality and reliability, all help maintain strong demand for data services. In 2013 Rostelecom’s revenue from provision of data services amounted to 23,025 million rubles or 7% of Rostelecom’s total revenue. Using huge capabilities of a powerful modern telecommunications network enables the Company to offer data transmission services to various categories of customers, from residential consumers to large operators, content providers and governmental authorities. Network Interconnection and Internet traffic transit are among the Company’s top priority activities. In 2013, compared with 2012, the Company increased its market share in the Internet backbone to 40%. The factors of significant growth in demand for Rostelecom services are extensive high-speed data network and high quality parameters, which are provided through direct connectivity to the world's leading Internet service providers, the largest traffic exchange sites and content sites in Russia and abroad. One of the important activities of the Company in 2013 was a further expansion of peering relationships with international and Russian operators in order to improve the network connectivity, quality of Internet access services and to reduce costs for the purchase of Internet traffic. A key milestone in the development of both the international and Russian segment of Rostelecom-owned MPLS network was the increase of the European network capacity up to 1.4 Tbps by the year end and establishment of regional peer-to-peer connections with networks of most significant domestic Tier-2 providers for traffic localization, aimed at the optimal routing and saving backbone resources. By the end of the year, the total capacity of peering connections with Russian and foreign operators and content providers was increased up to 2.4 Tbps. Nowadays, the Company is present at such traffic exchanges AMS-IX (Amsterdam, Netherlands), DE-CIX (Frankfurt, Germany), LINX (London, UK), MSK-IX (Moscow) and Netnod (Stockholm, Sweden). Google Global Cache (GGC) project was launched to install Google caching nodes on Rostelecom’s network. At the moment the nodes are installed in all Macroregional Branches of Rostelecom. In total all Google nodes provide to users 300 Gbps during peak hours, while consuming less that 50 Gbps. With launch of the GGC project Rostelecom’s users experience significantly shorter response time to access Google services and it became possible to view video content with the very best quality. Provisioning of Virtual Private Networks (IP VPN) is an interesting option primarily mostly for Rostelecom’s corporate customers. Rostelecom’s own IP/MPLS backbone network capabilities enables the Company to offer services for provisioning of private virtual networks (IP VPN) uniting all geographically distributed customer offices into a protected corporate network with a united information environment, full range of communications services, and high reliability. Data transmission security is ensured with the use of MPLS technologies, where each VPN- network of a customer is separated from networks of other customers, thus providing full protection of the traffic from unauthorized access. In addition, Rostelecom’s IP/MPLS network has been granted a certificate of compliance of the packet switching network with information security requirements of FSTEC of Russia, which guarantees a high degree of protection of the provided services. High reliability and availability of services are ensured by ring protection on Rostelecom’s backbone network, which is guaranteed by signing the Service Level Agreement (SLA), and also backed by round-the-clock network monitoring and user support. Rostelecom ensures provisioning of L3 VPNs of any topology and L2 VPNs/VPLS. Depending on customer’s requirements the Company will provision VPNs of any scale: local, nationwide, and international. Applying common IP-based standards enables integration of various company services and features VPN services, such as International Free Call service (dial numbers 8-800), outbound domestic and international long-distance telephony services over IP, Internet access services and server collocations services. These

25 ANNUAL REPORT universal standards permit Rostelecom to offer its clients comprehensive services, with convenient usage and saving of time. Excellent quality, superior performance and reliability characteristics of Rostelecom services to provision virtual private networks are confirmed by a certificate of compliance of the INTERECOMS Voluntary Certification system for services in the field of communications, information technologies and quality systems of enterprises. In 2013 Rostelecom continued to enhance the carrier-grade service “Interconnection and transmission of traffic of virtual private networks (InterAS VPN)”. Using this service, operators are able to extend the reach of their virtual private network services to the entire data transmission network of Rostelecom. Such interactions between operators allows for creation of a virtual private network (VPN) between offices located in the networks of different operators, with the networks possibly situated in different countries. Regardless of the distance between the user networks, or its offices and regional sites, IP VPN ensures full connectivity between them, security, operation and interactions of any business applications. InterAS VPN service features all of the advantages of the IP VPN service, including support of Service Quality Management (QoS), the possibility to implement VPN with any topology, provision of high security data transmission, as well as reduced costs of equipment and network operation. The principles applied in the provisioning of network-network interface, including agreement on Classes of Service (CoS) and carrier service level (SLA), guarantee an excellent quality of IP VPN services of both parties involved. The key competitive advantages of InterAS VPN service offered by the Company are considered to be wide geographic coverage of its own backbone network, optimization of customer’s expenses and flexible tariff plans, advanced technology and equipment, as well as a certificate of compliance for packet switching networks with information security requirements of the FSTEC of the Russian Federation. Rostelecom data-center services are currently actively adopted by corporate customers and communications service and content providers. By the end of 2013, the Company has set-up 13 data centers, located in Khabarovsk, Novosibirsk, Ekaterinburg, Kazan, Kaliningrad, Stavropol, Krasnodar, Ryazan, Sochi and Moscow. Rostelecom’s service offered on the basis of data centers allow customers to install their own server or telecommunications equipment or rent from Rostelecom a server with required configuration and have a permanent high-speed access via Internet to information resources located on servers. Date Center services enable Rostelecom customers to have a high-speed access to data information resources with confidence in security and integrity of the stored data, and in stable and uninterruptible operation of the equipment and information systems. The Company was granted certificates of compliance for its data center services from the INTERECOMS Voluntary Certification system for services in the field of communications, information technologies and quality systems of enterprises. Additionally, committed quality of service is supported though usage of state-of-the-art technologies and legally and financially ensured by signing a Service Level Agreement (SLA). Diversifying its business in 2013, Rostelecom aggressively advanced and promoted its data center services among hosting and content providers. Now Rostelecom’s data center services, like placement of one’s own equipment in a data-center or renting from the Company a dedicated server with a specific configuration are already widely-used by major federal and regional content providers. In 2013, Rostelecom introduced a new service for the business segment “WEB-video conferencing". Service aims at organization and support of multi-user video conferencing standard on PCs and Internet channels, without the use of videoconferencing equipment. To participate in the WEB-conference, a user requires only a personal computer connected to the Internet, WEB-camera, the headset (speakers, microphone). Rostelecom continues to deploy VoIP-transit service specifically designed to meet the needs of operators who offer IP-telephony services to end users, for the purposes of interconnection and voice traffic routing over IP. Interconnection with Rostelecom’s network is provisioned in facilities or traffic exchange points, as well as through public Internet. The service ensures reliable traffic transmission routes, and required port speeds depending on the operators’ traffic volumes. The Virtual Corporate Telephone Network service (Virtual Telephone Network - VTN) enables provision of a corporate telephone network with a common uniform numbering plans with short numbers and distribution of incoming calls on the basis of an IP-network, without the need to purchase a traditional PBX switch, while using over 100 additional intelligent services of the Company’s IP-based softswitch. It is worth noting that some of these services and features are impossible to implement using traditional digital telephone switches.

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Using the relevant web-interface a customer is able to manage settings of its corporate telephone network and additional intelligent services, while technical administration of the corporate telephone network is outsourced to Rostelecom.

NETWORK INTERCONNECTION AND TRAFFIC ROUTING Provision of interconnection with its network and voice traffic routing services has been historically a key Rostelecom designation. The Company offers interconnection and voice traffic routing services on the local, area (NPA), long-distance and international levels of interconnect to over 2,300 Russian and foreign fixed- line and mobile operators. In 2013 the Company’s revenue derived from interconnection and traffic routing services amounted to 24,864 million Rubles, accounting for 8% of the Company’s total revenue. Network interconnection service consists of establishment of inter-operation between the Rostelecom network and various operators’ communications networks in order to make it possible to transmit traffic between them. Technical facilities of operators can be connected Rostelecom’s resources both by dedicated channels and directly to ports of switching equipment. In order to perform interconnection, an operator is allowed to install its equipment on Rostelecom’s technological platforms. It is also possible to interconnect with Rostelecom’s network through the use of technical facilities of other operators, interconnected with the Company’s network. The Company Points of Interconnection are located in all Russia’s constituent entities. Rostelecom also offers call termination services to networks of Russian and foreign operators. These services enable traffic delivery from points of interconnection with other operators’ networks to user (terminal) equipment on Russian and foreign networks. Traffic delivery ensures quality transmission of voice and facsimile messages, and ISDN and IN traffic. Additionally Rostelecom has facilities for provision of switched transit for voice traffic across its own network situated between networks of Russian and foreign operators.

LEASED LINE SERVICES Realizing the potential of its main competitive advantage – the largest modern main telecommunication network of the Russian Federation, in 2013 Rostelecom takes a leadership position in the market providing for the use of digital leased lines throughout the Russian Federation and abroad. The main users of these services are corporate clients and operators. In 2013, revenues from leased lines totaled 9,486 million RUB or 3 % of the total revenues of the Company (including the operating segment - 6288 million RUB or 2% of the Company's total revenue). Rostelecom offers for lease 10 Gbps circuits on any scale: local, intra-area, national, and international. The service is provided on the basis of Rostelecom’s own high-speed backbone network and distributed local networks in all regions of Russia. Rent of digital channels from Rostelecom enables a customer to transmit huge volumes of information of any type, including data, voice and video traffic, without any restrictions. Customers can also use leased channels to set up corporate networks, thus uniting all regional offices in one common information environment. Leasing its digital circuits Rostelecom guarantees security of transmitted information. Any information transmitted internally via communications circuits is protected against any external influence, as data is exchanged directly and without any need for additional switching equipment. This is particularly important for customers with strict information security requirements. Moreover, the Company ensures round-the-clock use of a dedicated circuit with a guaranteed throughput, as well as the ability to promptly upgrade the circuit capacity. High reliability of the provided service is ensured by using dense wavelength-division multiplexing DWDM, ring protection of network sections, and supported by signing a Service Level Agreement with the customer. Rostelecom continues to deploy VoIP-transit service specifically designed to meet the needs of operators who offer IP-telephony services to end users, for the purposes of interconnection and voice traffic routing over IP. Interconnection with Rostelecom’s network is provisioned in facilities or traffic exchange points, as well as through public Internet. The service ensures reliable traffic transmission routes, and required port speeds depending on the operators’ traffic volumes.

INTELLIGENT NETWORK SERVICES

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Rostelecom’s own telecommunications network and intelligent platform enable the Company to provide its customers with intelligent network services on local, intra-area, federal, and international levels, offering high quality communication at low prices and huge opportunities to gather and handle statistical information. On the basis of License No. 29777 issued by the Ministry of Communications and Information Technologies of the Russian Federation Rostelecom provides the following intelligent network services:  Freephone service, using 800 dialing code;  Televoting service using 803 dialing code;  Premium rate communication services with 809 dialing code (Premium Rate Service);  International Freephone Service;  and also additional services: web-click services for "freephone" and "pay additional fee", allowing the users to access information, reference and entertainment content.

In the past year, using "Televoting" Rostelecom provided telephone voting during the International Song Contest "Eurovision 2013" and "Children's Song Contest "Eurovision 2013".

Within the service "freephone" the client may be granted a large choice of intelligent numbers, including easy ones, from the following pools of 8-800 numbers: 100, 200, 220, 303, 510, 707, 301.

ENHANCING COOPERATION WITH GOVERNMENT ENTITIES Historically, Rostelecom has bee providing telecommunications services to state and governmental bodies in defense, security and law enforcement sectors. High quality and security of services, as well as the Company’s skills and care have made it a trusted partner for such respected state bodies of the Russian Federation as the Federal Security Guard Service (to provide telecommunications services for the Presidential and governmental communications), the Ministry of Internal Affairs, the Ministry of Defense, the Ministry of Emergency Situations and Relief, the Federal Security Service, the Ministry of Telecom and Mass Communications of the Russian Federation, the Russian Post the Federal Service for State Registration, Cadaster and Cartography, the Federal Tax Service, the Pension Fund, the Federal Healthcare Institution Center of Blood of the Federal Medical and Biology Agency, the Federal Customs Service, the Supreme Court, Court Department of the Supreme Court, the Federal Center for IT implementation of the Central Election Commission, Federal Technical Supervisory Service, Federal Communications Supervisory Service, and many others. Besides on the basis of Federal Law № 94-FZ of 21.07.2005 and relevant Ordinances of the President and Government of the Russian Federation Rostelecom was designated as the sole contractor to provide telecommunications services for Presidential and Governmental Communications (Specsvyaz of the Federal Guard Service of Russia), telecommunications network of the Ministry of Defense, communications network for New Generation of Passport and Visa Documents (covering networks and telecommunications nodes of the Ministry of Internal Affairs, Federal Security Service, Ministry of Defense of Russia). In the reporting year, the Company provided Ministry of Defense of Russia with communication services via dedicated channels, VPN services and services to ensure operation of the equipment at the Company’s facilities. A phased transition to modern communications technology is being performed as well as transition of the facilities previously connected via satellite resources. Rostelecom provides local, intra-regional, long distance, international telephone and telegraph communications in the interests of Ministry of Defense of Russia subscribers located throughout the country. Large-scale military maneuvers "West-2013" are provided, large preparatory works to provide communication services of a series of military ministries and departments are carried out in connection with the XXII Winter Olympic Games "Sochi- 2014". In addition, the structural units of Rostelecom provided Russian FGS with telecommunications services in the interests of senior government officials. Some of these services include rental of digital communication, creation of virtual private networks VPNs, as well as operations and maintenance and operation of customer communication equipment. Network resources were provided by the Company for information and telecommunications network of legislative initiative subjects of the Russian Federation for 86 regions. Also in the framework of the state contract the Russian Defense Ministry units are granted permanent access to the resources of the Internet, including the implementation of the provision of information services and data center services of the Company. Official Russian Defense Ministry's media site is focused on the target audience and reflects the new face of the doctrine of the Armed Forces, provides the main results of the reforms and informs about the activities of the Armed Forces of the Russian Federation. In addition, the site offers public electronic document bank "Feat of the people in the Great Patriotic War of 1941-1945".

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Russian FMS signed a state contract with Rostelecom as the sole provider of services for the operation and development in the second half of 2013 the state system of production, processing and control of passport and visa documents of new generation (PVDNG). Within the framework of a state contract by the Company the services are rendered to all objects of single information and telecommunications infrastructure of PVDNG system designed for automated collection, storage, processing and transmission of personal registration of citizens, as well as other service information required for registration, issuance and control of new passport and visa documents. By the end of 2013 VPN network joined over 1,450 objects of the system. Due to the optimal price/quality ratio in 2013 Rostelecom developed new projects implemented with federal state authorities. The most significant projects include the provision of IP VPN services to over 2,500 objects of the Federal Bailiff Service, IP VPN services and the Internet to the central office and all regional offices of the Federal Service for Financial and budgetary supervision, IP VPN services for the headquarters and departments of Investigative Committee in Moscow, as well as in the Southern and North Caucasus federal districts. Rostelecom pays great attention to not only the promotion of traditional services, but also to the development of new ones. In 2013, the project on provision virtual servers for the operation of a central database ported numbers was started with CSRIC. Furthermore, Rostelecom provided introduction and operation of the second stage of the call center Russian Register located in Kazan. And in the interests of Russian Ministry of Health in 2013 a project aimed at creating data centers required for the functioning of the unified state health information system was also implemented. In order to ensure the functioning and development of the Russian National Integrated Population Notification and Warning System (OKSION) created within the framework of the Federal Target Program "Risk Reduction and mitigation of natural and man-made disasters in the Russian Federation until 2015", the Company provided services on data transmission over communication channels. Single network connected terminal complexes of OKSION in 36 regional information centers across the country. Thanks to the years of experience in the provision of telecommunications services, wide geographical coverage and the use of modern protected communication channels Rostelecom guarantees high quality and reliability of the services provided. This is a determining factor of trust that the Company obtains from the government agencies and authorities. In order to ensure transparent elections in the regions of the Russian Federation in a single day of voting on 08.09.2013, Rostelecom provided services for the provision of data transmission networks, signal broadcast on the Internet, data collection and storage under the regional contracts entered between the Administration of Krasnoyarsk, election commissions in the territory of the Republic of Khakassia and the Leningrad Region, Department of Information Technology of Trans-Baikal Territory and the city of Moscow and taking into account the requirements of CEC Regulation dated 26.09.2012 No 142/1076-6 “Order of application of video surveillance and broadcast images in the premises in order to vote in elections and referendums held in the Russian Federation". In total, the services were provided in respect of 5065 of precinct election commissions. The project involved the Company’s infrastructure network, two data centers, call centers; two portals are deployed http://webvybory2013.ru and http://vybory.mos.ru.

GUARANTEE OF HIGH QUALITY OF TELECOMMUNICATIONS SERVICES While offering its communications services to customers and developing new telecommunications services, Rostelecom traditionally devotes a lot of attention to the quality of its products so as to ensure a competitive advantage in the market. Since 2006 the Company has in place a Quality Management System in compliance with ISO 9000 Standard requirements. In 2011 for the first time after its reorganization Rostelecom was granted certificates of compliance of its quality management system (QMS) not only with requirements of GOST R ISO 9001-2008 Standard, but with requirements of the International ISO 9001:2008 Standard. In 2013, the Company received new certificates for compliance with the updated standard GOST ISO 9001- 2011 (ISO 9001:2008), the certification activities are added with software development and consulting in this area. The inspection and validation were performed issued by a respected Russian certification body – ANO Certification Center “Communication – Certificate” and international certification organization AFNOR Certification. According to the results of recertification, the following certificates are obtained: • Russian certificate of compliance with the national standard GOST ISO 9001-2011 (ISO 9001:2008);

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• International Certificate of compliance with the standard ISO 9001:2008, issued by international group of companies AFNOR Certification; • International Certificate of compliance with the standard ISO 9001:2008, issued by International Certification Network IQNet. The certificate applicability covers the quality management system of the entire Company, as applied to the design, development, deployment and provision of telecommunications and broadcasting services. The ISO 9000 family of standards are related not to the quality of provided services themselves but to the quality of management system which should identify and ensure achievement of the targets related to customers’ satisfaction with the quality of offered services. At present, the ISO standards of this series are the most popular and widespread. They are recognized worldwide and adopted as national standards in more than 140 countries. The certificate GOST ISO 9001-2011 (ISO 9001:2008) indicates the ability of Rostelecom to provide services relevant to ever-increasing demands of consumers, and to promote the effective and successful business development, which is important for acquisition and maintenance of the leading positions in various market segments. Availability of certified services from Rostelecom is an additional assurance that the Company provides telecommunication services with a guarantee of high quality meeting customer requirements and in compliance with relevant technical performance norms and standards.

INVESTMENT PROGRAM IMPLEMENTATION This section provides information according to the International Financial Reporting Standards.

Investment program Measurement units 2013 Investments in fixed assets (CAPEX) RUB mln. 68 487 Areas of investments: Broadband access (B2C) % 20,7 Broadband access (В2В) % 5,7 Development of backbone IPMPLS % 18,7 Development of federal mobile business % 28,5 Development of traditional telephony % 1,5 Digital TV, Internet services % 2,8 Electronic government, innovations % 2,6 Sochi-2014 % 1,4 Organization of sales points, call centers % 1,3 Implementation of IT-solutions % 10,5 Other % 6,3 Major and strategically important investment projects of 2013 Protection of GSM 1800 Licenses In 2013 the Company has protected GSM-1,800 licenses in 37 regions and set up 3,238 RBS Pico basic stations in such regions. Core switches of mobile network have been installed and launched in 44 regions. Positive expert conclusions of FGBU CENTRE MIR IT for UMTS networks have been received, and object were put into operation in 31 regions. Expansion of the mobile business within GSM and UMTS licenses, North-West macro-regional branch According to the results of 2013, general construction works have been completed on 624 base stations, 470 stations have been put into broadcasting, Core switch of mobile network has been assembled and put into operation, the network was commissioned for commercial exploitation. Expansion of the mobile business within GSM, UMTS and CDMA licenses, Ural macro-regional branch In 2013 construction has been completed and 3G network has been commissioned in 6 regions of Ural macro-regional branch (in Perm krai, Sverdlovsk, Chelyabinsk, Kurgansk, and Tyumen oblasts, Khanty- Mansi Autonomous Okrug, Yamalo-Nenets Autonomous Okrug), 1554 UMTS base stations were launched, 438 GSM base stations and 78 CDMA stations were launched. Expansion of the mobile business within GSM/UMTS/CDMA/LTE licenses, South macro-regional branch

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Contracts have been signed on planning and surveying, construction and installation, and pre- commissioning works for base stations of Soyuz-Telephonstroi OJSC (Sochi) and YUKS OJSC (Krasnodar and coast from Novorossiysk to Tuapse); LTE 800/2600 network in Sochi has been launched, including Olympic objects (Coastal and Mountain clusters); Works have been initiated for expansion of LTE in Krasnodar krai; Works have been completed for construction and installation and pre-commissioning works of switches in Krasnodar and Makhachkala, controlling units in Novorossiysk, Sochi and HLR backup in Novorozhdestsvenskaya (УАК-6); 52 GSM-1800 stations have been launched and integrated in Krasnodar krai; 368 site lease agreements have been signed, works have been completed for construction of base stations: UMTS - 210, GSM - 97, CDMA - 92, LTE – 77 pcs; Works have been completed for integration of base stations: UMTS - 183, GSM - 15, LTE – 481 pcs. Expansion of the mobile business within GSM, UMTS and CDMA licenses, Moscow macro-regional branch 1560 agreements have been signed for deployment of base stations equipment, 1543 stations have been assembled; Tenders have been conducted for supply of basic and ancillary equipment of base stations and Core switches of the network in 2013; Core switch has been assembled and put into technical operation on the site located at: 26, Suschevskiy Val St., with geo-reservation of HLR at 30 Goncharnaya St. Purchase procedures have been implemented and contracts have been signed with 10 new contractors for planning and construction-installation works. Expansion of the mobile business within GSM and UMTS licenses, Central technical projects of mobile communications Equipment for expansion of roaming testing system has been delivered, equipment has been integrated into the network. GTP-relay equipment has been delivered to all the macro-regional branches, equipment installation has been initiated. Due to a decision to establish joint venture with Tele2 Russia purchase of Systems of control and management of DPI/PCRF (PCC) data transmission services for mobile subscribers and Systems of network signalization monitoring have been suspended. Expansion of IP/MPLS data transmission network, implementation of CDN solution Additional channels have been arranged for TV broadcasting of the Olympic Games in the Russian Federation; 100% reservation of traffic of objects participating in Olympics broadcasting has been ensured in order to provide uninterrupted operation of the network at that time; Construction of strong and diverse CDN (Content Delivery Network) has been completed enabling provision of high-quality, speedy, and reliable services to content providers and end users; 367 sites of transport network and 87 nodes of multi-service network have been put into trial operation; Technical preparedness of 509 nodes of 100G/40G transports network, 104 nodes of multi-server network has been ensured in the territory of all macro-regional branches; Planning and surveying works have been completed for 964 sites of all the macro-regional branches; Construction and installation works have been done on 1,290 sites in the area of all macro-regional branches, pre-commissioning works on 696 sites; Existing binding units for connection of regional IP/MPLS nodes to the backbone network have been arranged and expended; ILD transmission to Belarus (Yartsevo, by 500 Gbps) has been additionally enhanced, new DWDM system was built, and existing ones have been additionally equipped; Extension of ILD channels to Finland has been arranged from Kingisepp (620 Gbps).

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121 regional nodes have been launched, 133 RU routers and 79 backbone network routers have been launched, the backbone network has been extended by 9,967 Gbps. Provisioning of High-Speed Transit Expressway Transit Europe-Asia (TEA Express) In 2013 technical preparedness of ILD-transmission line Russia (Kyakhta) – Mongolia (Altanbulag) has been provisioned with capacity of 80 GB/s with installation of a new DWDM system in the Kyakhta – Turuntaevo area, national network has been additionally equipped with new DWDM systems with 200 GB/s capacity: in ‘Kingisepp – Kochenevo’ area, without reservation; in ‘Kochenevo - Knyaze-Volkonskoe’, with diversity receipt of 100 GB/s. This project applied qualitatively new equipment allowing for traffic transmission with linear velocity up to 100 Gbps and supporting interfaces of OTN (a technology of optic traffic transmission using standardized speeds hierarchy, frame structure and client signal mapping formats). Construction of Fiber-Optic Cable Link Vologda-Arkhangelsk-Belomorsk to create a ring in North-Western region The project has been put into trial operation. In 2013 two last project stages were completed, within which FOCL-FL (6 OF; 2 OF) were laid on Vonguda-Kem and Kem-Kandalaksha areas, 350 km long each, binding nodes from FOCL Arkhangelsk-Kem and FOCL Kem-Murmansk were built to Rostelecom’s sites with lines about 30 km long, digital transmission systems were provisioned (10G, STM-64) using DWDM equipment on the Kem-Murmansk site along the geographically diverse route. Construction of intrazone fabric-optic cable link Salekhard-Nadym: In 2013 construction of high-speed digital transmission link Salekhard-Nadym was initiated using DWDM technology at the site of backbone transport network which will enable: significant reduction of costs for leased channels; provision of up-to-date telecommunication services to population of such areas; ensuring quality and reliability of telecommunication services; ensuring communication services at the qualitatively new level for private companies and state authorities. Innovative development of the Company In 2013 final stages of works in the following areas were completed: Development of the monitoring system for parameters and indicators of quality of fiber-optic lines in the exploitation process; Creation of the prototype of Unified Reporting System of Electronic government infrastructure; Development of automated set of information analysis using the DPI technology; Development of the prototype of unified multiplex add-on units allowing for receipt of convergent services package 07. Smart home; Establishing a pre-processing centre for receipt and processing of payments by bank cards; Development of О7 services, creation of prototypes of platform services, development of complex services for automation of organizational and technological processes of duty-dispatching services, fire protection services, population warning, follow-up of 112 cloud service; Purchase of IT equipment for cloud platform on industry services programs, development of components for Rostelecom cloud platform in charge of display of specialized industry services, adaptation and follow-up of the payment support system for calculation of payments at the cloud platform. EMC data storage system has been delivered, and equipment for 1.5. (1.7.) national cloud platform modernization has been partially delivered. Works on О7. are expected to be done within the Education, Medicine, Housing and Public Utilities, and Safety projects. Development of cloud platform infrastructure will be continued in 2014. Creation of the single national infrastructure operator for provision of the Electronic government services In 2013 the Company made additional supply of the equipment for additional enhancement of the Electronic government regional infrastructure, final stages were completed in the following areas:

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Development of regional segment of Electronic government infrastructure; Development of technical and organizational solutions of Rostelecom’s cloud platform; Development of components of infrastructure of execution, granting, and support of hardware for VPN networks identification and attestation with regards to the Informational Society project and collective centers of data processing for correspondence to requirements of information safety in the certification system of FSTEK of Russia; Design of a prototype of the mobile electronic signature services for the Single Portal of State Services (EPGU); Deployment of infrastructure of basic services of information safety of Electronic government systems; Modernization of cloud service of electronic document flow; Creation of the portal of the Authorization center and development of systems for automated working places of issuance of activation codes for the personal room and digital signature of the Single Portal of State Services (EPGU) user; Modernization of the cloud service of multifunctional center automation: 1 stage of R&D works has been implemented – Development of regional segment of electronic government infrastructure, 3 stages of prototype creation for the complex service of functioning control and management system (FCMS) have been completed. Construction of the backbone network of Single Information and Telecommunication Infrastructure of 2014 Sochi Winter Olympic Games In 2013 cables were laid between the mountain and coastal clusters along the basic and back-up routes, equipment for the backbone network nodes was installed at all the competition spots and on non-competition spots where technical requirements were finalized by the objects Investors/Developers. Cables were also installed to ensure back-up routes in the Olympic park. Equipment was installed in the Main Media Center for provision of channels services for the interests of the Olympic Broadcasting Corporation.

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SOCIAL RESPONSIBILITY The projects in the social sphere are the most important part of corporate social responsibility of Rostelecom both the federal and regional levels. The company is engaged in social activities and contributes to the solution of social problems and issues for over 10 years. The Company’s mission is to not only provide high quality communication services to its clients, but also to help in the development of local communities in the regions where it operates, to promote a stable social environment and quality of life in the country. Own infrastructure, telecommunication resources, a large range of services and relationships with regional authorities allow Rostelecom to effectively solve the problems of individual groups, such as veterans or people with disabilities as well as more global challenges in the areas of public life such as health, education, sports, environment and culture. Rostelecom provides long-term public interest projects in the whole territory of the Russian Federation – from Kaliningrad Region in the west to Sakhalin in the east, helping to solve the most pressing social issues. Support of professional education In 2013, the Company assisted to specialized higher educational establishments and educational institutions of secondary special education, namely to Moscow Technical University of Communications and Informatics, Bonch -Bruevich Saint-Petersburg State University of Telecommunications, Siberian State University of Telecommunications and Informatics (SIBSUTI), College of Telecommunications and Informatics SIBSUTI. During 2013 on the basis of basic universities within the Rostelecom program of innovation development own department of the Company continue to operate. Support of professional education institutions means, first of all, improvement of the material and technical base of educational institutions, support for student initiatives and student clubs, payment of scholarships, internships to the students in business units of the Company. Application of modern technologies for education and children's creativity In February 2013 at the VI International Winter Arts Festival in Sochi Rostelecom organized a series of music master class for young musicians in four cities of Russia – Sochi, Yekaterinburg, Novokuybishevsk (Samara region) and Yaroslavl. This was made possible thanks to the organization of multi-channel video that combined chamber music hall of Sochi and concert venues in these cities, equipped with special modern systems for videoconferencing. As a result, the young musicians and their teachers had a unique opportunity to "visit" the lessons of the great musicians – Yuri Bashmet and James Galway and to ask them questions about the secrets of mastering musical instruments in real time. Projects in the field of Internet security To protect the children and adolescents from Internet content contrary to Russian law, all tariff plans of the service offered to the clients include “Child at home”. The Company also manages the federal project to provide content filtering services for secondary schools. In addition to technical solution of Internet security, in 2013 the Company has implemented a series of communication projects on safe Internet – parent meetings "Children in the Internet", "Internet security in schools", "Children's video clips contest", "Social poster contest", National Russian competition of pedagogical development "Safe Internet" - which are aimed at different audiences – children, teachers, parents and the public. Complex of problems that raise these projects include work with malware, spam, fraud, malicious content, etc. Youth competitions and contests Along with the support of specialized education in the region, the Company provides support to various competitions, which aim to stimulate creative interest of pupils and students to modern computer technology, their involvement in the activities of the practical use of Internet technology and computer graphics. An example of this work in 2013 was the active support of the International Student Olympiad in Information Technology “IT- Planet". “Granma Online, Grandpa Online" One of the most ambitious social projects for several years is the programs to increase the level of computer literacy of older people. Rostelecom, together with interregional public organization "Association of veterans, invalids and pensioners" (IRPO "AVIP") and Intel, implements a project "Grandma – online, grandpa – online". Being

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Official Partner of the Program, Rostelecom provides Internet access services through its own network of opening centers of learning the basics of computer literacy and information and communication technologies (Centers) for the elderly in the regions of Russia. The main goal of the program is to promote the development of information society in our country, and in particular, the involvement of the elderly people in the informational and communications space. Training courses and training programs are focused on addressing the psychological barrier of the older listeners to new technologies, the formation of their computer and the Internet skills, including social networks, forums, IP-services. Program participants learn the basics of working with a personal computer, gain skills to find specific information on the Internet and e-mail use, learn how to use popular apps for online communication (ICQ, Skype), social networking, etc. Social initiatives in partnership with the Organizing Committee “Sochi- 2014" Starting from 2009, Rostelecom is the General Partner of the XXII Olympic Winter Games in Sochi and participates in the Olympic project, the principle of which is "Olympics to everyone!". Through this partnership, in 2013 the Company was a party in a number of social initiatives of the Organizing Committee "Sochi- 2014", aimed at the promotion and popularization of Olympic values in the regions of Russia. Federal sports and educational activities for children and youth have already become a good tradition in Rostelecom. Since 2011, especially in partnership with the Organizing Committee "Sochi 2014" in the preparation of the XXII Winter Olympic Games, the Company is implementing a program of children's youth sporting events and competitions. Events are held twice a year – in winter and late spring, and their participants come from dozens of cities across Russia. Olympic athletes, medalists and winners of competitions in different sports actively participate in the program, and the guests and spectators were numerous local residents who attend these fun competitions. With the assistance of Rostelecom in 2013 continued the implementation of the program of the Olympic distance education through a memorandum of cooperation with the Organizing Committee of the XXII Olympic Winter Games in Sochi in 2014 and the Russian Olympic Committee (ROC) to implement the Olympic education program "Sochi 2014" at the federal level, which was designed for a year and a half and covered all regions of our country. In accordance with the memorandum, Rostelecom as telecommunications systems partner of the Olympic education "Sochi 2014" provided a platform equipped with videoconferencing system in Moscow and other Russian regions to conduct training seminars for teachers from regional schools, trainers, etc. At the beginning of the new academic year 2013-2014 Rostelecom, Russian Olympic Committee (ROC) and the Organizing Committee of the XXII Olympic Winter Games in Sochi in 2014 for the first time in Russia held innovative Olympic Internet lesson "London 2012 - Sochi 2014” for schoolchildren. In Moscow, the pupils came to the Olympic lesson to the building the Organizing Committee "Sochi 2014", their peers from Sochi connected via a videoconferencing system. At the same time, anyone could see webcast tutorial sites www.rostelecom.ru and www.soch2014.com. During the lesson, students learn firsthand about the Olympic and Paralympic Games in London, as well as about the preparation of the Games in Sochi. Cooperation with the Russian Figure Skating Federation Starting from 2009 Rostelecom, is the General Partner of the Russian Figure Skating Federation (RFSF). Annually, the Company directs financial assistance for organizing and holding events of the Federation, for the preparation of the athletes of the Russian national team for the Olympic Games, European and world championships, final stages and ISU Grand Prix, etc. In December 2011, Rostelecom and RFSF have launched a joint program of master classes "Rostelecom Star Track". During the master classes, big sports stars shared secrets of their professional skills with the young skaters, and young athletes had a unique opportunity to demonstrate their abilities and skills to the famous coaches. In 2013, the activities of the program were held in 8 major cities of Russia – Yekaterinburg, Nizhny Novgorod, Tver, Sochi, Yuzhno-Sakhalinsk, Tomsk, Murmansk, Tyumen – and ended in November with child training in Moscow. Assistance to the sponsored child care institutions Rostelecom is actively helping a variety of social institutions – hospitals and orphanages. The Company buys medical equipment and pays for emergency medical operations, allocates funds to repair buildings and purchase of basic necessities, helps to organize holidays for children from orphanages

35 ANNUAL REPORT and meeting of relevant professional psychologists with children, provides channels for distance learning for children. Assistance is produced by both single appeals of the institutions and on an ongoing basis. Many of these institutions are the sponsored organizations for macro-regional branches of the Company. Christmas charity program for the sponsored orphanages and boarding schools Expecting 2014 Rostelecom has implemented a unique charity program at the national level for children in orphanages and boarding schools in dozens of Russian regions. Total participants in this program became 90 children's institutions of our country, which take care of about 7 thousand students. As New Year gifts the Company sent the money to buy clothes and shoes, furniture, educational, sporting and developmental equipment. Also in 15 cities of Russia Rostelecom branch employees took part in a large-scale New Year's volunteer project "You Can Become Santa Claus". Holiday trees were set in the Company’s offices and they were decorated with unusual toys – Christmas decorations and crafts made by children from orphanages. These toys were attached with children's letters to Santa Claus. Thus, each Rostelecom employee could choose a letter and buy an appropriate gift to fulfill a child’s dream. Expecting New Year 2014, Rostelecom again opened the doors of the main theater house of the country for the children from the orphanages and boarding schools, as well as large families of Moscow and Moscow region – on December 25, 2013 the Company organized a charity show "Nutcracker" ballet at the Bolshoi Theatre. New opportunities for children with disabilities Rostelecom traditionally helps in the social integration of the people with disabilities and, in particular, disabled children. Rostelecom, implements a program for distance learning of disabled children both at the level of the Corporate Center and at the level of macro-regional branches, at home and in the institutions. Thus, in 2013, in many regions of its presence Rostelecom participated in programs for distance learning, in which the Company provides disabled children with unlimited access to the Internet, and provides delivery and installation of the necessary equipment. Support for veterans Traditionally, expecting Victory Day Rostelecom and its subsidiary "Zebra Telecom" held a traditional meeting with the Russian Committee of War Veterans and military service (RK WVMS). In 2013, the veterans received new universal card s from "Zebra Telecom" that allowed them to make free calls to other cities, not only from a landline, but with cell phone. During the year Rostelecom has also organized a number of multi-channel video conferencing for the Great Patriotic War. Preservation of ecosystems In its activities, Rostelecom seeks not only to avoid negative effects on the environment, but also tries to minimize any environmental impact. Telecommunications infrastructure itself produces no harmful emissions and industrial waste into the environment, but new construction can have short-term negative impact on the environment. Therefore, in the construction of telecommunications infrastructure Rostelecom constantly performs a complex environmental measures that minimize emissions, insures the preservation of soil, water bodies, performs mandatory technical and biological reclamation of the land. The volunteers of the Company also regularly participate in federal and regional vents aimed at creating a respect for the environment – the so-called "environmental task forces" that clean the environment from debris and waste. Support of national art Since 2008 Rostelecom representatives are working in the Board of Trustees of the State Academic Bolshoi Theatre of Russia. The priority tasks of the Board of Trustees are to attract outside funding, facilitating Bolshoi Theatre in the implementation of the new productions, organization of tours attracting stars and talented young performers, as well as assist in improving management, financial and operating activities of the theater. Company personnel

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Priority of personnel management policies of the Company in 2013 was the solution of the problem of increasing operating efficiency of Rostelecom by creating organizational conditions for the growth of employee productivity, rational redistribution of resources and optimization of organizational structures. As part of solving this problem, during 2013 the Company has implemented a range of initiatives aimed at optimizing the size and composition of the staff. Key activities undertaken during 2013 in these areas were: Activities for the integration of subsidiaries and affiliates within the merger with Rostelecom of Svyazinvest and 20 subsidiaries and affiliates, held in October 2013; Project on optimization the number of administrative personnel in the macro-regions through standardization and optimization of the organizational and functional structures; Improving the efficiency of the functions of accounting and taxation, treasury functions for the collection of receivables and management personnel by sending transactional in multifunctional shared service center in Yaroslavl, Voronezh, Nizhny Novgorod and Novosibirsk; Optimization of the branch structure and composition of the Company's subsidiaries; Optimization of the organizational structure of the Company due to the exclusion of the two levels of government (regional and inter-regional communication centers) and the transition to the functional chain of command in the regional branches; Start of development projects in active sales in B2B and B2C segments, associated with recruiting and training professionals of the commercial units (active sellers) and technical unit (installers); Provide human resource development projects in mobile networks based on UMTS technology in Moscow, St. Petersburg, Krasnodar, Samara and Novosibirsk; Development of federal projects "Sochi- 2014" and "Information Society". All activities related to the optimization of headcount were planned, agreed and enforced in accordance with applicable law, the decisions of the competent authorities of the Company and the Company's internal regulations. The average headcount of the Company in 2013 was 152,586 people, and the average monthly salary was increased in comparison with 2012 by 7.2 % and amounted to 31,567 RUB. 2011 2012 2013 Average headcount of the Company 166 933 159 984 152 586 Average monthly salary of the Company’s employees 26 702 29 444 31 567 Data are given for Rostelecom, excluding subsidiaries

The need to implement a number of key business initiatives, in particular the development of new business segments, shows a new benchmark in professionalism and skill level of the employees. In this regard, in 2013 in order to develop enterprise-wide and professional competences, the Company continued training of the employees in full-time and distance forms. About 50 thousand employees have been trained and retrained for the past year. In particular, based on the Institute of Internal trainers over 14,000 professionals of the Company have been trained by different programs such as sales, public speaking and orator skills, stress management, effective customer service, effective communication during negotiations and other. An important aspect of working with the staff of the Company is the programs aimed at retention and social provision of the employees. For the purposes of improving the principles of social partnership the conditions for constructive dialogue of an employee and the Company as an employer were designed. These terms are fixed in the Collective Agreement of Rostelecom, in accordance with which the Company's employees are provided with a variety of social benefits and guarantees. A system of private pension provision of the Company and voluntary health insurance program is offered for the employees whose main job is in Rostelecom. In 2013, the Company continued to implement a long-term project to create a single integrated corporate culture. Projects, including a large-scale case study, complex focus groups, interviews and public discussions moved to the active phase of translation of the approved corporate model of corporate values. During the IVth quarter of 2013, complex of measures aimed at the presentation of corporate values in all macro-regional branches of the Company has been consistently implemented: responsibility, professionalism, innovation, openness and continuity. The participants in these sessions, representing all regions of Rostelecom business presence, had an opportunity to rethink and analyze, organically accept a

37 ANNUAL REPORT basic framework of corporate culture, in order to subsequently extend new value to its business environment: colleagues, customers and partners. As part of the translation process, the representatives of the branches were able to get acquainted with the new values of the Company, defined target audience that these values should be translated at and, most importantly, offered options for concrete action required today by Rostelecom for the transition to a new organizational culture. All proposals voiced at the event were recorded in order to subsequently form the basis for the Company’s developed Code of Corporate Behavior of employees. The initiatives, including the development and enactment of the Code, as well as promotion of corporate culture in the units of the Company at the regional level are planned for 2014 and have already begun to be implemented. They were included in the comprehensive strategic program "Staff Transformation", developed by the Company in 2013 and are planned to be implemented during 2014-2018. In addition, professional competitions among professionals employed in key business jobs: Technical (among cable jointers) and commercial (among specialists working with the mass segment) have been organized and conducted in the macro-regional branches of the Company. In addition, other traditional public events were held in the macro-regional branches: sports, creative and gala events to celebrate the significant industry and corporate achievements. During 2013 the Company has conducted more than 630 cultural events at the local, macro-regional and corporate level. Total number of cultural and educational activities was decreased by 14% against the same period in 2012 due to the consolidation and centralization of a number of local events. The total number of the employees involved in corporate life remained at the level of the previous year. As part of the rehabilitation programs for children of the employees of the Company, summer holiday of children was organized in the resorts of Russia. Labor protection Work on labor protection in the Company in 2013 was conducted in accordance with the Labor Code of the Russian Federation, laws and other regulatory legal acts on labor protection. The activities to improve conditions and labor protection in 2013 cost 677 559.4 thousand RUB (in 2012, 673 105 thousand RUB). As per 1 employee labor protection costs totaled 4,644 thousand, RUB which is 9.3 % more than in 2012 (4.21 thousand RUB). The employees are provided with necessary clothing and protective equipment in accordance with industry standards, regular medical check-ups are conducted by professional workers in work with harmful and dangerous production factors. Labor protection training, certification of workplaces according to working conditions, measures to reduce workplace injuries were developed and implemented. In the reporting year 6 cases of fatal injuries occurred which is 2 cases more than in 2012. Causes of fatal injuries were traffic accidents and fall of the workers from a height. As a result of ongoing work to ensure safe working conditions in 2013 occupational injury rate decreased compared with 2012 by 3% (64 accidents in 2013 compared to 66 cases in 2012). Number of man-days of disability due to injuries (calendar) in 2013 also was decreased by 22.2% compared with 2012 (3883 man- days in 2013 - 5125 man-days in 2012).

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THE COMPANY’S DEVELOPMENT PRIORITIES AND PLANS In 2013 the Company initiated analysis of current operations, as well as key strategy elements. That resulted in approval of an updated Company development strategy for the period of 2014-2018 by the Rostelecom Board of Directors in December 2013. One of key principles of updated strategy is setting forth various approaches to development of two basic segments of Company business: the fixed and mobile ones. As for the mobile segment which is not crucial for the Issuer’s income, it has limited scale of operations and requires significant amount of capital investment, so a decision was made on further development thereof within partnership with Tele2 Russia. Formation of a joint venture with Tele2 Russia (hereinafter – JV) is an essential point for implementation of Rostelecom strategy in cellular communications and is expected to enhance the Company positions in this segment. Mobile assets of Rostelecom and Tele2 Russia complement each other perfectly, both in terms of territory coverage, and with regards to combination of the expertise Tele2 Russia has in implementation of innovation solutions with vast range of Company’s licenses and band of frequencies of new generation. Furthermore, Rostelecom can enhance its share in the dynamically developing Russian market of mobile data transmission greatly due to strategic participation in a large and fast developing operator able to succeed in competition with key market participants. JV will enable formation of a federal mobile operator that will be of significant benefit for both parties to the deal and be favorable for both users and Russian telecommunication market in general. Joint venture has plans for significant investments in development of 3G/LTE network and innovative mobile services for the best interests of Russian users and corporate customers. Practicability of amalgamation of assets with Tele2 Russia is contingent upon the following strategic considerations:  JV will get the geographic footprint extended by the federal level, as well as the scale sufficient for successful competition with existing federal operators.  Amalgamation of mobile assets will enable JV to participate fully in growth of data transmission services market in Russian telecommunication market due to combination of successful operational model of Tele2 Russia in mobile segment and Rostelecom vast band of frequencies of new generation.  JV will have great potential for cash flows generation, including that at cost of realization of synergetic effect of assets amalgamation on a mid-time horizon, in particular, in networks deployment and support, sales of services and subscribers support which would be achieved due to perfect compelementability of assets and resources of both companies enabling nation-wide deployment of operations faster and with greater economic efficiency.  JV may offer convergent services of fixed-line and mobile communications at the federal level.  Rostelecom will receive additional benefits at cost of significant reduction of direct capital investments in the mobile communications area, as well as assignment of mobile operations related debts. As for the fixed-line segment being essential for the Company in terms of the profit and available expertise, Rostelecom aims providing high-quality and up-to-date communication services to customers and partners. With view to that Rostelecom will focus on solving the following key tasks: 1. Technological leadership in network infrastructure. One of the Company’s key competitive advantages is powerful extensive telecommunication network covering all the Russian Federation regions. As for today, the most up-to-date innovative solutions are available on the market, it witnesses substitution of regular technological cycle, which is why under circumstances of growing demand in high-quality and up-to-date communication services to preserve and increase the technological advantage the Company has, servicing about 34 mln households is of extreme importance. Rostelecom’s objective is to speed up the fixed-line network upgrade to the maximum which will let us offer new services with improved quality to our customers. In particular, the Company will implement the large-scale project for modernization of the ‘last mile’ aiming at achieving the fiber-optic network coverage of access to 33 mln of Russian households by the end of 2016. This will provide an opportunity to render complete range of up-to-date telecommunication services at the 1 GB/sec speed to Rostelecom customers. 2. Improvement of the customer support. Development and improvement of customer service will be a pivotal point to concentrate Rostelecom efforts. Simple usage and usability of services, a possibility to solve customer problems and receive information and

39 ANNUAL REPORT advice any time and via any customer care channel (offices, contact centers, multimedia channels, self- service functionality) – these are our priorities in this area. Rostelecom constantly reviews best practices of customer service and plans implementation of advanced customer servicing standards (SLA). In the first place this covers lead time for service activation, help-desk time to response, etc. Modernization of Operation Support System / Business Support System (OSS/BSS) is envisaged, allowing for optimal inventory, accounting and planning of telecommunications resources, for instance, numbering ranges, traffic, service delivery management, service performance and quality control, as well as fraud mitigation at the telecom data level, forecasting and driving service demand. The BSS subsystem includes application software to support business processes of a telecom operator, Billing and CRM first of all. 3. Development of service packages unrivalled in terms of market characteristics, and an attractive pricing range. The Company possesses unique strengths for the Russian market in terms of infrastructure and regional expertise in order to deploy and offer a range of telecom services with the best customer value to the market. This would mean an optimal balance of the pricing and composition of packaged services with communications services, Internet and digital TV. This concerns not only the service technical performance, like data speed, but also quality and relevancy of the offered content and customer support. The sheer scale of the Rostelecom operations enables it to design and offer unique and economically appealing products to customers in collaboration with right-holders. 4. Improvement of operational efficiency. A challenging task for the upcoming tasks is optimization of operational costs in a fixed-line segment and increase of investment activities efficiency. Costs reduction will be possible due to modernization and shift away from overlay networks, from centralization and decrease of management levels of the Company, release and reduction of costs for real estate operation. In terms of capital investments Rostelecom intends to focus on increase of return of investment and decrease of investment projects payback periods. Apart from this even now the first outcomes of extensive overhaul of procurement activities are visible, with their efficiency improving through: • unification and standardization of procurement processes both on the level of the Corporate Center and Macro-Regional Branches; • procurement centralization across key item groups to achieve the maximal economic effect; • increased competition due to enhancement of alternative/similar equipment base, and substitute products; • monitoring and control over independent procurement by Marc-Regional Branches; • consumption standard formation and control. Procurement centralization is one of the key areas of improving the Company operational efficiency. Currently Rostelecom intends to streamline and coordinate procurement in all units to improve operational efficiency and process transparency. Even now, through streamlined procurement commission activities, transparent tender procedure the Company managed to achieve savings up to dozens percent. For instance, in 2013, in the outcome of the tender procedures optimization and relations with contractors the Company managed to save over 16 billion rubles. The Company intends to apply and develop the best national and foreign purchase practices in its operations. 5. Improvement of business administration. Quality of administration practices is an essential resource to improve growth and efficiency. The Company will seek to achieve a radical improvement of business processes, streamlined management structure, better involvement of employees in solving the tasks the Company is facing. Particular attention is expected to be paid to personnel development and hiring new highly skilled employees.

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THE COMPANY TELECOMMUNICATIONS INFRASTRUCTURE Transport network The total length of the Company’s communication network is about 500 thousand kilometers. The main components of the backbone network are powerful fiber-optic communication lines connecting Moscow and Novorossiysk, Moscow and St. Petersburg and Moscow and Khabarovsk. The basis of a transport regional network is composed of communication lines connecting large settlements and regional towns with access to the backbone network. As for the international segment of the main transport network of the Company, a technological development strategy is inseparable linked with implementation of the plan for the infrastructure technical and technological development aimed at realization of various telecommunication projects related to enhancement of Rostelecom’s positions on the international market, development of new services on the international market, and provision of the Company’s international infrastructure for services development in the Russian market. The Company has set up international fiber-optic telecommunications lines providing access to Finland, Sweden, Turkey, Italy, Bulgaria, Greece, Japan, South Korea, China, Estonia, Latvia, Lithuania, Kazakhstan, Ukraine, Georgia, and Belarus. The Company has set up its international points of presence in Stockholm, Frankfurt, Amsterdam, and London. The Company also offers high-speed transit services from Europe to Asia via the territory of the Russian Federation. In order to minimize the risk of traffic loss and the consequences of emergency traffic interruptions on backbone and regional communication lines and for the purposes of improving the quality of service for Russian and foreign customers, Rostelecom undertakes special measures to plan and offer protection mechanisms for traffic transmission, both in terms of physical diversity and international cross-border links and points of interconnections with two or three independent foreign operators on each international route. All of Rostelecom’s backbone networks are 100% protected. As new digital communication lines have been deployed, the Company phases out its analogue communication links. For the period from 2001 to late 2013 about 156,450 kilometers of analogue communications lines were decommissioned.

Multiservice network Rostelecom as the national operator ensures provision of the following services:  Local telephone service;  Intra area telephone service;  Domestic and international long-distance telecommunications;  Interconnection and traffic transmission on local, intra-area, national, and international levels;  Signaling traffic transmission;  Video conference;  Audio and video conferencing;  ISDN and intelligent network services;  Interconnection and Internet traffic transmission;  Dedicated broadband Internet access;  IPTV;  VPN (Virtual Private Network), including L2 VPN, L3 VPN, VPLS, and InterAS VPN;  Data-Center Services. The international digital transit telephone network of the Company is based on 10 international Transit Nodes (TN). The total installed capacity of the international network by the end of 2013 amounted to 202.2 thousand circuits, where the digitalization level of the international nodes is 100%. Rostelecom long-distance digital transit telephone network is based on 16 Transit Long-Distance Nodes (TLDN) and 6 combined Area/Long-Distance Nodes. The total installed capacity of the long-distance network by the year end was 618.5 thousand circuits. Digital intra-area transit telephone network functions on the basis of 132 Transit area nodes. The total installed capacity of the Company’s area network by the end of 2013 amounted to 1,075.4 thousand circuits. The digitalization level of the area transit nodes is 100%. Rostelecom’s local digital transit telephone network functions on the basis of 27,055 automatic telephone exchanges. The total installed capacity of the local network by the end of 2013 amounted to 34,978.1 thousand subscriber lines. The digitalization level of local nodes is 80%. Currently, Rostelecom offers video conferencing services in the regions where there is a high demand for them. Access to national and international videoconferencing is open to clients in 78 regions of the Russian

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Federation, while customers in 177 Russian cities have their audio and video terminals connected to the videoconferencing network with 373 studios for providing video conferencing sessions. The Toll Free call service, Televoting, Premium Rate services based on the Intelligent Platform are provided to customers in all regions of Russia and in a number of networks owned by commercial communications providers. The Company provides International ‘FreePhone service’ from the territory of foreign states, as well as region-based services on intelligent platforms that are also provided to customers. Rostelecom’s IP/MPLS data transmission network for provision of package switched services includes the backbone data transmission network, regional data transmission networks, as well as the international segment (international centers abroad located in Stockholm, Frankfurt, and Honk Kong). As of the end of 2013, the total capacity of the IP/MPLS network exceeded 7.36 Tbps. In order to lease out Nx64 kbps digital channels to clients, Rostelecom deployed networks of leased national and international digital circuits using flexible multiplexer equipment:  a network based on Luchezar-MartisDXX multiplexers, consisting of 168 network nodes located in 117 cities;  a network based on UMUX multiplexers, consisting of 58 network nodes located in 52 cities.

Submarine cables As part of its program to expand and upgrade its international telecommunications capacity Rostelecom uses modern submarine cables to establish communication circuits between Russia and other countries. The Company is both a terminal party and owner of major capacity in four international submarine fiber-optic cable systems, namely: Italy-Turkey-Ukraine-Russia, Georgia-Russia, the Black Sea fiber-optic cable system, and Russia-Japan, in which Rostelecom owns approximately 30%, 67%; 10%, and 50% respectively. Remaining interests in cable systems are owned by various international providers. To provide access to these systems and establish high-quality direct international circuits to remote areas of the world Rostelecom participates in the construction of a number of international cable systems and acquires capacity in them. As of the end of 2013, Rostelecom holds interest or indefeasible right of use in 14 cable systems, including such global cable systems projects as FLAG (Fiber Link Around the Globe), the UK- Middle East-Japan system, the Trans-Pacific cable system (China-USA), the South-East Asia – Middle East – Western Europe and Trans-Atlantic systems.

Satellite communications The united satellite communications network of the Company is based on two technologies: own and leased circuits employing the space segment of the C-and Ku- frequency bands. Company owned channels are provisioned using leased capacity with the use of 83 earth satellite stations. The leased circuits are purchased on a turnkey basis from ‘RTComm.RU’ OJSC. Company owned VSAT-networks are provisioned on the basis of leased capacity with the use of central VSAT-stations located in Siberia, Ural, Far East macro-regional branches. Leased VSAT-networks (or individual channels) are purchased as a general redistributed pool resource from such providers as ‘RTComm.RU’ OJSC and CB ‘Iskra’ OJSC.

In order to ensure operation of satellite communications network Rostelecom engages FSUE Satellite Communications and OAO Gazprom Space Systemsfor the provision of services to the Company aimed at leasing capacities for ‘Express’ and ‘Yamal’ satellites, respectively. The Company decided upon the structure and location of satellite earth stations on the basis of secondary network needs, as well as the likelihood of accessing the digital backbone network.

Lines and circuits of other operators used by the company In the course of its business activity the Company engages other telecom operators for delivering line and circuits for use thereof, mainly for the purposes of providing protection and back-up for the Company’s existing technological network infrastructure and provision of services to end users in the event of shortages of Rostelecom’s own resources. In the latter case network resources are purchased based upon the term of the contract signed with the end user and taking into account margin requirements.

Cooperation with mobile network operators Cooperation of the Company with Russian operators of the ground-based mobile network aims at extension of range of high-quality network services, including the national and international roaming. As of the end of 2013, Rostelecom ensures international roaming routing for 642 mobile networks in 197 countries of the world.

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RISK MANAGEMENT

Risk-oriented approach to business Rostelecom’s business operations are exposed to various risks that may adversely affect the achievement of the Company’s objectives. In order to manage possible risks, the Company has implemented and continues to develop a risk-oriented business management approach designed to ensure efficient adoption of the most effective decisions made by the Company management under conditions of uncertainty, and to effectively identify opportunities for achieving Company’s goals and objectives. Every year the Board of Directors approves the risk management program, which involves regular risks update and development and subsequent monitoring of any response measures taken to reduce any negative consequences to an acceptable level. In the course of the development and implementation of operational business decisions, the Company also assesses inherent risks through discussions at Board of Directors, Auditing Committee, Management Committee, and Internal Control Committee meetings, as well as various working groups and conferences. Below are the most significant risks that can affect the Company’s operations, however other risks may exist as well, including those that the Company currently is not aware of or that Rostelecom deems insignificant.

Industry risks Risks connected with an increase in competition in the telecommunications industry. Domestic market: After its merger with IRCs (Inter-regional telecommunication companies) in 2011 Rostelecom became a provider of services of Internet access, paid television, and mobile communications (in some federal districts) where the level of competition is very high. As a result of DLD and ILD market liberalization as of the end of 2013 44 companies were licensed to provide DLD and ILD communication services. Among the operators licensed to render DLD and ILD communication services, as of 31.12.2013 the following operators (other than OJSC Rostelecom) provide long-distance communication services: MTT, VimpelCom, TransTelecom, MTS, and others. Additionally, the fast growth of mobile communications facilities provides communication operators with a wide access to end users of telecommunication services throughout the country. Mobile operators have the technical capabilities to provide DLD and ILD services on the national, international, zonal, and local levels using both their own networks and networks of competing operators. Ubiquitous construction by competitors of broadband data networks using FTTx and PON technologies with roll-out from cities with over a million population to cities with populations over 50 thousand people results in competition in technologies of service provision and declining demand for services using xDSL technology used by Rostelecom. There is a risk of declining market share of the Company in the regions with a shortage of the required volume of FTTx/PON technology based networks. Moreover, active development of IP-telephony may also significantly enhance competition in the Russian voice services market. IP-technology allows to ensure existence of a more optimized cost structure compared with the costs of operators of public telephone networks. Moreover, development of broadband Internet in the Russian Federation and throughout the world makes IP-telephony services an attractive alternative to the more expensive communication services offered by incumbent carriers and mobile operators. The competition offered by operators, offering the IP-telephony services, can have an adverse effect on Rostelecom’s capability to attract new clients and to preserve current clients. It can also lead to a decrease in the operating profit margin and a decrease in the Company’s market share. In 2012 a number of players including Rostelecom announced their plans to launch commercial operation of wireless LTE networks; this will also results in tougher competition both on wireless service market, and with traditional means of internet access. Today LTE services in Russia are offered by companies, like Skartel, MegaFon, MTS, and Rostelecom. By the end of 2013 Rostelecom, within protection of the LTE license, additionally to Krasnodar krai, built LTE networks in Republics of Khakassia and North Ossetia – Alania, Sakhalin oblast, Chukotka and Nenets Autonomous Okrugs, Jewish Autonomous Oblast. Lagging behind the competition in terms of LTE network development may negatively affect the Company operations in mid-term. Rostelecom pursues a sound policy of acquisitions and subsequent integration of the attractive assets according to its strategic priorities. Possible mergers or takeovers or consolidation of larger players on the Russian ICT market may potentially affect the Company operations.

43 ANNUAL REPORT Intending to lower such risks, the company continuously monitors the operations of its competitors, including the (non)compliance of their operations with legislation, undertakes efforts aimed at developing new services and improving competitiveness of existing services and, if necessary, devising necessary countermeasures External market: Industry changes on the external market do not have a significant impact on Rostelecom’s business due to the inconsiderable number of operations performed there. Risks connected with possible alteration in the prices of raw materials and services used by the Company in its activities. Domestic market: Growth of Rostelecom’s expenses for regulated communications services without corresponding tariffs adjustments may lead to lower profitability, which could have a negative impact on the Company’s financial results. In order to mitigate this risk the Company is undertaking efforts to optimize costs of the provided services and improve operational efficiency. External market:

Tariffs for services used by Rostelecom on the external market (leasing of ILD-channels, ILD-traffic transfer) remain generally stable, and the risks associated with their change, are estimated as minute. Risks relating to possible changes in prices and tariffs for the Company’s products or services. Domestic market: Due to the fact that Rostelecom is included in the Register of Natural Monopolies, the Company’s operations are subject to the regulation of the Federal Tariff Service (FTS). Presently, the FTS regulates the Company’s tariffs for DLD communication services throughout entire Russian Federation, as well as for its local and intra-area telecommunications services. In general, regulation of the Company’s tariffs allows to set competitive and economically feasible and sustainable tariffs. There is a risk of declining profit margins of regulated services in the event growing costs without corresponding adjustment of regulated tariffs. Decreasing tariffs for interconnections and traffic transmission may significantly affect the Company revenues. To reduce this risk, the Company cooperates with regulating authorities on setting optimal tariffs. External market: The Company’s tariffs in the foreign markets (leasing of ILD-channels, ILD-traffic transfer), as well as tariffs to similar services consumed by Rostelecom at the external market are generally stable and the risks related to any fluctuations in this area are not fundamental. Country and regional risks The Company is a registered taxpayer in the city of Saint Petersburg, where the collective executive body, i.e. the Management Board is sitting, while the sole person executive body of the Company – its President is located in Moscow. The Company carries out its core activity in all federal districts of the Russian Federation on the basis of eight macro-regional branches, namely, Center, Moscow, North-West, Volga, South, Ural, Siberia, and the Far-East Macro-regional branches. Main activity in each of them (except for Moscow and Far East macro-regional branches) generates more than 10 percent of the Company’s income. All of these specified regions are characterized by risks associated with the political and economic situation in the country as a whole. The stability of the Russian economy depends mostly on economic reforms, development of legal, tax, and administrative infrastructure, and the efficiency of measures taken by the Government of the Russian Federation in the financial and monetary policy fields. Presently the political situation in the country is relatively stable; nevertheless, the Russian economy is subject to fluctuation in response to the world economy. In many ways, the Russian economy is dependent on the oil prices leading to inflow or outflow of foreign investments in Russia, as well as affecting manufacturing recovery, unemployment rate, growth of income per household, and the replenishment of the country’s gold and currency reserves. In spite of the stabilization measures taken by the government of the Russian Federation aimed at ensuring the liquidity and refinancing of foreign loans to Russian banks and companies, some uncertainty remains regarding the possibility of access to capital resources and the cost of capital for the Company and its contractors. This may influence the Company’s financial position, as well as the outcomes of its operations and its economic prospects. The instability of capital markets may lead to a significant worsening of liquidity in banking sector and a subsequent stiffening of the terms of credit in the Russian Federation. As a whole, Rostelecom cannot produce any significant impact on the economic situation in the country. Nevertheless, the Company will take all possible measures to reduce the occurrence of negative results that may compromise its ability to fulfill its security obligations, including portfolio diversification, should there be any negative results in the country or in particular regions in which the Company is a registered taxpayer and conducts its business.

44 ANNUAL REPORT Risks relating to possible military conflicts, states of emergency, and strikes in the country and regions, in which the Company carries out its core activity The likelihood of military conflicts, introduction of national state of emergency and/or strikes in the country and the regions in which Rostelecom is a registered taxpayer and conducts its business is evaluated as insufficient for these risks to be treated as circumstances capable of significantly impacting the Company business. To prevent strikes the Company on its part creates favorable working conditions and fulfills all of its obligations toward the employees. To minimize the risk of terrorist attacks, the Company takes additional security and protection measures. Risks relating to specific geographical features of the country and the regions in which the Company conducts its core activity, including increased danger of natural disasters, possible stoppages of transport connections due to remoteness and difficult to access localities, etc. Risks related to specific geographical features of regions in which the Company conducts its core activity, including increased danger of natural disasters, possible stoppages of transport connections due to remoteness and difficult to access localities are considered insignificant.

Financial risks Risks related to interest rates changes at the financial market. The Company’s debt finance portfolio has instruments whose value depends on the floating interest rates. In this respect, a possible increase of interest rates in the market may potentially increase the Company’s expenses related to its debt servicing obligations, as well as result in an increase in cost of new debt financing. In order to mitigate this risk Rostelecom continuously monitors the money market situation and if necessary is capable of refinancing its loan obligations with floating interest rates using debt financing with fixed interest rates. Such indicators of the Company’s financial performance as interest payable is most sensitive to this type of risks and can grow in value in the event that this risk is materialized. Due to changes in the situation on the money and loan market there is also a possibility of higher interest rates of new borrowings. Risks relating to changes in foreign currency exchange rates. A share of the Company’s revenue, as well as costs and liabilities, including capital expenditures and borrowings, are denominated in foreign currencies, whilst the major part of its operational earnings is in rubles. As a result of 12 months of the year 2013 ruble appreciation against the US dollar was 7.8% (the RUB/USD exchange rate as of December 31, 2012 was 30.3727 compared with 32.7292 ruble for US dollar as on 31.12.2013). The ruble appreciation against the Euro was 11.8% (the RUB/Euro exchange rate as of December 31, 2012 was 40.2286 RUB per EUR, compared with 44.9699 rubles for 1 Euro as on December 31, 2013). Since the probability of further fluctuation of the national currency remains, Rostelecom’s expenditures and liabilities may increase considerably in ruble terms, which, in turn, would adversely affect the profitability and the results of the Company’s operations. Additionally, significant fluctuations in the ruble’s exchange rates may lead to losses related to re-evaluation of the Company’s foreign currency assets and liabilities, which may produce a negative effect on the Company’s financial results. At the same time, the currency risk should not significantly impact liquidity and the Company’s sources of finance, taking into account the fact that the major part of its assets and liabilities are denominated in rubles. Foreign currency nominated debt liabilities are rather insignificant and carry no significant risk for the Company operations. Such indicators of the Company’s financial performance as cash funds, receivables and payables, loaning and borrowing debts accrued, which may fall or rise in case the risk is realized, are most vulnerable to this kind of risk. The risk is, above all, related to changes in global currency markets and in government regulation relating to currency exchange rates.

Inflation related risks Inflation risks remain at quite a high level with high probability, despite some stabilization of the inflation rate for past few years: 2009 – 8.8%, 2010 – 8.8%, 2011 – 6.1%, 2012 – 6.6%. For the year 2013 the inflation rate amounted to 6.5%, or 0.1 percentage points lower than the rate of 2012. As some of Rostelecom’s expenses are subject to inflation, a rising general price level may increase the nominal value of the Company’s costs, while the increasing competition between telecommunication operators and set thresholds for regulated tariffs may prevent the Company from increasing, at its own discretion, its tariffs up to a level sufficient to sustain the required minimum profitability of its core activity. To reduce this risk, Rostelcom allocates available funds to income-bearing financial instruments, extends income basis at cost of fast-growing services (mobile and fixed-line data transmission, paid interactive television, cloud services) and optimizes the cost of the services it provides.

45 ANNUAL REPORT Indicators of the Company’s financial performance such as funds that are subject to potential devaluation and investment costs that may rise in case the risk is realized are most vulnerable to this kind of risk. The probability of the risk is, above all, related to government regulation of money in circulation and of prices and tariffs. Risks relating to failure of the Company’s customers and other counterparties to meet their payment obligations and their inability to recover the debt. Occasionally, both in the past and presently, the Company has experienced delays in receiving payments from organizations, individuals, government bodies, and some international operators. Delayed payments may cause cash shortages that may force the Company to borrow funds to compensate for them and consequently pay interest rates for the use of said borrowed funds. In addition, Rostelecom allocates available cash to short-term promissory notes and other financial instruments. Faced with the instability of the financial system in Russia, especially amid a possible ‘second wave’ of the global financial crisis, the Company risks failing to retrieve the deposits or receiving repayments of deposit certificates, as well as to repay its debt obligations. To reduce this risk, the Company optimizes working procedures to recover receivables, including cases when debt collection agencies are engaged. Indicators of the Company’s financial performance such as the debts payable are most vulnerable to this kind of risk since they can be reduced in case of increase of this risk evaluation (increase of doubtful debts provisions). The probability of the risk is, above all, related to the solvency of the Issuer’s contractors and the general economic climate in the country. Risks relating to insufficient asset liquidity of the Company. While the Company repays its own obligations in a timely manner, it may be exposed to liquidity risks; in the event that the Company’s contractors demand due payments from the Company, it may face difficulties and even incur losses due to the insufficiency or lack of funds required to repay such obligations and due to the need to dispose of its liquid and other assets with a significant discount. Nevertheless on 13.06.2013, the international rating agency Standard&Poor’s reiterated its BB+ credit rating of the Company with a ‘stable’ outlook. Additionally, on 28.08.2013 an international credit rating agency Fitch Ratings assigned a default rating of ВBB- to the Company with a stable outlook. The Fitch Ratings report stressed that the Company is likely to keep its leading positions in the fixed line business, including the Internet broadband access sector. According to Fitch Ratings analysts, one of key risks is increase of deflux of fixed line telephony subscribers, the rate of which, however, is still lower than that for European analogous companies.

Indicators of the Company’s financial performance such as financial investments, payables and loaning and borrowing debts accrued, are most vulnerable to this kind of risk, as they are subject to increases, as are the penalties, charges and forfeits, in case the risk is realized. The probability of the risk is, first above all, related to the Company’s financial investments. Currently, the said risk is not significant for the Company. Legal Risks Legal risks related to the Company’s activity. Domestic market: Presently, the Company’s main legal risks are connected with changes in legal regulation relating to specific services and requirements of business operation in the telecommunications industry in view of the amendments to the federal law No. 126-FL ‘On Telecommunication’ dated July 7, 2003, approving a series of legal acts regulating different operational fields in rendering telecommunication services (Rules on rendering local, intra-area, DLD and ILD telephone communication services, Rules on telecommunication networks connection and their interaction, Rules on rendering telegraph communication services, Rules on rendering mobile communication services, etc.) and bringing the existing relations in line with the requirements of the legal acts in force. External market: Legal risks relating to activity on the external market do not have a substantial influence on the Company’s activity because of the small volume of the Company’s corresponding operations. Risks relating to changes in the exchange regulation: Domestic market: Risks related to possibility of changes in the exchange regulation are presently considered insignificant by the Company. In view of carrying out a liberalization policy of the exchange regulations, the risks relating to changes in the exchange legislation are decreasing. The Russian legislation regulating foreign investments in no way forbids or limits foreign investment into the telecommunication industry. However, there is no unanimity as to what means and level of government regulation in the telecommunication industry are optimal. Since the telecommunication industry is deemed a strategic industry for Russia, a governmental control of it may increase and foreign investment to it may be

46 ANNUAL REPORT limited. Any similar strengthening of governmental control or limitation on foreign investment volume may prevent the access to additional capital. External market: Legal risks relating to changes in the exchange regulation on the external market do not have a substantial influence on the Company’s activity because of the small volume of the Company’s operations on the external market. Risks relating to changes in tax legislation: Domestic market: Russian tax legislation is subject to variable interpretations and regular amendments. Rostelecom monitors ongoing changes in tax legislation, paying attention to workshops and meetings with a participation of the leading experts in this field. Recent developments in the Russian Federation indicate that the tax authorities may take up a tougher position on the interpretation of tax legislation and tax calculations. As a result, the tax authorities may lodge claims to those transactions and accounting methods which were not subjects to said claims before. Consequently, the tax authorities may charge significant additional taxes, penalties and fines. The tax inspections may cover three calendar years of activity preceding the year of current inspection, and under certain circumstances such inspections may cover even earlier periods. External market: Legal risks relating to changes in tax legislation on the external market do not have a substantial influence on the Company’s activity because of the small volume of the Company’s corresponding operations. Risks associated with changes in customs control regulations and customs duties regulations. Part of the Company’s equipment required for construction of the communication lines and/or rendering of telecommunication services is imported and/or manufactured from the components produced abroad. Any changes in customs control regulations and custom duties regulations may bear the risks for the Company associated with increases in the costs of acquired basic assets and an increased delivery period related to necessary equipment and/or spare parts, which may in return inflict additional costs on the Company, as well as increase the likelihood of network failures in technological infrastructure. Risks associated with changes in licensing requirements of the Company’s main activity or licensing of the rights to use objects with limited circulation. Domestic market: The main Company’s activity is subject to licensing according to the current legislation. The list of licensing requirements according to the Federal Law No. 126-FL ‘On Telecommunications’ dated July 7, 2003, is formed by the Government of the RF. Changes in licensing requirements in the telecommunication industry may lead to delays in renewing the Company’s main licenses for rendering telecommunication services or in a failure to obtain new licenses, which may negatively affect the Company’s financial performance. In addition, Rostelecom has no absolute guarantees that, by the expiration of its validity, the licenses will be renewed and a subsequent growth in liabilities and/or a reduction in the rights granted under the terms of prolonged licenses will not occur, which may result in increased costs and maybe a limitation in telecommunication services rendering area. If the Company is unable to renew current licenses or obtain new licenses that meets the current requirements, it will be forced to cut the range of services rendered, which, in turn, will result in a decrease in the number of subscribers. At the same time the Company takes all of the steps necessary to fully comply with the licensing requirements, therefore the forecast concerning the licenses renewal for the delivery of certain types of the services is positive and the risks associated with inability to prolong the Company’s license is considered to be minimal. External market: Legal risks relating to changes in licensing requirements on the external market exert no material influence on the Company’s activity because of the small volume of the Company’s corresponding operations. Risks associated with changes in court practices regarding the issues inherent in the Company’s activity (including licensing issues). Domestic market: Even though there is no case law in the Russian Federation, the court practices play an important role in the system of law enforcement. Judicial acts, not being sources of the legal system in the proper sense, in certain cases imply compulsory interpretation of legal norms subject to enforcement. In practice, the following regulations are mandatory for legal agencies to refer to:  Decrees of the Plenum of the Supreme Court;  Decrees of the Plenum and the Presidium of the Supreme Arbitration Court of the Russian Federation;  Judgments of the Constitutional Court.

47 ANNUAL REPORT Rostelecom operates in exact accordance with current legislation. The negative consequences for the Company of changes in the court practices are only possible in the event of changes in the stand of regulatory authorities or if the Company exercises its operations in breach of the legal provisions. External market: Legal risks relating to changes in the court practices on the external market exert no material influence on the Company’s activity because of the small volume of the Company’s corresponding operations. Risks associated with the Company’s activity. Risks associated with current legal proceedings in which the Company is involved The legal proceedings in which the Company is involved as of December 31, 2013, are set forth below and may dramatically affect the Company’s business operation and financial performance. In case if the judgments on these cases are not in the Company’s favor, the Company will incur significant expenses, which may negatively affect its financial statement. 1. In February 2010, the Interregional Inspectorate of the Federal Tax Service for Major Taxpayers No.7 completed a complex tax inspection of Rostelecom for 2007-2008 and produced a Resolution No. 3 dated April 2, 2010, stating imposition of sanctions to the Company for the tax offence committed according to the results of which the Company was charged additional taxes, penalties and fines in the aggregate amount of 714,727,286.03 rubles. The Company appealed against the Judgment at the Federal Tax Service. The Federal Tax Service of Russia in its Resolution No. AC-37-9/11482@ as of September 17, 2010 (received by the Company on September 28, 2010), partially disallowed Resolution no.3 of the Interregional Inspectorate of the Federal Tax Service for Major Taxpayers No.7 as of April 2, 2010, that is – invalidated the following charges: profit tax of 14,793,081.00 rubles with respective penalties and charges; VAT of 352,475,816.80 rubles with respective penalties; profit tax penalties of 4,983.59 rubles; land tax of 77,472.00 rubles; water tax of 83,308.00 rubles with penalties of 14,838.4 rubles and charges of 10,850.00 rubles; charges on personal income tax of 251.07 rubles. As for the rest, the Resolution of the Interregional Inspectorate of the Federal Tax Service for Major Taxpayers No.7 dated April 2, 2010, left unaltered and was confirmed. The Company applied to the Moscow Arbitration Court with a statement to declare the Resolution invalid to the extent concerning the additional charges totaling 305,387,512.48 rubles (including 279,779,309.69 rubles of taxes). The Moscow Arbitration Court initiated the proceedings on the case No. A40-100845/10-4-498. The Judgment of the Moscow Arbitration Court dated June 10, 2011, completely satisfied the Company’s claims. Decree of the Ninth Arbitration Court of Appeal dated October 21, 2011 disallowed the judgment of the Moscow Arbitration Court with regard to this matter. The Ninth Arbitration Court of Appeal reviewed this case according to the rules established for cases to be considered by an arbitration court of primary jurisdiction and adopted a new judicial act which:  recognized the Company's waiver of the claim with regard to appealing against Clause 1.8 of the disputed Resolution of the tax authority;  satisfied the Company's claims that Clauses 1.1, 1.10, 1.66 of the disputed Resolution should be recognized invalid (with respect to additional tax charges for the total amount of 240,374,426,89 rubles);  declined the other part of the Company's claims (to the total additional tax charges of 39,404,882.79. rubles.  The Decree of the Federal Anti-Monopoly Service of the Moscow District as of March 16, 2011 with respect to Case No. A40-100845/10-4-498 disallowed Resolution of the Ninth Arbitration Court of Appeal as of October 21, 2011 with respect to Case No. A40-100845/10-4-498 as regards satisfaction of the Company's claims related to:  additional income tax charges according to the Clause 1.7.of the Resolution of the tax authority on the indebtedness of Pacific Gateway Exchange Inc., which amounted to 11,578,166.96 rubles;  additional VAT charges according to the Clause 1.16 of the Resolution with regard to a failure to accept the tax deduction, which amounted to 1,973,294.55 rubles;  bringing to tax liability for incomplete payment of income taxes, VAT and UST (Uniform Social Tax), as well as accrual of penalties for late payment of the above mentioned taxes. For this purpose the court recognized Resolution no. 3 of the Interregional Inspection of the Federal Tax Service for Major Taxpayers No. 7 as of April 02, 2010, related to additional VAT charges according to the Clause 1.16 of the Resolution with regard to a failure to accept the tax deduction amounting to 1,973,294.55 rubles.

48 ANNUAL REPORT As regards Clause 17 of the Resolution on Pacific Gateway Exchange Inc.’s debt amounting to 11,578,166.96 rubles, as well as bringing to tax liability for incomplete payment of income taxes, VAT, and UST, as well as penalization, the case was sent for a new hearing by the Ninth Arbitration Court of Appeal. Decree of the Ninth Arbitration Court of Appeal No. 09AП-9059/2012-АК as of June 01, 2012 declared invalid the Resolution No. 3 of the Interregional Inspectorate of the Federal Tax Service for Major Taxpayers No. 7 as of April 02, 2010 as regards additional income tax charges according to the Clause 1.7 of the Resolution on Pacific Gateway Exchange Inc.’s debt amounting to 11,578,116.96 rubles (the amount of additional income tax charges is 2,778,760.07 rubles) as well as related appropriate fines and penalties; and with respect to bringing to the tax liability for incomplete payment of income taxes, VAT and UST payable to the federal budget, and for a delay of payment of the said taxes. The Decree of the Court of Appeal was not considered under cassation procedure. 2.On December 06, 2010 the Open Joint Stock Company Central Telecommunications Company applied to the Moscow Arbitration Court with a statement to invalidate Resolution No. 11 of June 30, 2010 of the Interregional Inspectorate of the Federal Tax Service for Major Taxpayers No. 7 concerning the Company's bringing to liability for tax offence committed. The Resolution was made by the tax authority based on a field tax inspection of the Company’s activities for the years 2007-2008. The Company disputes the additional VAT charges amounting to 34,394,013.36 rubles, additional income tax charges of 3,872,772.15 rubles, as well as fines and penalties of 69,044.00 rubles and 31,936.61 rubles, respectively. Taking this statement into account the Moscow Arbitration Court filed a case A40-144303/10-90-850. In the course of proceedings due to reorganization, the Moscow Arbitration Court replaced the applicant party OJSC CenterTelecom with Rostelecom in the above-mentioned arbitration case. According to a Judgment of the Moscow Arbitration Court dated November 24, 2011, the Company’s claims were satisfied in their entirety. According to a Decree of the Ninth Arbitration Court of Appeal on case No. 09AП-37096/2011-AK dated February 2, 2012, the judgment of the arbitration court of primary jurisdiction was remained in force and the appeal of the tax authority was not satisfied. The Interregional Inspectorate of the Federal Tax Service for Major Taxpayers No. 7 filed a cassation appeal with the Federal Anti-Monopoly Service of the Moscow District. The Decree of the Federal Anti-Monopoly Service of the Moscow District as of May 11, 2012 left the court judicial acts of the Arbitration Court of Moscow and the Ninth Arbitration Court of Appeal unchanged and did not satisfy the cassation appeal of the tax authority. 3. On December 09, 2010 the Company applied to the Arbitration Court of Samara Region with a statement to nullify the Order No. 480 dated September 9, 2010, issued by the Office of the Federal Anti-Monopoly Service in Samara Region ‘On Introduction of Changes into the Register of Economic Entities with a Market Share of Certain Goods of More than 35 Percent that are Dominant in a Market of a Certain Type of Goods, if Cases of Recognition of a Dominant Position of Economic Entities with Respect to Such a Market are Specified in the Federal Laws’ and to exclude the Company from this Register. On June 14, 2011 Hearing on Case No. A55-25947/2010 was held which resulted in a judgment, completely satisfying the asserted claims. This judgment has not been reviewed by a court of appeal or a cassation court. 4. The Interregional Inspectorate of the Federal Tax Service of Russia for Major Taxpayers in the Republic of Dagestan (hereinafter referred to as ‘Tax Authority’ or ‘Inspectorate’) conducted a field tax inspection of Dagsvyazinform OJSC (currently Dagestan Branch of Rostelecom) in the matter of complying with legislation concerning taxes and revenues with respect to all taxes and revenues collected from January 01, 2008 through December 31, 2009, and with respect to Personal Income Tax in a period from December 19, 2008 through June 23, 2010. The results of the inspection performed by the tax authority were presented in Field Tax Inspection Statement No. 10-55 dated August 04, 2011, which suggested that unpaid taxes should be collected from the Company in the amount of 82,996,625.00 rubles including VAT in the amount of 78,983,177.00 rubles, the income tax in the amount of 4,013,448.00 rubles and penalties for delayed payment or non-payment of taxes (levies). Upon consideration of the tax inspection materials some of the Company's arguments stated in Objections to the Tax Inspection Statement were accepted by the Inspectorate, while the other conclusions of the Inspectorate remained in force and presented in the Resolution No. 10-55Р dated September 29, 2011. The Company lodged an appeal to Office of the Federal Tax Service of Russia for the Republic of Dagestan (hereinafter referred to as Office of the FTS of Russia for the Republic of Dagestan) on the Resolution, which did not come into force.

49 ANNUAL REPORT According to the results of the Resolution No. 15-08/091 made by the Office of the FTS of Russia for the Republic of Dagestan on December 15, 2011 the arrears and penalties additionally charged by Inspectorate amounting to 10,791,366.00 rubles were recognized unjustified. The Office of the FTS of Russia for the Republic of Dagestan recognized the other arguments set forth in the Company’s appeal - unreasonable. Resolution of the tax authority No. 10-55P dated September 29, 2011 with due consideration of amendments made by the Office of the FTS of Russia for the Republic of Dagestan came into force on December 15, 2011. On December 28, 2011 the Interregional Inspectorate of the FTS of Russia for Major Taxpayers No. 7 sent to the Company a Request No. 95 demanding that the Company should pay a tax, levy, penalties and fines amounting to 76,364,348.00 rubles, including arrears in the amount of 67,735,929.00 rubles and penalties of 8,628,419.00 rubles. For the purpose of appealing against the Resolution of the Tax Authority No. 10-55P dated September 29, 2011 and Request No. 95 for payment of a tax, levy, penalties and fines dated December 28, 2011 the claim papers were transferred to the Arbitration Court of Moscow. At a preliminary court hearing which took place on April 20, 2012 the proceedings related to appeal against the Resolution No. 10-55P was detached into a separate case and passed over to the Arbitration Court of the Republic of Dagestan. As for the other part of the case hearings in the Arbitration Court of Moscow were suspended. The case was taken over by the Arbitration Court of the Republic of Dagestan and at present time is seriously investigated. During investigation of the said case by the Arbitration Court of the Republic of Dagestan Rostelecom appealed against another resolution of the Interregional Inspectorate of the FTS of Russia for Major Taxpayers in the Republic of Dagestan, that is the Resolution No. 10-72P dated April 25, 2012 based on the results of the field tax inspection of the Dagestan Branch of the Company for the years 2010-2011. The total sum of additionally charged taxes amounted to 72,353,651.00 rubles. As reasons for additional charge of taxes were the same, according to the opinion of the court, the Arbitration Court of the Republic of Dagestan at its own initiative lumped these two cases into one case and on December 12, 2012 produced a judgment to satisfy all claims of the Company except for VAT charges. The Inspectorate lodged an appeal. The Sixteenth Arbitration Appeal Court considered an appeal of the Interregional Inspectorate of the FTS of Russia for Major Taxpayers in the Republic of Dagestan on March 11, 2013 and refused to satisfy it. Thus, the Resolution of the Arbitration Court of the Republic of Dagestan dated December 12, 2012 came into force. The Interregional Inspectorate of the FTS of Russia for Major Taxpayers in the Republic of Dagestan lodged a cassation appeal for these judicial acts to the Federal Anti-Monopoly Service of the North Caucasus District. By Decree of the Federal Anti-Monopoly Service of the North Caucasus District made on August 07, 2013 they were cancelled and the case was remanded for a new trial by the Arbitration Court of the Republic of Dagestan. By the Resolution of the Arbitration Court of the Republic of Dagestan made on December 05, 2013 the resolutions of the tax authority were recognized invalid only in a part of additional Personal Income Tax charges amounting to 124,551.00 rubles, the other demands were refused. The Company lodged an appeal to the Sixteenth Arbitration Appeal Court. 5. In July 2010 the Interregional Inspectorate of the Federal Tax Service for Major Taxpayers No.7 completed a repeated field tax inspection on the updated declarations of income tax for 2006 and 2007. Upon its results was produced a Resolution No.13 dated September 06, 2010 to dismiss prosecution for a tax offence based on which the North-West Telecom JSC was requested to pay the income tax arrears in the amount of 12,356,000.00 rubles, and income tax penalties equal to 388,000.00 rubles. The OJSC North- West Telecom in the appeal procedure established by the Art. 101.2. of the Tax Code of the RF disputed the resolution of the Inspectorate in a superior authority - the Federal Tax Service. By Resolution No. AC-37-9/14409@ on the appeal dated October 28, 2010 the Federal Tax Service cancelled the Resolution of Inspectorate concerning the income tax penalty charges to the amount of 223,000.00 rubles, leaving the other part of the Inspectorate’s resolution unchanged, that is to the total amount of 12,521,000.00 rubles. In 2011 the Company, being a legal successor of OJSC ‘North-West Telecom’, filed a claim with the Moscow Arbitration Court to recognize the Resolution No. 13 dated September 06, 2010 invalid in the disputed part.

50 ANNUAL REPORT According to the Resolution of Moscow Arbitration Court as of November 30, 2011, the stated claims were satisfied, the resolution of Inspectorate was recognized invalid in the part related to additional charge of income tax for 2007 amounting to 3,647,762.00 rubles (on the grounds specified in Clause 2 of the reasons for judgment section), income tax amounting to 9,310,298.00 rubles (therefrom 4,919,412.00 for 2006 year and 4,390,886.00 rubles for 2007 year (on the grounds specified in Clause 5 of the reasons for judgment section). According to the Resolution of the Ninth Arbitration Court of Appeal No. 09АP-810/2012 dated February 02, 2012 the resolution of the arbitration court of primary jurisdiction remained unchanged and the appeal of the tax authority - unsatisfied. The Interregional Federal Tax Authority for Major Taxpayers No. 7 lodged a cassation appeal to the Federal Anti-Monopoly Service of Moscow District that has to be reviewed on April 23, 2012. Decree of the Federal Anti-Monopoly Service of Moscow District dated April 27, 2012 remained unchanged the resolution of an arbitration court of primary jurisdiction and the decree of an arbitration court of appellate instance. 6. According to the Resolution No. 10 of the Office of the Federal Anti-Monopoly Service of Novgorod Region dated October 28, 2011 Rostelecom was brought to administrative liability under Article 14.31, Part 1 of the Administrative Code of the Russian Federation in the form of penalty amounting to 8,248,150.00 rubles. On November 16, 2011 to the Arbitration court of Novgorod Region was filed a statement disputing the resolution of the administrative authority as regards bringing to administrative liability. By a decree dated December 08, 2011 on the case No. A44-6048/2011 the statement was accepted for handling. The case was established for court hearing on February 02, 2012. By a decree of the Arbitration Court of Novgorod Region dated February 02, 2012, the proceedings on the case No. A44-6048/2011 was suspended until case No. A44-230/2011 will be considered by courts of appeal and cassation. 7. Rostelecom is a respondent in a dispute with CJSC Telecom MTK (Moscow) which is currently under the bankruptcy proceedings. A bankruptcy receiver of CJSC Telecom MTK disputed a statement of OJSC Dalsvyaz, whose successor is the Company, as regards offset of the similar counterclaims, that both CJSC Telecom MTK as well as OJSC Dalsvyaz had based on a number of construction contracts. CJSC Telecom MTK’s bankruptcy manager believes that this offset violates the priority order for satisfaction of the creditors' claims in re bankruptcy case, because the deal was entered into in so called ‘period of suspicion’. On March 15, 2012, the Arbitration court of Moscow partially satisfied the statement of the bankruptcy manager: Rostelecom's debt to CJSC Telecom MTK was restored in the amount of 6,877,307.00 rubles, while CJSC ‘Telekom MTK's debt to the Company was restored in the amount of 35,390,876.00 rubles. By the decree of the Ninth Arbitration Court of Appeal dated May 25, 2012, this judicial act remained unchanged. By the decree of the Federal Anti-Monopoly Service of Moscow District No. Ф05-15141/2011 dated August 01, 2012 the judicial acts of the first and appellate instance remained unchanged and the Company's cassation appeal – without satisfaction. On October 19, 2012 the Company's statement for a supervisory review of the case was returned by the Supreme Arbitration Court of the Russian Federation. As a result of case examination to the Company may be raised a claim on the part of Gorsvyazstroy LLC (Moscow) amounting to 28,513,569.00 rubles. Telecom MTK CJSC conceded the mentioned debt amount to Gorsvyazstroy LLC in the process of bankruptcy. 8. Interregional Inspectorate of the Federal Tax Service of Russia for Major Taxpayers No. 7 carried out a field tax inspection with respect to Rostelecom as a successor of Uralsvyazinform OJSC for the issues of compliance by Uralsvyazinform OJSC with the tax and levy legislation of the RF within a period from January 01, 2008 till December 31, 2009. The results of such inspection were posted by the Interregional Inspectorate of the Federal Tax Service for Major Taxpayers No. 7 in the Resolution No. 1 dated January 16, 2012. Being disagreed with the resolution made by the Interregional Inspectorate of the Federal Tax Service for Major Taxpayers No. 7, the Company applied to the Arbitration Court of Moscow. Whereas the Company disputes the additional VAT amounting to 34,394,013.36 rubles, additional income tax amounting to 854,571.97 rubles, property tax amounting to 27,140,441.00 rubles, and the relevant fines and penalties. The Arbitration Court of Moscow commenced a case No. А40-114401/12-99-596 on this statement. The resolution of the Arbitration Court of Moscow dated February 25, 2013 satisfied the Company’s claims in the part of:  invalidation of the cl. 1.2 2.2 of the statement of reasons of the resolution No. 1 dated January 16, 2012 (additional charge of income tax amounting to 808,048.00 rubles and property tax amounting to 430,448.00 rubles);

51 ANNUAL REPORT

 additional charge of income tax, relevant fine and penalty amounts due to a failure to account for additional charge by cl. 2.1 and 2.2 of the resolution No. 1 of the tax authority dated January 16, 2012 of the property tax amounting to 26,709,933.00 rubles and 420,448 rubles as the expense decreasing a taxable base for 2008-2009;  provisions of the cl. 2, 3.1 of an operative part of the resolution related to these clauses. The Company as well as the Interregional Inspectorate of the FTS of Russia for Major Taxpayers No. 7 applied to the Ninth Arbitration Court with the appeals. By the decree No. 09АП-12767/2013 and No. 09АП- 13094/2013 of the Ninth Arbitration Court of Appeal dated May 21, 2013 the resolution of the arbitration court of primary jurisdiction remained unchanged. The Company as well as the Interregional Inspectorate of the FTS of Russia for Major Taxpayers No. 7 applied to the Federal Arbitration Court of Moscow District with the cassation appeals. By the decree of the Federal Arbitration Court of Moscow District dated October 10, 2013 the Company’s appeal was satisfied, the resolution of the Arbitration Court of Moscow concerning refusal to recognize invalid the cl. 2.1. of disputed resolution was cancelled, as regards this part the case was sent for a new trial. As for the rest the judicial act remained unchanged. Being disagreed with the decree of the Federal Anti-Monopoly Service of Moscow District dated October 01, 2013 the Interregional Inspectorate of the FTS for Major Taxpayer No. 7 applied to the Supreme Arbitration Court with a supervisory appeal. By a ruling No. ВАС-14828/13 of the Supreme Arbitration Court dated October 29, 2013 submission of the case to the Presidium of the Supreme Arbitration Court of the Russian Federation was refused. By resolution of the Arbitration Court of Moscow dated December 24, 2013 re the case No. A40-114401/12- 99-596 the Company’s claims in the part, that was sent for a new trial, were satisfied to the full extent, the resolution No. 1 of the Interregional Inspectorate of the FTS for Major Taxpayers No. 7 dated January 16, 2012 was recognized invalid in the part of clause 2.1 of the statement of reasons section about additional charge of property tax amounting to 26,709,994.00 rubles. The tax authority, being disagreed with this judicial act, applied to the Ninth Arbitration Court of Appeal with an appeal. The hearing will take place on March 03, 2014. 9. The Interregional Inspectorate of the Federal Tax Service for Major Taxpayers No. 7 has carried out an on-site tax audit pertaining to Rostelecom as a successor of OJSC SZT for the period from January 01, 2008 till December 31, 2009. As a result of that audit, it made a Resolution No. 2 as of January 16, 2011 on bringing the Company to tax liability. The Company appealed against this resolution at the Federal Tax Service of the Russian Federation. By Resolution of the Federal Tax Service of the Russian Federation No. CА-4-9/9235@ as of June 06, 2012, the above mentioned resolution of the Interregional Inspectorate of the Federal Tax Service for Major Taxpayers No. 7 was amended as follows: The Federal Tax Service of the Russian Federation has quashed the resolution in so far as pertaining to additional charge of profit tax in the amount of 21,328,354.00 rubles (clauses 1.1. and 1.5. of the Resolution) and pertaining to the fine for personal income tax for failure to report, within the due term, about impossibility to withhold a tax in the amount of 200.00 rubles (item 3.4. of the Resolution), and in so far as pertaining to the relevant amount of penalties being due for the specified amounts of taxes. The rest of the Resolution remained unchanged, and hence became final. Being disagreed with the resolution made by the tax authority, the Company applied to the Arbitration court of Moscow to adjudicate it as partially invalid. The resolution was appealed against in the part of additional charge of profit tax and VAT for the total amount of 51,297,280.43 rubles, and in the part of the penalties being due for this amount. The Arbitration Court of Moscow has accepted this application and has initiated proceedings on case No. А40-120812/12-90-604. The regular session of the court pertaining to this case has was scheduled on January 29, 2013. By a resolution of the Arbitration Court of Moscow dated February 04, 2013 the Company’s claims were satisfied only in part of additional charges of property tax amounting to 4,573,580.43 rubles, as for the rest the satisfaction of claims was refused. The Company and the tax authority applied with their appeals against this court decision. Consideration of appeals is scheduled on August 18, 2013. By the decree of the Ninth Arbitration Court dated June 17, 2013 a resolution of the court of primary jurisdiction was partially cancelled and the Company’s claims satisfied to the full extent. The appeal of the tax authority was refused. The Interregional Inspectorate of the FTS for Major Taxpayers No. 7, being disagreed with said decree of the court of primary jurisdiction, appealed against it under cassation procedure at the Federal Anti-Monopoly Service of Moscow District.

52 ANNUAL REPORT By the decree of the Federal Anti-Monopoly Service of Moscow District dated November 14, 2013 the court dismissed the cassation appeal of the tax authority and remained prior decree of the Ninth Arbitration Court of Appeal without any changes. 10. By a ruling of the Arbitration court of Moscow dated November 19, 2012 on the case No. А40- 27560/2012, the Company's claims for the total amount of 1,042,853,668.85 rubles have been included into the register of claims by creditors of GlobalStar-Kosmicheskiye Telecommunikatsii CJSC (into the third priority order of the claims satisfaction). The regular session of the court concerning a report of the GlobalTel's CJSC interim manager has been assigned for April 23, 2013. On July 06, 2013 in relation to GlobalStar-Kosmicheskiye Telecommunikatsii CJSC was introduced a financial recovery procedure for 18 months period. 11. Limited Liability Company Imaklik Servis applied to the Arbitration Court of Saint Petersburg city and Leningrad region with stated claims to bind the Company to accept and pay for the goods – technological equipment Luchezar 150 in a number of 180 items for the total amount of 91,818,360.00 rubles. In support of its stated claims the Plaintiff referred to an agreement achieved by both parties under all material terms of the contract for supply of this equipment by sending an offer and its acceptance by the Respondent. By a resolution of the Arbitration Court of Saint Petersburg city and Leningrad region dated June 29, 2012 under case No. A56-12712/2012 satisfaction of the stated claims to the Company was refused in full. By a decree of the Thirteenth Arbitration Court of Appeal dated October 05, 2012 the court resolution made in the case remained unchanged – the appeal of Imaklik Servis LLC - without satisfaction. By a decree of the Federal Arbitration Court of North-Western Okrug dated December 13, 2012 the judicial acts made in the case remained unchanged and a cassation appeal of Imaklik Servis LLC – without satisfaction. 12. Interregional Inspectorate of the FTS of Russia for Major Taxpayers No. 7 (hereinafter – Interregional Inspectorate of the FTS for Major Taxpayers No. 7, tax authority) carried out a field tax inspection in relation to Rostelecom OJSC with simultaneous inspection of reorganized companies consolidated to Rostelecom OJSC (Sibirtelecom OJSC, VolgaTelecom OJSC, Dalnevostochnaya Kompaniya Elektrosvyazi OJSC, Uralsvyazinform OJSC, Tsentralnaya Telekommunikatsionnaya Kompaniya OJSC, Yuzhnaya Telekommunikatsionnaya Kompaniya OJSC, North-West Telecom OJSC) as to correctness of calculation and opportuneness of all taxes and revenues payment (withholding, transfer) for a period from January 1, 2009 to December 31, 2010, as well as insurance contributions for mandatory pension insurance under art. 2 and cl. 1 of the art. 25 of the Federal law No. 167-ФЗ dated December 15, 2001 ‘Concerning Mandatory Pension Insurance in the RF’ and the unified social tax for a period from January 01, 2009 till December 31, 2010. According to the results of tax inspection and consideration of the Company’s Objections to the Field Tax Inspection Report of the Interregional Inspectorate of the FTS for Major Taxpayers No. 7 was made the Resolution No. 2 about bringing the taxpayer to the tax liability as of March 28, 2013. The total amount of tax claims amounts over 140 million rubles. The resolution of the Interregional Inspectorate of the FTS for Major Taxpayers No.7 was challenged on appeal at the FTS of Russia, however the main claims of the Interregional Inspectorate of the FTS for Major Taxpayers No. 7 remained. The Company applied to the Arbitration Court of Moscow with a statement to invalidate the resolution No. 2 of the Interregional Inspectorate of the FTS for Major Taxpayers No. 7 dated February 28, 2013 in a part of episodes to the amount over 140 million rubles. By a ruling of the Arbitration Court of Moscow dated September 20, 2013 was initiated a case No. A40-130146/13-20-467. A regular court session on this case is scheduled on January 22, 2014. Risks associated with the Company’s possible liability for the third parties’ debts, including the Company’s subsidiaries. The Company occasionally bears a risks associated with possible liability for the third parties’ debts to the amount of the securities provided by them. In case of non-performance or improper performance by the debtors of the obligations secured by the Company’s surety, Rostelecom shall be jointly and severally liable to their creditors. Rostelecom’s Management does not expect arising of any significant obligations in respect of a security provided. A probability for occurrence of the factors, that may lead to the non-performance or improper performance of the obligations, is minimal. Risks associated with possible loss of the consumers accounting for at least 10% of the total sales revenue of the Company’s products (works, services). At the present time such risks do not exist, because the Company has no consumers accounting for at least 10% of the Company’s total revenue.

53 ANNUAL REPORT Risks related to integration of newly acquired companies In order to strengthen its market position on the Information and Communication Technologies Market the Company makes a market analysis for probable acquisitions and acquires the companies in accordance with its strategic priorities. Ineffective integration of newly acquired companies in the event of revealing the facts unknown to the Company at the time of acquisition may result in additional expenses and failure to realize the expected synergies. In order to mitigate this risk the Company develops an integration plan for the newly acquired companies and controls its implementation. Risks associated with lack of demand for current and emerging Company’s products and services. At the present time the Company’s revenue is primarily generated by traditional services, such as DLD and ILD telecommunication and lease of line services. Lately, the Company has been developing and promoting new advanced innovative products and services, including high speed Internet access based on fiber-optic lines, provisioning of Virtual Private Networks (IP VPN), TV, etc. In conditions of continued decrease in demand for traditional voice services which may not be compensated for by consumption of new services offered by the Company, this risk may negatively affect the Company’s financial performance and growth prospects. In order to mitigate possible consequences the Company develops IT-based products. Also the Company is involved in sales optimization, develops and applies new principles and approaches to voice service packaging together with other services. Risks associated with failure to fulfill or undue fulfillment of the obligations to customers and clients on major projects: At the present time Rostelecom is in the process of realizing a range of complicated projects (including federal projects), involving the operation of high-tech equipment, significant costs, and long realization periods. Success of such projects calls for a high level performance at all stages of realization, including those of planning, cooperation with subcontractors and public authorities, financing, and execution. Poor quality or delayed implementation of these projects by the Company, including failures not attributable to the Company’s fault, like failure to perform on the part of associated contractors, unpredictable changes in the customer’s requirements for the project outcome, may incur significant financial and reputation damage. In some projects, such as Industry Specific Services, Sochi’2014 and Electronic Government, the realization of a project is directly linked to issues of national or strategic importance and can have among others significant social implications. To reduce this risk, the project management offices of the most important projects have been made separate units within the Company, and continuously coordinate the Company and its contractors’ operations according to the projects’ schedules. Risks associated with a lack of capacity, insufficient network capabilities of the Company, and a possible decrease in returns on investment in the communications network. Active development of the data network-based services is becoming one of the main drivers of growth in the telecommunications market. To guarantee this development, it is necessary to significantly expand the data network capacity, functionality and features. In order to reduce this risk, Rostelecom OJSC invests a lot into the development and upgrade of the existing data network. However, if the Company’s predictions on the growth of demand for these services turn out to be incorrect, or if the Company fails to develop the data network on time, the growth in revenue derived from these services may be limited. Significant increases in the volume of data traffic in the network call for investment in the data network’s development and are expected to naturally lead to falling rates per traffic volume unit for end users. In this context, there is a risk of falling returns on investment made into the data network, as per traffic unit rates decline further and the data service market becomes saturated. In order to manage the risk of declining return on investment for investment project the Company is implementing a program to improve investment efficiency including among others putting in place a per- project and per-site supervising and monitoring system of investment project implementation. Risks associated with changes of existing and initiation of new technologies of services rendering in communications industry. A lot of the services offered by the Company (Internet access, IPTV, IP VPN, etc.) include a variety of technological components subjected to rapid and substantial changes. The emergence of new technologies or significant modifications of existing technologies can weaken the Company’s and render it noncompetitive and requiring of additional investment for further improvement and a guarantee of marketability.

54 ANNUAL REPORT In addition, investment in new technologies in which the Company has neither implementation skills nor experience can be commercially unreasonable. Such technologies can demand more time for their introduction or additional expenditures that were not originally anticipated. These changes may adversely affect the Company’s financial results and the introduction of new products and services. To decrease this risk, the Company has established a special internal unit that continuously monitors technological innovations. The Company also develops and implements plans of introducing new products and services given best implementation practices in each corresponding area. The Company consistently analyses opportunities to use new technologies and product offerings on their basis, including cross-industry implementations. Risks associated with possible claims by the Federal Antimonopoly Service against the Company. Rostelecom is included in the register of natural monopoly entities. In addition, the range of the Company’s activity continues to grow both through integration of interregional telecommunications operators and through acquisitions, which requires preliminary coordination with the Federal Antimonopoly Service (FAS). In view of obscure rules of antimonopoly regulation, unfair and disputable complaints against the Company to the FAS by competitors, as well as the objective growth of the Company’s presence in some markets due to its transition to the sphere of universal telecommunications provider, FAS proceedings against the Company may occur unexpectedly and adversely affect both the Company’s market position and its financial performance and reputation. To lower this risk, the Company does its best to meet the relevant anti- monopoly requirements and, if necessary, to defend its position in court proceedings.

55 ANNUAL REPORT

CORPORATE GOVERNANCE Development of corporate governance practice in the Company is one of the priority tasks for the Company’s management. The efficiency of Rostelecom’s corporate governance is secured by keeping of a stable system of relationships in the Company, allowing to achieve a balance between economic and social objectives, between the interests of the Company, its shareholders, and other concerned parties. In its everyday corporate governance practice Rostelecom adheres to recognized Russian and world standards, recommendations of the independent rating agencies and consultants in the sphere of such practice improvement. Following to the high standards of corporate governance and information disclosure in the Company allows to create an atmosphere of confidence and assurance between all participants of corporate governance, increases the efficiency of making the management decisions, that leads to investment attractiveness of the Company in the long-term prospect. Structure of Company Governance Pursuant to the Rostelecom’s Charter, the Company shall be governed by:  the General meeting of shareholders – the highest governance body of the Company;  the Board of Directors, which shall be elected by the General meeting of shareholders of the Company for strategic management of the Company;  the President and the Management Board, which shall be appointed by Rostelecom’s Board of Directors for the purpose of ensuring everyday operating management of the Company. Corporate Governance Standards For securing transparent and easy-to-understand governance mechanisms of the Company for Rostelecom’s shareholders, as well as for securing high ethic standards while doing business the Company has the Corporate Governance Code and the Ethics Code, that strengthen the high standards of corporate practices recognized in the whole world and regulate such matters as a conflict of interests, a ban on the use of official position and insider information, an order for preparation and disclosure of performance information. The Corporate Governance Code and the Ethics Code were developed by the Company in accordance with the requirements and recommendations of New York Stock Exchange, the US Securities and Exchange Commission and recommendations of the Bank of Russia. Performance of the standards, set forth in these Codes, is a necessary condition for maintaining a listing of the Company’s securities on the Russian and foreign stock exchanges. The Company’s Codes are based on the following corporate governance principles recognized in Russia and worldwide:  observance of the shareholders’ rights and interests vested by the applicable legislation, norms and requirements, as well as securing of the long-term increase in stock value owned by them through the improvement of corporate practices and increase of information disclosure and transparency;  securing of transparent and efficient mechanisms of interaction between the Company governance bodies, as well as faithful and competent discharging by them of their duties in accordance with the high standards of corporate governance and business ethics;  maintenance of the efficient internal control and audit system of the Company;  active cooperation of the Company with the individuals concerned with ensuring of long-term and stable development of Rostelecom. Corporate Governance Rating On December 2013 the Russian Institute of Directors (the RID) gave the Company a rating at the level of ‘7+’ – ‘Developed Corporate Governance Practice’ under the scale of the National Rating of Corporate Governance (NRCG) according to the results of monitoring for corporate governance practice carried out from August 2012 till November 2013. Thus the RID considers that Rostelecom is among the leaders of the Russian companies as regards the quality of corporate governance. The Company has low corporate governance risks. The Company complies with the requirements of the Russian legislation in the sphere of corporate governance, follows to the main part of recommendations of the Russian Corporate Code of Conduct and to the separate recommendations of the international best practices of corporate governance. Compliance with recommendations of the Corporate Code of Conduct of the FCSM of Russia On November 28, 2001 the Government of the RF approved the Corporate Code of Conduct, whose recommendations are used by the Company at the present time in the process of improvement of the corporate governance practice. The mechanisms, securing their implementation in accordance with current legislation of the RF, are established at the Company’s Charter and other internal documents.

56 ANNUAL REPORT Information concerning the Company’s compliance with the recommendations of the Corporate Code of Conduct of the Federal Commission for the Securities Market (FCSM) of Russia is set forth in Annex No. 1 to this Annual Report and is an integral part thereof.

The Company complies with the requirements of the Russian legislation concerning corporate governance, follows the Russian Code of Corporate Conduct in most cases as well as the separate recommendations of the international best practices in corporate governance. Compliance with the Code of Corporate Conduct of FCSM of Russia On November 28, 2001, the Russian Government approved the Code of Corporate Conduct. In the course of improving its corporate governance standards, OJSC Rostelecom took the recommendations of the Code and embedded them into its own Charter and other internal regulations of the Company in accordance with the current legislation of the Russian Federation. Information on Rostelecom compliance with recommendations of the Corporate Conduct Code of the Federal Commission for Securities Market of the Russian Federation is provided in Appendix 1 to this Annual Report and constitutes its integral part.

57 ANNUAL REPORT

SHARE CAPITAL As of December 31, 2013 the Charter Capital of Rostelecom 7 280 089 425,0 rubles, including 1 597 702 001 ordinary shares (state registration number issue 1-01-00124-А dated November 10, 1993), 1 071 502 300 ordinary shares (state registration number additional issue 1-01-00124-А-018D dated August 29, 2013) and 242,831,469 Type A preference shares (state registration number 2-01-00124-А dated November 10, 1993), with par value of 0.0025 rubles each. By the decision of the Service on financial markets of the Bank of Russia as of February 20,, 2014 the additional security symbol 018D for issuing ordinary Rostelecom shares was dismissed, as a result currently in circulation there are 2 669 204 301 ordinary shares (state registration number 1-01-00124-А dated November 10, 1993) and also hereabove mentioned Type A preference shares. According to OJSC Rostelecom’s Charter, effective as on December 31, 2013, the Company in addition to already placed outstanding shares could issue announced shares totaling 2 613 935 751 ordinary shares and 531 Type A preference shares, with a par value of 0.0025 rubles each. Rostelecom’s Share Capital Structure as of December 31, 2013 The shareholders who own 2% or more of Charter Capital or ordinary (voting) shares of the Company (including nominal holders): Share in Share in Share in Charter capital Ordinary Preference shares shares RUB % % % Shareholders The Russian Federation represented by 3 135 437.9100 43.07% 46.99% 0.00% Federal Property Management Agency LLC Mobitel 702 218.4900 9.65% 9.38% 12.55% Vnesheconombank 275 901.8950 3.79% 4.13% 0.00% Rostelecom LLC (treasury account) 587 716.1850 8.07% 7.22% 17.50% Nominal holders NPO CJSC NRD 2 896 342 215.0 39.78% 38.45% 54.42% As on December 31, 2013 the Russian Federation represented by the Federal Property Management Agency owns 1254 189 564 ordinary shares of the Company. The Russian Federation does not have a special right ("golden share") to participate in the management of the Company. Breakdown of the Company shareholders by category: Number of Share in Charter Percentage of Percentage of registered capital ordinary shares Preference shares shareholders Legal entities, including: 736 93.58% 94.41% 84.52% Resident companies 639 93.54% 94.36% 84.51% Non-resident companies 97 0.04% 0.05% 0.01% Individuals, including: 156,680 6.42% 5.59% 15.48% Residents 156,431 6.40% 5.58% 15.43% Non-residents 249 0.02% 0.01% 0.05%

The Dividend Policy Rostelecom pays dividends in accordance with the Company Charter and in Regulations on the dividend policy. In clause 10.3 of the Charter, and in par. 5.2 of the Regulation on Dividend Policy the minimal total value payable as a dividend on preference shares is fixed at ten percent of the Company’s net profit, defined in accordance with Russian legislation (Russian Accounting Standards) determined upon results of the last accounting period to be divided by the total number of shares constituting twenty-five percent of the Company’s Charter Capital. In December 2011, the Board of Directors approved the new second edition of the Regulation on Dividend Policy. According to accepted regulation, the minimal total value payable as a dividend on ordinary shares should constitute no less than twenty percent of the Company’s total net profit

58 ANNUAL REPORT determined in accordance with International Accounting Standards (IAS). Earlier, the dividend policy defined the minimal total value payable as a dividend on ordinary shares on the basis of the Company’s net profit according to Russian Accounting Standards. The Company’s Annual General Shareholders’ Meeting held on June 17, 2013, resolved to pay the following dividends based on the 2012 year results:  dividends on Type A preference shares in the amount of 4 1022 rubles per share;  dividends on ordinary shares in the amount of 2 4369 per share. Thus, the total amount of the dividends accrued on Type A preference shares totaled 996 143 thousand rubles and accounted for 3.05% of the Company’s net profit for 2012. The total amount of dividends payable on ordinary shares exceeded 7 172 426 thousand rubles, or 21.95% of the Company’s 2012 net profit. In the 2013 reporting year, the Company paid dividends to the federal budget totaling 532 billion rubles. Therefore, the Company has no indebtedness on payments of dividends to the federal budget. As on December 31, 2013 the Company’s debt to shareholders upon the results of dividend payments for 2012 amounted to approximately 0.74% of the total dividend amount payable in respect of the relevant periods. The main cause of dividends non-payments is the shareholders’ failure to submit information on certain changes in their personal data to the register of the Company’s securities holders in accordance with the payment method they had selected. These changes included:  Changes in the shareholder’s residential location, for those opting to receive dividends by mail transfer;  A lack of details, indication of incorrect bank details and/or changes in bank details for those opting to receive dividends by bank transfer;  Changes in shareholders’ passport details (this being applicable to any payment method) Rostelecom complies with the resolutions of the Annual General Shareholders’ Meetings and fully performs its obligations pertaining to the remittance of dividends to persons entitled to receive them. Moreover, pursuant to par. 5 of Article 44 of the Federal law No. 208-FZ “On Joint-Stock Companies” of October 31, 2002, and par. 13.3 of Article 13 of Rostelecom Charter, a shareholder shall advise the Company’s Registrar in a timely manner on any changes in his/her personal details. In case of a shareholder’s failure to provide information on changes in his/her details (on time), OJSC Rostelecom and the Registrar shall not be held liable for his/her losses inflicted in connection therewith. It is important to note that upon the expiry of the dividend payout period set by the General Meeting of Shareholders, the Company, together with the Registrar, monitors the shareholder register on a monthly basis and pays outstanding dividends to the shareholders which have made requisite changes to the register of the Company.

59 ANNUAL REPORT The Company’s Shares on the Russian Market

As of December 31, 2013 the Company’s ordinary and preference shares (RTKM, and RTKMP tickers) are currently listed as level A1 securities on the MICEX Stock Exchange. The listing on the MICEX as well as the inclusion of OJSC Rostelecom’s securities in the calculation of exchanges’ indices demonstrates the ample liquidity of the Company’s securities and ensures the observance of rights and interests of shareholders and investors in accordance with listing requirements.

Performance of Rostelecom Shares prices, MICEX Index

* Prices of OJSC Rostelecom’s ordinary and preference shares and the MICEX index were assumed to be equal to 100 base points as on December 31, 2012 ** The MICEX weighted average prices for OJSC Rostelecom’s ordinary and preference shares are used.

Volume of OJSC Rostelecom’s Shares Traded on MICEX

60 ANNUAL REPORT Company’s Securities on Markets Abroad Rostelecom ADRs were listed on the New York Stock Exchange (NYSE) from February 1998 to December 2009. In December 2009, the Board of Directors thoroughly reviewed the Level II ADR Program and decided to delist the ADRs from the NYSE and to deregister them with the U.S. Securities and Exchange Commission. The main reason for this decision compliance with reporting requirements under the U.S. Exchange Act was associated with substantial expenses, while the major market for Rostelecom’s securities was by far and large the Russian securities market. After the delisting from the NYSE the ADR Program was transferred to Level I and Rostelecom’s ADRs had begun trading in the U.S. over-the-counter (OTC) market by means of the ”Pink Sheets” electronic system. In March 2010, to maintain a high level of transparency and disclosure in line with the best global practices, OJSC Rostelecom’s ADRs were listed on the OTCQX International Premier – the highest tier of the U.S. OTC market. The Company’s ADRs are also traded outside of listing at the London, Frankfurt and other foreign stock exchanges. As of December 31, 2013, some 3.34% of the Company’s ordinary shares circulated outside the Russian Federation in the form of ADRs. Volume of OJSC Rostelecom’s Shares (ADR) Traded on Foreign Stock Exchanges

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GENERAL MEETING OF SHAREHOLDERS Pursuant to the Company’s Charter the General Shareholders’ Meeting is the Company’s supreme governing body. Annual Rostelecom Shareholders’ Meeting was held on June 17, 2013, and approved the annual report and annual financial statements of the Company on results of 2012. The shareholders also approved distribution of the profit and elected members of the Board of Directors. Also the said meeting approved ZAO KPMG as the Company’s auditor for 2013 and endorsed the remuneration payable for performance of their duties to members of the Board of Directors, who are not public servants. Also the Extraordinary Shareholders’ Meeting approved new issues of the Company’s Charter and regulations of on general meeting of shareholders. An extraordinary general meeting of Rostelecom shareholders was held on June 27, 2013 at which the Company shareholders made a decision to reorganize the Company in shape of merger by absorption of Svyazinvest and 20 more companies which directly or indirectly were wholly owned subsidiaries of Rostelecom and/or Svyazinvest, which was the logical continuation of the first stage of reorganizing which took place in April 2011. The shareholders who voted against or those who did not participate in decision- making concerning reorganizing could present their shares for reacquisition. After the review of shareholders claims on reacquisition of their shares Rostelecom reacquired 6.5 % of ordinary and 17.5% of Type A preference shares Following the results of extraordinary general meeting which took place on December 30th the shareholders decided to reorganize Rostelecom in shape of transfer of operator’s mobile assets to “RT-mobile” CJSC affiliation. Reorganizing in shape of assets transfer to “RT-mobile” CJSC is an important stage of mobile operations development implying conjunction of mobile assets of the company with Tele2 Russia through creating a joint venture. As it was in case with the meeting held in June 27, 2013 the shareholders who voted against or those who did not participate in the decision-making concerning reorganizing could present their shares for reacquisition. After the review of shareholders claims on reacquisition of their shares Rostelecom reacquired 6.1% of ordinary and 13.7% of Type A preference shares.

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THE BOARD OF DIRECTORS Pursuant to the Company’s Charter, the Board of Directors is a governing collective executive body responsible for the general management of the Company in between the General Shareholders’ Meetings, and consists of 11 members. In its activity, the Board of Directors is guided by the Charter of the Company and the Regulations on the Board of Directors of the Company. The new edition No. 11 of the abovementioned Regulations was approved by the Annual General Shareholders’ Meeting of the Company held on June 14, 2012, Minutes No. 1 dated June 16, 2012. The persons listed below were members of the Board of Directors of the Company during 2013 as well as in 2014 until the date of the Company’s Extraordinary Shareholders’ Meeting which was held on April 2 2014: Name, patronymic letter, surname of BoD 17.06.2013 Member 1. Sergei A. Azatyan 2. Ruben A. Agabengyan 3. Mikhail Yu. Alekseev 4. Vladimir N. Bondarik 5. Mikhail M. Zadornov 6. Anton A. Zlatopolsky 7. Anton S. Inshutin 8. Sergei B. Kalugin 9. Yury A. Kudimov 10. Sergei A. Kulikov 11. Sergei A. Kuznetsov 12. Mikhail A. Leschenko 13. Anatoly A. Milyukov 14. Alexander Yu. Provotorov 15. Alexander A. Pchelintsev 16. Ivan I. Rodionov 17. Vadim V. Semenov Brief biographies of the members of Rostelecom’s Board of Directors are attached as Appendix No.2 “Company Management and Controlling Bodies” to this Annual Report and shall be its integral part. Activities of the Board of Directors and its Committees in 2013 During 2013 the Company’s Board of Directors held 50 meetings, nine of which 6 meetings were held by attendance in person and 44 meetings by written correspondence. This ratio of the number of meetings by attendance and absentee meetings is based on the wish to make meetings as efficient as possible given such requirements as to make prompt decisions on the agenda issues, volume of information to be reviewed by members of the Board of Directors and the need for discussing the Company development issues. Information on the meetings of the Board of Directors of the Company is attached as Appendix No 5 to this Annual Report and made its integral part.

63 ANNUAL REPORT Major Resolutions Adopted by the Board of Directors  In January – February 2013 the Board of Directors reviewed a number of questions related to issue of bonds and optimizing of the affiliation structure of the Company in wide-scale concept “Regional affiliations composition optimizing”.  In March 2013 the Board of Directors has made a decision to preliminarily relieve current President from his duties and elect a new one, Sergei B. Kalugin.  In May a number of decisions were made for preparing reorganizing of the Company by means merger by absorption of Svyazinvest and 20 more affiliations and dependent companies.  In June and July 2013 the Board of Directors approved more than 40 transactions within the framework of MVNO GSM/UMT project implemented with Skylink group  In the beginning of August the Board of Directors reviewed a number of questions related to creation of joint venture with Tele2 Russia: in November an extraordinary meeting of shareholders of the company was held for making a decision concerning mobile assets transfer to separate affiliation in the beginning of December, and in the beginning of December the Board of Directors made a decision on participation of the Company in joint venture “T2 RTK Holding” LLC. Also during this meeting the strategy of the company until 2018 was determined.  During fiscal year the Board of Directors approved Company’s Budget for 2014 and regularly reviewed the questions on meeting budget indices and also on debts receivable management.  During the whole year the Board of the Directors applied significant efforts to refining risk management, internal audit and management of the Company. Moreover, according to the competency of the Board of Directors and according to Federal law “On Joint Stock Companies” they regularly reviewed questions on approval of transactions of interest. Also in 2013 there were decisions made on preparation and holding Annual general shareholders meeting on results of the year 2012, extraordinary general meeting of shareholders in June 2013 due to reorganizing of the Company by means merger by absorption of Svyazinvest and 20 more affiliations and dependent companies and extraordinary general meeting of shareholders in December 2013 due to reorganizing of the Company in shape of “RT-mobile” CJSC spin-out. Committees of the Board of Directors To improve the Company’s efficiency, the Board of Directors set up the Strategy Committee, the Nominations and Remuneration Committee, the Audit Committee, and the Corporate Governance Committee. These committees are elected on an annual basis. As initiatives are proposed, each Committee carries out a detailed analysis from the perspective of its own area of expertise and presents its recommendations to the Board. This ensures that each decision made by the Board of Directors is well-researched and sufficiently informed. Information on the meetings of Committees of the Board of Directors of the Company is presented in Appendix No 5 to this Annual Report and made its integral part. The Strategy Committee In its activity the Strategy Committee is guided by the Regulations on the Strategy Committee of the Board of Directors of the Company. Its new second edition was approved by the Board of Directors in 2009 (Minutes No 5 dated June 24, 2009). In 2013 the Strategy Committee focused significant efforts on reviewing matters related to elaboration of a strategy of the Company development until 2018, and ensuring further growth and modernization of the Company business on the whole. Besides, the Strategy Committee traditionally pays a lot of attention to meeting budget targets and approval of the budget for 2014. Members of the Strategy Committee until June 17, 2013: • Sergei Azatyan; • Sergei Inshutin; • Sergei Kuznetsov; • Alexander Provotorov; • Vadim Semenov. Members of the Strategy Committee as of August 29, 2013: • Anatoly Milyukov; • Ruben Agabengyan; • Mikhail Alekseev; • Mikhail Zadornov; • Sergei Kalugin;

64 ANNUAL REPORT • Sergei Kulikov; • Vadim Semenov; • Kai Uve Melhorn; • Maria Florentieva. The Nominations and Remuneration Committee In its activities the Nominations and Remuneration Committee is guided by the Regulations on the Nominations and Remuneration Committee of the Board of Directors. Its new edition No 1 was approved by the Board of Directors in 2009 (Minutes No 11 dated September 21, 2009). Members of the Nominations and Remuneration Committee until June 17, 2013: • Sergei Azatyan; • Anton Zlatopolsky; • Mikhail Leschenko; • Anatoly Milyukov. Members of the Nominations and Remuneration Committee as of August 29, 2013: • Ruben Agabengyan; • Yury Kudimov; • Anton Zlatopolsky; • Alexander Pchelintsev; • Ivan Rodionov The Audit Committee In the course of its activities the Audit Committee is guided by the Regulations on the Audit Committee of the Board of Directors. Its new second edition was approved by the Board of Directors in 2009 (Minutes No 11, dated September 21, 2009). In 2013 the Audit Committee was focused on controlling the quality and integrity of information included in the Company’s financial (accounting) statements. The Committee regularly reviewed and evaluated the statement of opinions of the Audit Commission and opinions of the independent external auditor, monitored efficiency of the Company’s auditing practices and reviewed draft auditing services agreements. Particular attention in 2013 the Audit Committee paid to improvement of the Company’s risk management program, and further improvements of the quality of internal audit and controls. Members of the Auditing Committee until June 17, 2013: • Yury A. Kudimov; • Anton Inshutin; • Vadim Semenov; • Ivan Rodionov. Members of the Auditing Committee as of August 29, 2013: • Yury A. Kudimov; • Anatoly Milyukov; • Vadim Semenov; • Ivan Rodionov. The Corporate Governance Committee In its activity, the Corporate Governance Committee is guided by the Regulations on the Corporate Governance Committee of the Board of Directors of the Company, the revised second edition of which was approved by the Board of Directors in 2009 (Minutes No 11 dated September 21, 2009). In 2013 the Corporate Governance Committee focused primarily on improving corporate governance practices of the Company; in particular, special efforts were aimed at drafting new revisions of key corporate documents of the Company: the Charter, Regulations on the Board of Directors, Regulations on the Audit Commission. The committee also reviewed matters related to preparation and adoption of the agenda and materials for the Company’s Annual General Shareholders’ Meeting on 2012 results. Members of the Corporate Governance Committee until June 17, 2013: • Vladimir Bondarik; • Anton Zlatopolsky; • Sergei Kuznetsov; • Mikhail Leschenko; • Alexander Provotorov. Members of the Corporate Governance Committee as of August 29, 2013: • Anton Zlatopolsky;

65 ANNUAL REPORT • Sergei Kulikov; • Ekaterina Mironova; • Alexander Pchelintsev; • Alexander Rogovoi. Remuneration of the Board of Directors Pursuant to par. 2 of Article 64 of the Federal law “On Joint Stock Companies”, the amount of remuneration payable to the members of the Board of Directors shall be determined set by a resolution at the General Shareholders’ Meeting. In compliance with the requirements of the Russian legislation, the Annual General Shareholders’ Meeting held on June 17, 2013 made a decision “On remuneration of the members of the Board of Directors who are not government workers in amount specified by internal documents of the Community”. The remuneration of the members of the Board of Directors consists of quarterly and annual payments. The quarterly remuneration payable to each member of the Board of Directors shall be equal to 1,500,000 rubles. The Chairman of the Board of Directors shall receive remuneration 1.3 times as much as the remuneration of individual board members. The quarterly remuneration of a member of Board of Directors shall be reduced:  by 10%, in case of absence in 25 or less percent (inclusive) of the Board of Directors meetings and absentee meetings held;  by 30%, in case of absence in more than 25 yet less than 50 percent (inclusive) of the Board of Directors meetings and absentee meetings held;  by 100%, in case of absence in more than 50 percent of the Board of Directors meetings and absentee meetings held. If during a quarter, there were changes in the personal membership of the Board of Directors and/or changes in the terms and conditions of performing the duties (for remuneration/on a complimentary basis) by a member of the Board of Directors, the remuneration shall accrue and be payable pro rata to the period of time during which the member of the Board of Directors performed their functions for a remuneration. The annual remuneration for all members of the Company’s Board of Directors shall be set by resolution of the Annual General Shareholders’ Meeting as a percentage of OIBDA1 upon the completion of the annual financial statements prepared according to IFRS. At the Annual General Shareholders’ Meeting held on 2011 results, shareholders approved the Regulations on the Board of Directors of the Company in a new edition No 11, according to which the annual remuneration for the entire composition of Board of Directors is established by the resolution of the Annual General Shareholders’ Meeting on results of the last full fiscal year as a percentage of OIBDA calculated on the basis of consolidated financial statements prepared according to IFRS for the reporting financial year, in which such resolution was passed. This percentage shall not exceed 0.13% and is used to determine the remuneration of persons who performed the functions of members of the Board of Directors as of the Annual General Shareholders’ Meeting on results of the last full financial year until the next Annual General Shareholders’ Meeting. Annual remuneration for a member of the Board of Directors shall be determined according to the following calculation method: the value described above divided by the number of persons elected to the Board of Directors. The annual remuneration of the Chairman shall be 1.3 times this amount. Annual remuneration of a member of the Board of Directors shall be reduced by 50% in the event of his/her participation in less than half of the Board of Directors meetings held over his/her term of office. If during the period starting from the election of the Board of Directors by the Annual General Shareholders’ Meeting until the next Annual General Shareholders’ Meeting, there were changes in the personal membership of the Board of Directors and/or changes in the terms and conditions of performing the duties (for remuneration/on a complimentary basis) by a member of the Board of Directors, the remuneration shall accrue and be payable pro rata to the period of time during which the member of the Board of Directors performed their functions for a remuneration. The annual remuneration to each member of the Board of Directors shall be paid no later than 3 months after its approval at the Annual General Shareholders’ Meeting. Members of the Board of Directors of OJSC Rostelecom who are also members of the Auditing Committee will receive an additional quarterly payment amounting to 150,000 rubles for fulfilling these duties. The payment to the Chairman of the Audit Committee shall be 1.25 times this amount.

1 OIBDA is calculated as the amount of operational income less depreciation and loss from depreciation of non- current assets according to the consolidated income statement for the relevant period.

66 ANNUAL REPORT A member of the Board of Directors also serving as a member on other Board committees will receive an additional quarterly payment amounting to 126,000 rubles for serving as a member of the Board committee. The payment to the Chairman of each committee shall be 1.25 times this number (for participation in each committee). The quarterly remuneration of a member of a Committee of the Board of Directors may be reduced by:  10%, in case of absence in 25 or less percent (inclusive) of the Board of Directors meetings and absentee meetings held;  30%, in case of absence in more than 25 yet less than 50 percent (inclusive) of the Board of Directors meetings and absentee meetings held;  100%, in case of absence in more than 50 percent of the Board of Directors meetings and absentee meetings held. If during the quarter there were changes in the composition of the Committee, the remuneration to the former or new Committee member shall accrue and be paid in proportion to the period of time during which the member of the Committee performed his/her functions. Members of the Board of Directors who are simultaneously employed by the state shall perform their duties on an unpaid basis. Members of the Board of Directors are not entitled to any additional remuneration or compensation in whatever form or manner for any expenses incurred in the course of performing their duties in respect of making any decisions by the Board of Directors or by the Company other bodies, as well as in respect of exercising their rights and obligations as members of the Board of Directors, apart from those remunerations and compensations to be received according to the Regulations on the Board of Directors or pursuant a decision of the Annual General Shareholders’ Meeting expressed in other way. Given all payments (including bonuses, commission fees, benefits and/or compensation for expenses, as well as other property distributions) the total remuneration paid by the Company to the Board of Directors in 2013 amounted to 488 982 362 rubles.

67 ANNUAL REPORT

THE PRESIDENT AND MANAGEMENT BOARD According to the Company’s Charter, the Management Board is a governing collective executive body responsible for its day-to-day management. The number of members and the personnel composition of the Management Board are determined by the Board of Directors. Management Board members are elected by the Board of Directors excluding the Chairman of the management Board. According to the Federal law “On Joint Stock Companies”, the authority of the Chairman of the Management Board is vested with the President. The decision of the Board of Directors of the Company nominated Sergei Kalugin to President post on March 27, 2014 During 2013 and in 2014 the following persons took part in the Company’s Management Board activities:

Name, patronymic letter and surname Feb.18 Mar.27 Aug.1 Feb.21

of the Management Board member 2012 2012 2012 2013 1. Natalya A. Albrecht 2. Alexander E. Abramkov 3. Andrey V. Balatsenko 4. Pavel A. Zaitsev 5. Ivan I. Zima 6. Sergei B. Kalugin 7. Anton Yu. Kolpakov 8. Maxim G. Kudryavtsev 9. Sergei A. Lukash 10. Mikhail M. Magrilov 11. Alexander V. Maslow 12. Kai Uve Melhorn 13. Vladimir K. Mironov 14. Aleksey S. Nastchekin 15. Alexander Yu. Provotorov 16. Dmitry V. Proscura 17. Alexander M. Rogovoi 18. Galina V. Rysakova 19. Olga N. Rumyantseva 20. Dmitry V. Sadkov 21. Oleg I. Senkov 22. Victor V. Strelkov 23. Larisa S. Tkachuk 24. Maria V. Florentieva 25. Roman A. Frolov 26. Anton A. Khozyainov 27. Alexander M. Tseitlin 28. Andrei V. Cheglakov Brief biographies of people that held the positions of President and members of the Company’s Management Board in 2013 are presented in Appendix No 2 entitled “The Company Management and Controlling Bodies” attached to this Annual Report and made its integral part. Activities of the Management Board and its Committees in 2013 The Management Board of the Company held 50 meetings in 2013, 4 meetings by attendance in person and 46 meetings by written correspondence. In 2013, the Management Board reviewed the Company’s operational activities with particular focus on development of current plans and decisions which will make possible ensuring achievement of the declared goals. The Management Board also regularly reviewed budget performance reports and reports on marketing and advertising plan implementation.

68 ANNUAL REPORT In order to improve operational efficiency, the Management Board adopted certain resolutions in 2013 on the decommissioning of analogue communication lines and facilities and on optimizing the structure of Rostelecom’s branches. Furthermore, to ensure thorough study of matters and quality of decisions to be taken, the Management Board made significant efforts to prepare materials and issues for the Board of Directors to pass resolutions, including efforts devoted to preliminary review of related party transactions. Constantly working on improvement of the Company’s corporate governance standards and internal control procedures, in 2013 the Management Board paid particular attention to the risk management program implemented by the Company. The Management Board realizes Companies’ social responsibilities and enhances the Company’s social responsibility initiatives, undertaking numerous charitable and sponsorship initiatives on behalf of the Company. Committees of the Management Board In 2013, several committees were in place to improve the efficiency and support general activities of the Management Board: the Budget and Investment Committee, the Compensations Committee, the Information Disclosure Committee, the Risk Management Committee, and the Charity Committee of the Management Board. The Budget and Investment Committee In 2013 the Budget and Investment Committee analyzed, assessed, and made investment decisions related to projects and programs planned for 2013 and 2014. In addition, the Committee completed a thorough review of the 2014 budget for structural units and branches in order to produce a 2014 Consolidated Budget for the united Company. The Compensations Committee The Compensations Committee focused on making improvements to the Company’s efficiency by ensuring the employees are highly-qualified personnel stimulated to achieve the common goals. The Committee took decisions associated with compensation and motivation schemes for the Company’s employees The Information Disclosure Committee During 2013 the Information Disclosure Committee ensured consistency and compliance with procedures of disclosing information deemed important for the Company, before disclosure of this information to third parties, in order to prevent the inconsistency and conflicts of information disclosed by the Company. The Risk Management Committee The objective of activities of the Internal Control Committee is to coordinate the development of Company’s risk management system and to provide effective risk management at all levels which is done for wise decision-making. The Charity Committee The Charity Committee is engaged in reviewing appropriate issues and making decisions on the Company’s charitable donations and participation in socially significant projects.

Remuneration of the President and of the Management Board Pursuant to the Regulations on the President of the Company, the remuneration of the President is defined in a written contract the terms and conditions which are approved by the Board of Directors. In addition, according to the resolution of the Board of Directors, the following amounts are payable to the President:  A quarterly bonus based on diligent performance of duties and upon results of meeting quarterly budget targets.  An annual bonus based diligent performance of duties and upon achievement of annual key performance indicators as approved by the Board of Directors. Decision on remunerations payable to members of the Company’s Management Board shall be taken by the Board of Directors, according to an internal document approved by the Board of Directors. At present, members of the Management Board receive a quarterly monetary remuneration for performing their duties. Quarterly bonus payable to an individual Management Board member shall not exceed 733,000 rubles and 879,600 rubles payable to the Chairman. Quarterly bonus amounts payable to members of the Management Board shall be determined by the Board of Directors based on meeting performance targets. Quarterly bonus amounts payable to members of the Management Board shall be determined by the Board of Directors based on meeting the following performance targets:

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 The results of implementation of the main economic indices of Company’s budget as of the end of the financial quarter;  The results of implementation of decisions previously made by the General Meeting of Shareholders and the Board of Directors of the company and the quality of the materials prepared for the meetings of the Board of Directors. When evaluating the quality of materials prepared for the Board of Directors’ meetings, the Board of Directors takes into account the due arrangement and timely delivery of materials and solutions, their compliance with the current legislation, the Charter and the internal documents of the Company, as well as accepted standards. In 2013, the total remuneration amount paid to members of the Management Board members for their duties pursuant to the Regulations on the Management Board amounted to 41,899,546 rubles. Other payments to the persons acting as members of the Management Board in 2013, including the President, (including salaries, bonuses, commissions, benefits and/or compensation of expenses, as well as other payouts in the form of property under the Labor Code of the Russian Federation and relevant employment contracts) amounted to 279,271,271 rubles in 2013.

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THE AUDIT COMMISSION Pursuant to the Company’s Charter the Audit Commission is established as an independent body within the Company responsible for supervising the Company’s financial and operational activities during the periods between the Annual General Shareholders’ Meetings. On June 17, 2013, at the Annual General Shareholders’ Meeting on 2012 results, the currently effective Audit Commission was elected, consisting of seven members as follows: Svetlana N. Bocharova; Valentina F. Veremyanina; Vasiliy V. Garshin Bogdan I. Golubitsky; Olga G. Koroleva; Vyacheslav G. Ulupov; Alexander V. Shevchuk. Brief biographies of the Company’s Audit Commission members are presented in Appendix No2 “The Company Management and Controlling Bodies” attached to this Annual Report and made its integral part. The Audit Commission Activities in 2013 During 2012, the Audit Commission conducted a review of the Company’s financial and operational activities. The Audit Commission used selective inspection techniques of individual transactions. The review was based on documents such as accounting and taxation records, as well as registers and statements provided by the Company’s management. Within the analysis framework the Audit Commission also reviewed the disclosure and accounting procedures applied for reflection in the Company’s financial accounts of information regarding the Company’s financial and business activities; as well as the Company’s accounting methods and principles, and procedures used to prepare the Company’s financial statements and annual reports. Remuneration of the Audit Commission members The amounts of remuneration payable to members of the Auditing Commission and compensation for expenses are set forth in the Regulations on the Audit Commission. Members of the Auditing Commission are compensated for all proven expenses incurred while executing their duties. Members of the Auditing Commission during their term in office shall receive quarterly remuneration amounting to 350,000 rubles to each individual member. The quarterly remuneration to the Chairman of the Audit Commission is 1.3 times as much as this amount. During the quarter when the Auditing Commission is being reelected or in the event that a member of Commission resigns as stipulated by paragraph 8 of the Regulations on the Audit Commission, quarterly remuneration will be paid pro rata to the period when such member performed all applicable duties during the relevant quarter. The overall remuneration paid to the members of the Auditing Commission in 2013 amounted to 7,823,846 rubles.

THE COMPANY’S SIGNIFICANT TRANSACTIONS Related Party Transactions In 2013, the Company participated in a number of related party transactions. Information on these transactions, as well as information on their preliminary approval by Rostelecom’s Board of Directors, is provided in Annex No.3 of this Annual Report and is an integral part hereof. Major Transactions In 2013 the Company did not participate in transactions deemed significant by the federal law “On Joint Stock Companies”.

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INFORMATION ON THE ACTUAL EXECUTION RESULTS OF LAWS AND REGULATIONS OF THE PRESIDENT OF THE RUSSIAN FEDERATION AND ORDERS OF THE GOVERNMENT OF THE RUSSIAN FEDERATION Information regarding the establishment of specialized committees under the Company’s Board of Directors, approval of the KPI system, development and adoption of regulations on remuneration of management members (based on the KPI system) and remuneration of the Board members (according to Order of the Government of the Russian Federation No. VZ-P13-6294 dated July 23, 2009, the letter of the Federal Property Management Agency No. GN-13/20732 dated August 18, 2009). Information regarding the establishment of specialized committees by Rostelecom Board of Directors, as well as remuneration of the members of the Board is presented in the “Board of Directors” sub-section of the “Corporate Governance” section of this Annual Report. In 2012, the company will implement a new system of incentive and compensation. The basis of the remuneration of employees is a balanced system of key performance indicators (hereafter referred to as KPI), which motivate the staff to ensure a more effective fulfillment of the Company’s strategic objectives. The KPI system represents a pyramid with corporate KPI indicators at the top characterizing general performance of the Company and the strategies for future. Corporate KPIs can be broken down into business KPIs defining the operation of departments and personnel at all levels of management. When giving bonuses to employees of all levels, corporate KPIs and business KPIs are used. The value of corporate KPIs goes down as management hierarchy narrows. Such a cascading mechanism guides experts of different spheres, enables them to perform universal duties, and provides coherence and coordination in implementation of cross-functional processes. Information on realization of investment programs (Order of the First Deputy Chairman of the Russian Federation No. ISH-P13-5361 dated September 18, 2009, fax message of the Federal Property Management Agency No. GN-15/8808 dated April 1, 2011). Information on realization of investment programs is presented in the “Investment Program Implementation" ” section of this Annual Report. Information on realization of the joint-stock company strategy in the field of energy saving and efficiency (paragraph 8 of the Order of the Russian Federation Government No. ISh-P9-3772 dated June 18, 2008 on implementation of the Decree of the President of the Russian Federation No. 889 dated June 04, 2008 “On certain measures aimed to increase the energetic and ecological efficiency of the Russian economy”, Letter of the Federal Property Management Agency No. GN- 13/28934 dated November 27, 2008). For the purpose of implementation of Federal law No. 261-FZ dated November 23, 2009 “On energy saving and improvement of energy efficiency and making alterations to some legislation acts of the Russian Federation” Rostelecom has become a member of self-regulatory organization in the field of energy examinations “Non-profit partnership “Self-regulatory organization of energy examinations” and thus gained the right to carry out activities in the field of energy examinations by the Company experts. The measures are implemented in accordance with the Standards and Regulations of energy certificate execution and the Requirements of Minenergo of Russia for the execution quality of energy certificates. Information on procurement of products of Russian origin (Letter of the Federal Property Management Agency No. GN-13/7796 dated April 03, 2009). Products of Russian origin made a 15.31% share of all 2012 deliveries. Information on working out the Company’s midterm development strategy and its innovative development program (Minutes No. 4 of the meeting at the Russian Federation Prime Minister’s Office dated August 3, 2010), Letters of the Federal Property Management Agency No. GN-15/9233 dated March 28, 2012 and No. 11/54024 dated November 20, 2013. Program of innovative development of OJSC Rostelecom (Version 2) was approved by Rostelecom Board of Directors on September 6, 2012 (Minutes No. 13 dated September 10, 2012). Information on disposal of non-core assets pursuant to Decree of the President of the Russian Federation No. 596 dated May 7, 2012 (Letters of the Federal Property Management Agency No. GN-13/1359 dated January 24, 2011, No. GN-13/1472 dated January 25, 2011, No. GN-15/10587 dated April 9, 2012, No. GN-15/10588 dated April 09, 2012, No. EA-15/48093 dated October 25, 2012), No. 11/58630 dated December 12, 2013, No. 11/7029 dated February 21, 2014, and Letter of

72 ANNUAL REPORT the Ministry of Economic Development of Russia No. DO8i-314 dated February 25, 2014. including information about consideration at meetings of the Board of Directors of issues of non- core asset disposition both of the parent organization as well as of the subsidiaries and affiliates and approval of programs aimed at disposal of the said assets. Information about disposition of shares in non-core companies is provided in the “Rostelecom Group of Companies” section of this Annual Report. As part of activities aimed at the sale of non-core property items in 2013, 375 items retired with the residual cost of 152,949 thousand rubles. Revenue from their realization amounted to 884,497 thousand rubles, excluding VAT. Information on measures aimed at ensuring transparency of purchases and transition to making e-purchases, including terms regulating procedures of goods, work and services procurement. It is important to disclose the results of the meeting of the Board of Directors (Supervisory Board) of the joint-stock company which considered the said issues (Order of the Government of the Russian Federation No. ISh-P13-8685 dated December 17, 2010, Letter of the Federal Property Management Agency No. GN-13/1416 dated January 25, 2011. In 2013 measures aimed at ensuring information openness regarding procurement activities were implemented in accordance with Rostelecom regulation on procurement of goods, work, and services which had been considered and approved by the Board of Directors on February 29, 2012 (Minutes No. 39 dated March 5, 2012). Procedure of purchases in Rostelecom is open and transparent for all suppliers of goods, works and services. All purchases are made in strict compliance with the Federal Law No. 223-FZ ‘On purchase of goods, works and services by special types of legal entities’ dated 18 July 2011 (hereinafter referred to as 223-FZ). Complete and detailed information about expected and current purchases is published and is constantly available in the Internet-site www.zakupki.gov.ru and in the "Acquisitions" section the Company corporate site www.rostelecom.ru Equal access to bidding - is one of the principles of Rostelecom business which is supported by a constantly growing number of the Company suppliers. For example in 2013 Rostelecom had more than 36 thousand suppliers. The share of acquisitions in electronic form exceeded 80 %. The increase of the number of suppliers is goes hand in hand with fiercer competition at bidding. In 2013 the average number of those taking part in such activities went up by 70% as compared with the year 2012. For the second year running Rostelecom activities in the field of information transparency with regard to acquisitions were highly appraised. which was demonstrated by confirmation in 2013 of Rostelecom's rating as a company with guaranteed acquisition transparency, The rating was organized by the National Association of Participants of e-commerce. The rating is performed with the assistance of the Ministry of Economic Development of the Russian Federation, the Federal Anti-Monopoly Service and the Audit Chamber of the Russian Federation. Information on decisions aimed at improving the compensation system for employees of the joint- stock company (Order of the Government of the Russian Federation, dated December 4, 2010 No. KA-P13-8297; Letter of the Federal Property Management Agency No. GN-13/3802 dated February 15, 2011.

In 2013, the following steps were undertaken as part of activities aimed at the establishment of a universal system of motivation and remuneration of employees:

 a common grading system for the whole Company was introduced which makes it possible to evaluate the personal contribution of each employee in achievement of the common result. Each position in the Company had been thoroughly evaluated in accordance with universal assessment standards and a common scale of factors indicated by STRATA methodology;  ranges of remuneration for each “grade” based on the grade system were defined and approved on the basis of common principles for the entire company, taking into account the Company’s economic capacities and terms of payment for labor on the labor market;  a standard KPI reference book was prepared and approved as part of standardization of the system of monetary incentives of the employees which considers all aspects of financial and business operations of the Company as broken down according to functions. The reference book is a multi- level system of key indicators of efficiency with corporate KPI at the head which are mapped on KPI of lower levels. This enables to link the results of the performance of each employee with the system

73 ANNUAL REPORT of monetary incentives depending both on the results of individual performance and the results of the Company's activities in general;  a standard regulation on remuneration for employees of Rostelecom was adopted. On its basis, regulations on remuneration for employees of macroregional branches of Rostelecom were also developed and approved;  principles and ranges of bonuses to be paid to employees were elaborated and approved with consideration of specific nature of employment duties. These principles and ranges of bonuses are aimed at enhancement of motivation and interest of employees in proper performance of their employment duties and achievement of high production results. Information concerning activities aimed at the creation of innovative development programs in joint stock companies on the list of organizations that produce such programs, as approved by Resolution of the Government Commission for Advanced Technology and Innovation dated August 3, 2010, Minutes no. 4 (Letter of the Federal Property Management Agency No. GN- 13/32160 dated October 29, 2010, No. GN-13/32156 dated October 29, 2010).

A number of key activities must be performed in order to realize innovative development programs. A list of these activities, as well as their completion status as of the end of 2012 is provided below:

Activity Status Creation of the Company’s innovative development unit Done Setting up the Innovative Center Done Budgeting innovative development Done Introduction of the ideas management system Done Creation of the KPI system for managers aimed at the achievement of goals regarding the innovative Done development of the Company Development of interaction patterns with universities and research institutions Done Financing the target capital fund of the Skolkovo Institute of Science and Technology Done Working out criteria of assessment of interaction with universities and research institutions Done Working out /modernization of regulations for the Company innovations management Done Development of partnerships with supporting universities and research institutions, venture capital Done funds, technology parks, etc. Development of partnerships with various participants of the innovation market, including innovative Done small and medium businesses Involvement of the Company employees in the process of innovative activities Done Participation in the activity of technical committees and international communication institutions Done Paragraph “E”, clause 1 of the List of regulations of the President of the Russian Federation on the implementation of priority measures aimed at improving the investment climate in the Russian Federation, No.Pr-846 dated April 2, 2011, according to which it is necessary to provide information on the adoption of solutions to reduce the expenses on acquisition of goods (work, services) per one unit of production by at least ten percent per year, within three years in real terms in government-controlled companies (joint stock companies), where the share of the Russian Federation in the charter capital constitutes more than 50% (hereafter - OJSC) (Letters of the Federal Property Management Agency No. GN-15/27795 dated September 14, 2011, No. GN- 15/28326 dated September 16, 2011, No. GN-15/27797 dated September 14, 2011 as well as No. GN- 15/28327 dated September 16, 2011 and No. DP-15/20610 dated July 14, 2011. The Company’s Board of Directors approved the value calculation methodology "Rate of change of expenses on acquisition of goods (work, services) per one unit of production in the Company (Minutes no. 29 dated December 29, 2011), including for the purpose of defining the size of a reward to the President of the Company). In 2013, the Company’s expenses on acquisition of goods (work, services) per one unit of production decreased by 47.3% per one unit of production as compared with the year 2012 (in 2010 prices). In 2013, with its system of incentive and remuneration, OJSC Rostelecom continued with introduction of the system of key performance values (KPI) to assess the performance of the Company and the Company staff, which contemplates inclusion in KPIs for managerial personnel some values pertaining to achievement of the target of reducing expenses in acquisition of goods (work, services) per one unit of production and achievement of the target level of acquisition budget saving.

74 ANNUAL REPORT Information on the liability insurance of independent directors – public interest representatives in the management of joint stock companies (Order of the President No. Pr-2206 dated August 3, 2011, Letter of the Federal Property Management Agency No. GN-15/36784 dated November 29, 2011). In November 2012, the liability insurance contract of officers and members of Rostelecom Board of Directors was signed by the Company with a liability limit of USD 250 million. This contract had received a preliminary approval by members of the Board of Directors (Minutes no. 19 dated November 26, 2012). The term of validity of the contract is May 27, 2014 inclusively. Information on proposals and recommendations aimed at promoting the development of mechanisms for environmental liability according to international standards, including financial statements and the system of voluntary certification and labeling, subject to independent verification and certification (subparagraph "l" clause 1 of the List of regulations of the President of the Russian Federation No. Pr-1640 dated June 6, 2010, Letter of the Federal Property Management Agency No. GN-13/37524 dated December 5, 2011) Activities aimed at development of Rostelecom’s environmental policy have been performed by the Company. The Company's environmental policy includes environmental performance in dynamic economic growth, which provides the most efficient use of natural resources and preservation of favorable environmental conditions for future generations. The goal shall be reached by implementing the following principles:  reduction of the Company’s impact on the environment through implementation of the best environmental management methods currently available and development of environmental management system in accordance with international standards.  a consistent improvement of the Company’s environmental management system with the help of the timely development and updating of corporate regulations in the field of environmental protection and ecological safety.  compliance of Company activities with legislative and other requirements in the field of ecological safety and environmental protection.  continuous perfection of the Company’s image as an ecologically-oriented company.  Support of available information regarding the Company’s activities in the fields of environmental protection and ecological safety and efficient society outreach. The environmental policy of Rostelecom is planned to be adopted in the first half of 2014. Within the framework of the implementation of environmental policy provisions, “The regulation of environmental control implementation in the field of waste management” was approved. The goals of this document are following:  compliance with the requirements of Russian Federation legislation in the field of environment protection, waste management, industrial safety, sanitary-epidemiological well-being of the population, licensing and other requirements associated with the processes of waste management;  compliance with the requirements and regulations set in relation to Company by current authorization documents;  prevention of damage to the environment in the result of Company activities;  improvement of waste transportation processes in Company, the optimization of such processes for the reduction of costs, quantity and nomenclature of generated waste;  minimization of Company’s risks (environmental, legal, financial etc.) connected with waste management;  compliance with the principles of effective use and restoration of natural resources, waste recycling;  prevention of emergency situations in the process of waste management, timely identifying and addressing their causes. On practicability of core assets disposition in economy sectors with a sufficient level of competition in compliance with subparagraph "B", Clause 1 of the List of Orders of the President of the Russian Federation No. Pr-1092 dated April 27, 2012, (Letters of the Federal Property Management Agency No. DP-15/26414 dated July 12, 2012, No. 15/34268 dated August 22, 2012, No. OD-11/8539 dated February 27, 2013, No. OD-11/40116 dated August 29, 2013).

75 ANNUAL REPORT Rostelecom telecommunication assets are involved in provision of a full range of telecommunication services, as well as implementation of the Company development strategy as an integrated operator. OJSC Rostelecom development strategies as approved by the Company Board of Directors (December 26, 2012 and November 19, 2013) (hereinafter referred to as the "Strategies") did not suggest apportionment or sell-off of core assets in 2013. Equipment not involved in the production process which is standing ready for use for back-up purposes and national security protection cannot be sold. Equipment which is disposed of and put out of operation is out-of-date and cannot be efficiently used for provision of communication services. Besides, the sale of some items of the range of telecommunication equipment (assets) will not allow small and medium business enterprises to provide communication services due to a specific nature of the communication systems organization as a unified industrial complex, including equipment, networks and channels, software and professional human resources. On March 28 2014 in execution of the approved Strategies and Decision of the Company's Board of Directors of December 12, 2013 blocks of shares of companies owned by Rostelecom which provide mobile telecommunication services were submitted for payment of Rostelecom share in the charter capital of T2Rus Holding.

On expediency of the use of recommendations related to management of exclusive rights to the results of intellectual activity pursuant to the Task of the Government of the Russian Federation No. ISh-P8-800 dated February 04, 2014 (Letter of the Federal Property Management Agency No. 11/9288 dated March 07, 2014). Rostelecom exercises management of exclusive rights to the results of intellectual activity in compliance with the Russian Federation law. The internal regulatory documents of the Company comply with recommendations elaborated by the Ministry of Economic Development of the Russian Federation including the procedure of their registration, requirements to contractual activity work with items, designation of divisions responsible for work with items, procedure of financing projects related to items, etc. The Company takes additional steps to ensure the security of the most important items of intellectual property, such as inventions, utility models, software by way of carrying out relative patenting/registration procedures as required by law. On adhering to the Anti-corruption Charter of Russian Business (Letter of the Federal Property Management Agency No. 11/53971 dated November 20, 2013). Rostelecom had adhered to the Anti-corruption Charter of Russian Business and on May 16, 2014 it was entered in the Consolidated Register of participants under No. 129.

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GENERAL INFORMATION ABOUT THE COMPANY OJSC ROSTELECOM Full company name: Open Joint Stock Company Long-Distance and International Telecommunications Rostelecom Abbreviated company name: OJSC Rostelecom Registration number and date of issuance of State Registration Certificate: Data on the original state registration: No.021.833 dated September 23, 1993 Data on the registration of the legal entity: the Certificate of Unified State Register of Legal Entities No. 004891969 Series 77 (OGRN No. 1027700198767) dated September 9, 2002 Legal address: 15 Dostoevskogo Street, Saint Petersburg, 191002, Russian Federation Mailing address: 14 Pervaya Tverskaya-Yamskaya Street, Moscow, 125047, Russian Federation Main activity: The code ARCEA (All-Russia Classifier of Economic Activities) 64.20 - Activity in the field of telecommunications Information regarding shortlisting of strategic joint-stock companies: OJSC Rostelecom is not included in the list of strategic joint-stock companies, approved by Decree of the President of the Russian Federation No. 1009 as of August 04, 2009. However the Company is a business entity of strategic importance for ensuring defense of the country and state security as it performs activities specified in paragraphs 12-14 and 37 a) of Art. 6 of the Federal Law of 29.04.2008 № 57-FZ “On the Procedure for Foreign Investment in Business Companies which are of Strategic Importance for National Defense and State Security":  activity subject to licensing pursuant to the Russian Federation legislation related to distribution of encryption (cryptographic) tools;  activity subject to licensing pursuant to the Russian Federation legislation related to maintenance of cryptographic equipment;  provision of services data encryption services;  Activity of the economic entity listed in accordance with Article 23 of the Federal Law “On Protection of Competition” register, and occupying the dominant position in the communication services market of the geographic boundaries of the Russian Federation (excluding access to the Internet services). Contact phone/fax: Corporate Center: 8 800 200 00 33 Shareholder hotline: 8 800 100 16 66 Website: www.rt.ru – for product and service descriptions www.rostelecom.ru – for information disclosure

Director of External Executive Director - Corporate Secretary Director of corporate Communication Director of Investors governance Relations

Kira E. Kiryukhina Ekaterina N. Ustinova Ekaterina S. Mironova Pavel A. Nezhutin P: + 7 (499) 9998283 P: +7 (499) 9998283 P: +7 (499) 9959783 P: +7 (499) 9959840 F: +7 (499) 9959877 F: +7 (499) 9959877 F: +7 (499) 9959854 F: +7 (499) 9959777 [email protected] [email protected] [email protected] [email protected]

77 ANNUAL REPORT

Branches Addresses Moscow Macroregional Branch 30 Goncharnaya St., 115172, Moscow Center Macroregional Branch 17 3-ya Horoshevskaya St., 123298, bldg. 1 North-West Macroregional Branch 14/26 Gorokhovaya St., 191186, St. Petersburg Volga Macroregional Branch 53 Maxim Gorky Sq., 603000, Nizhny Novgorod South Macroregional Branch 59 Krasnaya St., 350000, Krasnodar Ural Macroregional Branch 11 Moskovskaya St., 620014, Yekaterinburg Sibir Macroregional Branch 53 M. Gorkogo St., 630099, Novosibirsk Far East Macroregional Branch 57 Svetlanskaya St., 690091, Vladivostok Training and Production Center 143380, Town of Bekasovo, Naro-Fominsk District, (UPTs RT) Moscow region

Representative Offices in Geneva 94 Rue de Lozanne, 1202 Geneva, Switzerland

THE REGISTRAR Name: Open Joint Stock Company “United Registration Company” (JSC URC) Legal address: 30 Buzheninova St., Moscow, Russian Federation Mailing address: 30 Buzheninova St., 107996 Moscow Office: 30 Buzheninova St., Moscow, Russian Federation Contact phones/fax: +7 (495) 775 1820 License: Russian FCSM perpetual License for exercising registrar’s activities No.10-000-1-00314 dated March 30, 2004 E-mail address: [email protected] Website: www.ork-reestr.ru THE INDEPENDENT AUDITOR Name: JSC KPMG Legal address: 18/1 Olympiysky avenue, Room 3035, Moscow, Russian Federation, 129110 Mailing address: 10 Presnenskaya Embankment, Block C, floor 31, Moscow, Russian Federation, 123317 Contact phones/fax: +7 (495) 937-44-77 / +7 (495) 937-44-00/99 Member of self-regulated auditor organization:

78 ANNUAL REPORT Member of Non-profit partnership “Auditing Chamber of Russia”. The general registration number in the state register of auditors and auditing organizations is 10301000804. E-mail address: [email protected] Website: www.kpmg.ru

79 COMPLIANCE WITH RECOMMENDATIONS ISSUED BY FCSM OF RUSSIA (BANK OF RUSSIA)

APPENDIX NO. 2 TO THE ANNUAL REPORT BASED ON YEAR 2013 RESULTS INFORMATION ON COMPLIANCE WITH RECOMMENDATIONS CONTAINED IN THE CODE OF CORPORATE CONDUCT OF FCSM OF RUSSIA"

Compliant or No. Provision of FCSM’s Corporate Conduct Code Notes Non- Compliant General Shareholders' Meeting 1. Notice to shareholders on intent to convene a General Compliant Article 18.4. of Rostelecom’s Shareholders' meeting no less than 30 days before the Charter1. meeting date regardless of the agenda items unless the law determines a larger notice period. 2. Opportunity for shareholders to study the list of persons Compliant Article 35.3. of Rostelecom’s entitled to participate in a General Shareholders' meeting Charter1. beginning from the day of the notice until the in-presence general shareholders meeting is closed. In case of an in- absentia general shareholders meeting - until the end of voting bulletin acceptance period. 3. Opportunity for shareholders to study information Compliant This provision is set forth in (materials) relevant to the General Shareholders' meeting Rostelecom’s Corporate Governance by means of electronic telecommunications, including the Code2 (see section “Participation of Internet. Shareholders in the Management of the Company”). 4. Opportunity for shareholders to put issues on the general Compliant This is compliant with, but this rule is meeting agenda or request a convocation of a general not set forth in Rostelecom's internal shareholders meeting without a statement from the documents. shareholders’ register, if such shareholder’s title to the shares is attested by a shareholders’ register. Where the shareholder’s title to the shares is attested by a DEPO account, a statement from the DEPO account will suffice in order to exercise the above rights. 5. Stipulation of provisions in the Company’s Charter or Compliant This provision is set forth in internal documents requiring the presence at a Rostelecom’s Corporate Governance shareholders meeting of the General Director, Code2 (see section “Participation of Management Board members, Board of Directors Shareholders in the Management of members, Audit Commission members, as well as an the Company”). auditor of the Company. 6. Mandatory presence of candidates at a General Compliant This provision is set in Rostelecom’s Shareholders meeting when election of the Board of Corporate Governance Code2 (see Directors and Audit Commission members, as well as section “Participation of Shareholders approval of the Company’s auditor are considered. in the Management of the Company”). 7. Stipulation in the Company’s internal documents of a Non- The procedure of registration of procedure regulating registration of participants to a compliant attendees of a General Shareholders' General Shareholders' meeting. meeting is not set forth in Rostelecom's internal documents. Board of Directors 8. Stipulation in the Company’s Charter of the Board of Compliant Clause 23.3.1. of Article 23 of Directors' authority to approve the Company’s financial and Rostelecom’s Charter1. economic plan (budget) on an annual basis. 9. Existence of a risk management procedure approved by Compliant Risk Management Policy approved the Board of Directors. by Minutes No.12 of the absentee voting of Rostelecom’s Board of Directors dated March 20, 2007. 10. Stipulation in the Company’s Charter of the Board of Non- According to Article 23.3. 23. of Directors’ right to decide on suspension of powers of the Applicable Rostelecom’s Charter1, the Board of General Director appointed at a General Shareholders' Directors has the right to decide on meeting. appointment and early dismissal of the President. 11. Stipulation in the Company’s Charter of the Board of Compliant Articles 23.3.29., 23.3.30. of Directors’ right to establish criteria for qualification and the Rostelecom’s Charter1, as well as size of remuneration of the General director, Management Rostelecom’s Corporate Governance

1 COMPLIANCE WITH RECOMMENDATIONS ISSUED BY FCSM OF RUSSIA (BANK OF RUSSIA)

Board members, and heads of he Company’s main Code2 (see section “Selection, divisions. Evaluation and Retention of the CEO and members of the Management Board”). 12. Stipulation in the Company’s Charter of the Board of Compliant Articles 23.3.29. and 23.3.30 of Directors’ right to approve agreements with the General Rostelecom’s Charter1. Director and members of Management Board. 13. Stipulation in the Company’s Charter or internal documents Compliant This provision is set forth in of the requirement that while approving agreements with Rostelecom’s Corporate Governance the General Director (managing company or manager) and Code2 (see section “Selection, members of the Management Board, votes of the Board of Evaluation and Confirmation Directors members, who also serve as the General Engagement of the CEO and Director and the Management Board members, are not members of the Management taken into consideration. Board”). 14. Presence on the Board of Directors of at least three Compliant During 2013 at least three members Independent Directors who qualify for requirements of the of Rostelecom’s Board of Directors Corporate Conduct Code. qualified for requirements of the Corporate Conduct Code. 15. No persons on the Board of Directors found guilty of Compliant Observed in practice. This provision economic crimes or crimes against government or local is set forth in Rostelecom’s Corporate authorities, government interests, or persons who were Governance Code2 (see section administratively liable for crimes related to violations in “Composition of the Board of business, finance, taxes and levies, or securities market. Directors”). 16. No persons on the Company’s Board of Directors, being Compliant Observed in practice. This provision participants, general directors (top managers), members of is set forth in Rostelecom’s Corporate governing bodies, or employees of any entity that is Governance Code2 (see section competing with the Company. “Composition of the Board of Directors”). 17. Stipulation in the Company’s Charter of a requirement for Compliant Article 24.3. of Rostelecom’s election of members of the Board of Directors by Charter1. cumulative vote. 18. Stipulation in the Company’s internal documents of an Compliant This provision is contained in OJSC obligation of members of the Board of Directors to refrain Rostelecom Corporate Governance from actions that will lead or might potentially lead to Code2 (Section titled Responsibility of conflicts between their interests and the Company’s Members of the Board of Directors), interests; and should such conflicts of interest arise - an Rules of transactions in Rostelecom obligation to inform the Board of Directors of such conflicts. securities and Regulations on access to insider information, rules regarding safeguarding its confidentiality and control of compliance with legal requirements with regard to insider information . 19. Stipulation in the Company’s internal documents of an Compliant This provision is set forth in obligation of members of the Board of Directors to notify Corporate Governance Code2 (see the Board of Directors in writing about intentions to make section “Responsibility of Directors”) transactions with securities of the corporation, in which and in the Insider Trading Policy 5. they are members of the Board of Directors or of its subsidiaries (affiliates), as well as to disclose information about transactions they made with such securities. 20. Stipulation in the Company’s internal documents of a Compliant This provision is set forth in requirement for hold meetings of the Board of Directors at Rostelecom’s Corporate Governance least once every six weeks. Code2 (see section “Organization of Board of Directors Activity”). 21. Holding meetings of the Board of Directors’ during the Compliant Observed in practice (50 meetings year, for which the Company’s annual report is prepared, altogether during 2013). at least once every six weeks. 22. Stipulation in the Company’s internal documents of a Compliant Article 26 of Rostelecom’s Charter1 procedure of holding meetings of the Board of Directors. and Article 6 of the Regulations on Rostelecom Board of Directors6. 23. Stipulation in the Company’s internal documents of the Compliant This provision is set forth in necessity for the Board of Directors to approve all Rostelecom’s Corporate Governance Company transactions worth more than 10 percent of the Code2 (see section “Management Company assets, except for deals made in the ordinary Board Responsibility”) and Article course of business. 31.6. of Rostelecom’s Charter1.

2 COMPLIANCE WITH RECOMMENDATIONS ISSUED BY FCSM OF RUSSIA (BANK OF RUSSIA)

Also pursuant to Article 31.6 of Rostelecom’s Charter1 transactions amounting to 0,5 to 25 percent of the Company assets shall be preliminarily approved by the Board of Directors. 24. Stipulation in the Company’s internal documents of the Compliant This requirement is contained in Board of Directors’ right to obtain from the executive paragraph 3.4. of the Regulations on bodies and heads of the Company’s major divisions the Board of Directors of the information required to assist the Board of Directors in Rostelecom6. fulfilling its duties, as well as responsibility for a failure to This provision is also set forth in submit such information. Rostelecom’s Corporate Governance Code2 (see section “Management Board Responsibility”). 25. Existence of the Board of Directors’ committee on strategic Compliant The Board of Directors established planning or assignment of the functions of this committee the Strategy Committee on to another committee (excluding the Audit Committee and September 16, 2003. Current the Personnel and Compensation Committee). members of the Strategy Committee were elected on August 29, 2013 (according to Minutes of the Board of Directors No. 14 dated August 29, 2013). 26. Existence of a committee of the Board of Directors’ (the Compliant The Board of Directors established Audit committee), which advises the Board of Directors on the Audit Committee on December selection of an auditor for the Company and cooperates 21, 2004. Current members of the with the auditor and the Company’s Audit Committee. Audit Committee were elected on August 29, 2013 (according to Minutes of the Board of Directors No. 14 dated August 29 , 2013). 27. Presence of independent and Non-Executive directors only Compliant This requirement is contained in on the Audit Committee. paragraph 3.2. of the Regulations on Board of Directors’ Audit Committee of Rostelecom7; decision on item 4 of Minutes of the Board of Directors No. 14 of August 292013. 28. An Independent director’s chairmanship of the Audit Compliant Decision on item 4 of Minutes of the Committee. Board of Directors No. 14 dated August 29, 2013. 29. Stipulation in the Company’s internal documents of the Partially This provision is set forth in right of all Audit Committee members to have access to Compliant Rostelecom’s Corporate Governance any of the Company’s documents and information on a Code2 (see section “Board of non-disclosure basis. Directors’ Audit Committee”) and Article 4.15 of the Regulations on the Audit Committee of Rostelecom’s Board of Directors7. 30. Establishment of the Board of Directors’ Committee Compliant The Board of Directors established (Nomination and Remuneration committee), which will the Nominations and Remuneration develop selection criteria for candidates to the Board of Committee on September 16, 2003. Directors and develop the Company’s remuneration policy. Current members of the Nominations and Remuneration Committee were elected on August 29, 2013 (according to Minutes of the Board of Directors No.14 dated August 29, 2013) 31. An Independent director’s chairmanship of the Personnel Compliant From September 16, 2003 and up to and Compensation Committee. now the Chairman of Nominations and Remuneration Committee is an Independent Director; decision on item No.2 of Minutes of the Board of Directors No. 14 dated August 29, 2013 32. No Company’s executives in the Nomination and Compliant The provision is embodied in Article 3 Remuneration Committee. of the Regulations on Nominations and Remuneration Committee of the Board of Directors of Rostelecom8;

3 COMPLIANCE WITH RECOMMENDATIONS ISSUED BY FCSM OF RUSSIA (BANK OF RUSSIA)

decision on item 2 of Minutes of the Board of Directors No. 14 dated August 29, 2013. 33. Establishment of the Board of Directors’ Committee for Partially The Risk Management Committee of risks or assignment of this Committee’s functions to Compliant the Management Board of another committee (excluding the Audit committee and the Rostelecom is charged with Nomination and Remuneration committee). performing this function7. 34. Establishment of the board of directors’ committee for Compliant The Corporate Governance corporate conflict settlement or assignment of this Committee of OJSC Rostelecom committee’s functions to another committee (excluding the Board of Directors is charged with audit committee and the nomination and remuneration performing this function. See Article 2 committee). of the Regulation on the Corporate Governance Committee of OJSC Rostelecom Board of Directors9. 35. No Company’s executives on the Committee for Corporate Non- On August 29, 2013, the Board of conflict settlement. compliant Directors appointed members of the Corporate Governance Committee of OJSC Rostelecom Board of Directors (Minutes of the Board of Directors No 14 as of August 29, 2013), the members of which are Rostelecom Corporate Secretary E.S. Mironova and the Company Vice President A.M. Rogovoy. 36. An Independent director’s chairmanship of the Committee Compliant During 2013 the Corporate for Corporate Conflict settlement. Governance Committee of Rostelecom the Board of Director was chaired by an independent director. 37. Existence of the Company’s internal documents approved Compliant On September 18, 2009, the Board of by the Board of Directors, providing for the procedure of Directors approved Regulations on creation and functioning of the Board of Directors’ the Audit Committee7, Nominations committees. and Remuneration Committee8 and Corporate Governance Committee9. On July 23, 2009, the Board of Directors approved Regulations on the Strategy Planning Committee10. 38. Stipulation in the Company’s Charter of a procedure for Non- designation of the Board of Directors’ quorum, which will compliant provide for mandatory participation of Independent directors in the Board of Directors’ meetings. Executive Bodies 39. Existence of the Company’s collective executive body Compliant Article 27.1. of Rostelecom’s Charter. (Management Board). 40. Stipulation in the Company’s Charter or internal documents Partially Regulation on operations of mandatory approval of real estate transactions and loan compliant documenting and control procedures agreements by the Management Board, if these deals are with respect to fixed assets not considered as major ones and do not belong to day-to- accounting of Rostelecom stipulates day business of the company. the procedure of taking decision on acquisition and retirement of assets, including real estate, and the necessity to approve these transactions by the Management Board. 41. Stipulation in the Company’s internal documents of the Compliant This provision is set forth in procedure of coordinating transactions which are beyond Rostelecom’s Corporate Governance the scope of the Company’s financial and economic plan. Code2 (see section “Management Board Responsibility”). 42. No persons in executive bodies, being participants, general Compliant Conformed to in practice. This directors (top managers), management body members or provision is set forth in Rostelecom’s employees of any legal entity that is competing with the Corporate Governance Code2 (see Company. section “Management Board and Its Committees”). 43. No persons in executive bodies found guilty of economic Compliant Conformed to in practice. This

4 COMPLIANCE WITH RECOMMENDATIONS ISSUED BY FCSM OF RUSSIA (BANK OF RUSSIA)

crimes or crimes against government or local authorities, provision is set forth in Rostelecom’s government interests, or persons who were Corporate Governance Code2 (see administratively liable for crimes related to violations with section “Management Board and Its business, finance, taxes and duties or securities market. If Committees”). the sole executive body’s functions are fulfilled by a management company or a manager, the General Director and Management Board members of the management company or the manager must meet the requirements set for the General Director and Management Board members of the Company. 44. Stipulation in the Company Charter or internal documents Non- of a ban on a management company (manager) to perform Applicable similar functions in a competing company, as well as to establish other property relations with the Company except for provision of services of a management organization (manager). 45. Stipulation in the Company’s internal documents of an Compliant This provision is set forth in obligation of executive bodies to refrain from actions that Rostelecom’s Corporate Governance will lead or can potentially lead to conflicts between their Code2 (see section “Management interests and the Company’s interests; and should such Board and Its Committees”). conflicts of interest arise - an obligation to inform the Board of Directors of such conflicts. 46. Stipulation in the Company’s Charter or internal documents Non- of the criteria for selection of a management company. Applicable 47. Monthly reports of executive bodies on their deliverables to Partially The Company’s Board of Directors the board of directors. compliant deems it reasonable to consider at its meeting quarterly reports of the Management Board. 48. Stipulation in agreements between the Company and the Compliant Conformed to in practice. This norm General Director (management company, manager), as is embodied in Corporate well as between the Company and Management Board Governance Code of Rostelecom2 members of the responsibility for violating regulations on (Section “Management Board and its confidential and insider information use. Committees”), in contract with Rostelecom’s President and in contracts with members of the Company’s Management Board. Company Secretary 49. Existence in the Company of a special official (the Compliant Regulations on Corporate Secretary Company corporate secretary), whose task is to facilitate and Corporate Secretary's office of adherence by the Company bodies and executives to Rostelecom11. requirements that guarantee exercise of rights and legal interests of the Company. 50. Stipulation in the Company’s Charter or internal documents Compliant Article 23.3.35. of Rostelecom’s of the procedure of appointing (electing) the Company Charter1. secretary and establishing the secretary’s duties. Section 2 of Regulations on Corporate Secretary of Rostelecom11. 51. Stipulation in the Company’s Charter of requirements for Partially Article 27.11. of Rostelecom’s secretary candidates. compliant Charter1 designates a special person to assure compliance by the Company’s executive bodies with applicable regulations and procedures aimed to protect legal rights and interests of the shareholders. Requirements to the candidacy for Rostelecom’s Corporate Secretary are contained in Section 2 of Provision on Corporate Secretary of Rostelecom11. Major Corporate Activities 52. Stipulation in the Company’s Charter or internal documents Compliant This provision is set forth in of a requirement to approve large deals (worth 25-50 Rostelecom’s Corporate Governance percent of the Company assets value) before they are Code2 (see section “Major Corporate made. Activities”). 53. Mandatory engagement of an independent appraiser to Compliant This provision is set forth in

5 COMPLIANCE WITH RECOMMENDATIONS ISSUED BY FCSM OF RUSSIA (BANK OF RUSSIA)

appraise the market value of property that is the subject of Rostelecom’s Corporate Governance large deals. Code2 (see section “Major Corporate Activities”). 54. Stipulation in the Company’s Charter of a ban on taking Non- Rostelecom’s Charter1 does not any measures, when acquiring major stakes in the Compliant contain provisions aimed to protect Company (acquisition), aimed at protection of interests of the interests of executive bodies executive bodies (members of executive bodies) and (members of executive bodies) and members of the Company Board of Directors, and board of directors members, when worsening the shareholders’ positions as compared to their acquiring major stakes in the current positions (in particular, a ban for the Board of This provision is set forth in Directors to make decisions, prior to the assumed end date Rostelecom’s Corporate Governance of share purchase, on issue of securities convertible into Code2 (see section “Major Corporate shares or securities that grant the right to acquire the Activities”). Company shares even if the right to make such a decision is stipulated in the Charter). 55. Stipulation in the Company’s Charter of a requirement for Non- This provision is set forth in mandatory engagement of an independent appraiser to applicable Rostelecom’s Corporate Governance appraise the current market value of shares and possible Code2 (see section “Major Corporate changes in their market value as a result of acquisition of Activities”). the Company. 56. No release in the Company’s Charter of purchasers from Compliant This provision is missing in the an obligation to offer shareholders an opportunity to sell Company’s Charter1. their ordinary shares of the Company (securities convertible into ordinary shares) upon acquisition. 57. Stipulation in the Company’s Charter or internal documents Compliant This provision is set forth in of a requirement for mandatory engagement of an Rostelecom’s Corporate Governance independent appraiser to determine the share conversion Code2 (see section “Major Corporate ratio in the Company reorganization. Activities”). Information Disclosure 58. Existence of a document approved by the Board of Compliant The Board of Directors approved the Directors that makes the rules for and approaches to Information Disclosure Policy (new disclosure of information about the Company (the version No.1) on December 29, Information Policy Regulations). 200812. 59. Stipulation in the Company’s internal documents of a Non-com requirement for disclose of information about the purpose pliant of placing shares, about persons who intend to buy these shares, including a large stake, as well as about intentions of Company executives to buy the Company shares to be placed. 60. Stipulation in the Company’s internal documents of a list of Compliant Article 18.5. of Rostelecom’s documents, materials and other information to be Charter1. submitted to the shareholders for solving issues put on the agenda of a general shareholders meeting. 61. Existence of the Company’s of an Internet website and Compliant www.rostelecom.ru regular publication of information about the Company on the website. 62. Stipulation in the Company’s internal documents of a Compliant This provision is set forth in requirement for disclose of information about the Rostelecom’s Corporate Governance Company’s deals with persons who, according to the Code2 (see section on Company Charter, are the Company’s top executives, as well as Information Policy) and Insider about the Company’s deals with organizations, in which Trading Policy of OJSC Rostelecom5. the Company top executives directly or indirectly hold 20 percent or larger stakes, or on which these executives are able to exert essential influence. 63. Stipulation in the Company’s internal documents of a Compliant This provision is set forth in requirement for disclosure of information about all deals, Rostelecom’s Corporate Governance which may influence the market value of the Company Code2 (see section on the Company shares. Information Policy). 64. Existence of an internal document approved by the Board Compliant Insider Trading Policy of OJSC of Directors that describes how to use essential information Rostelecom5. about the Company’s activity, shares and other securities, Regulations on Provision of Access and also about transactions with them, which is not publicly to Insider Information, Safeguarding accessible and the disclosure of which may essentially Its Confidentiality and Exercising influence the market value of the Company shares and Control Over the Law Requirements

6 COMPLIANCE WITH RECOMMENDATIONS ISSUED BY FCSM OF RUSSIA (BANK OF RUSSIA)

other securities. with Regard to Insider Information16. Financial and Business Control 65. Existence of procedures approved by the Board of Partially Internal control over financial and Directors for internal control over the Company’s financial compliant economic activities of Rostelecom is and economic activities. performed including, but not limited to, a relative system of business processes (Internal control system). It was not however approved by the Board of Directors. 66. Existence of a special division in the Company that Compliant Internal Audit Department; facilitates adherence to the procedures of internal control Regulations on Internal Audit (control and auditing service). Department13 67. Stipulation in the Company’s internal documents of the Compliant This provision is contained in the control and auditing service’s obligation to inform the Audit Regulations on Internal Audit committee about irregularities found, as well as an Department 13. obligation of the service head to regularly report to the Audit Committee on implementation of the Company’s financial and economic plan and deviations from the plan. 68. No persons in the Company control and auditing service Compliant Observed in practice. found guilty of economic crimes or crimes against government or local authorities, government interests, or persons who were administratively liable for crimes related to violations with business, finance, taxes and duties or securities market. 69. No persons in the control and auditing service, being Compliant Observed in practice. members of the Company executive bodies, as well as being participants, general directors (top managers), management body member or employees of any legal entity that is competing with the Company. 70. Stipulation in the Company’s internal documents of a Compliant These provisions are set out in the period for submitting documents and materials to the Regulations on Internal Audit control and auditing service, required for assessing a Department of OJSC Rostelecom and financial and economic transaction made, as well as Regulations on the Audit Commission responsibility of the Company executives and employees of OJSC Rostelecom14. for failure to submit the above papers prior to the deadline. 71. Stipulation in the Company’s internal documents of the Compliant These provisions are set out in the control and auditing service’s obligation to inform the Audit Regulations of Internal Audit Committee (or in its absence, the Board of Department of OJSC Rostelecom and Directors) about irregularities. Regulations on the Audit Commission of OJSC Rostelecom5 72. Stipulation in the Company’s Charter of a requirement for a Non- Assessment of practicability of control and auditing service to assess advisability for compliant performed operations not provided for making transactions (nonstandard transactions) that are in the Rostelecom’s year budget shall not included in the Company’s financial and economic be made by the Board of Directors plan. and Management Board of the Company. This provision is set out in the Corporate Governance Code2 (Section “Responsibility of the Management Board”). 73. Stipulation in the Company’s internal documents of a Compliant This provision is set forth in procedure of coordinating nonstandard transactions with Rostelecom’s Corporate Governance the Board of Directors. Code2 (see section “Management Board Responsibility”). 74. Existence of an internal document approved by the Board Not This requirement is in conflict with of Directors that describes the procedure of auditing the applicable Federal Law No.208-FZ on Joint- Company’s financial and economic activity by the Audit stock Companies of December 26, Commission. 1995. In accordance with this law Regulations on the Audit Commission of Rostelecom14 are approved by the annual General Meeting of Shareholders of OJSC Rostelecom. 75. Review by the Audit Committee of the auditors’ opinion Compliant This requirement is included in the prior to presentation thereof to the shareholders at a Regulations on the Audit Committee general meeting. of the Board of Directors7.

7 COMPLIANCE WITH RECOMMENDATIONS ISSUED BY FCSM OF RUSSIA (BANK OF RUSSIA)

Dividends 76. Existence of an internal document approved by the Board Compliant Rostelecom’s Dividend Policy15 of Directors, based on which the Board of Directors passes recommendations for the size of dividends (the Dividend Policy Regulations). 77. Stipulation in the Dividend Policy Regulations on the Compliant Rostelecom’s Dividend Policy15. procedure of determining a minimum amount of the Company’s net profits allocated for dividend payment, and conditions, under which dividends are fully or partially paid on preferred shares; the size of dividends on these preferred shares is set out in the Company’s Charter. 78. Publication of information about the Company’s Dividend Compliant The required information is placed in Policy and changes therein in a bulletin stipulated in the the Internet-site www.rostelecom.ru Company’s Charter for publication of statements about general shareholders meetings, as well as publication of this information on the Company’s website.

1 Charter of OJSC Rostelecom (restated version No.14) approved by the Extraordinary Meeting of Shareholders of OJSC Rostelecom on April 02, 2014 (pursuant to Minutes No.1 as of April 04, 2014 2 Corporate Governance Code of OJSC Rostelecom approved by the Board of Directors of OJSC Rostelecom on December 27, 2007 (pursuant to Minutes No.12 as of December 29, 2007) 3 Regulations on the General Shareholders’ Meeting of OJSC Rostelecom (restated version No.5) approved by the Annual General Meeting of Shareholders of OJSC Rostelecom on June 17, 2013 (pursuant to Minutes No.1 as of June 20, 2013) 4 Code of Ethics of OJSC Rostelecom approved by the Board of Directors of OJSC Rostelecom on December 27, 2007 (pursuant to Minutes No.12 as of December 29, 2007) 5 Insider Trading Policy of OJSC Rostelecom (restated version No.1) approved by the Board of Directors of OJSC Rostelecom on December 29, 2008 (pursuant to Minutes No.14 as of December 30, 2008) 6 Regulations on the Board of Directors of OJSC Rostelecom (restated version No.11) approved by the Annual General Meeting of Shareholders of OJSC Rostelecom on June 14, 2012(pursuant to Minutes No.1 as of June18, 2012) 7 Regulations on the Audit Committee of OJSC Rostelecom Board of Directors (restated version No.2) approved by the Board of Directors of OJSC Rostelecom on September 18, 2009 (pursuant to Minutes No.11 as of September 21, 2009) 8 Regulations on the Nominations and Remuneration Committee of OJSC Rostelecom Board of Directors (restated version No.1) approved by the Board of Directors of OJSC Rostelecom on September 18, 2009 (pursuant to Minutes No.11 as of September 21, 2009)) 9 Regulations on the Corporate Governance Committee of OJSC Rostelecom Board of Directors (restated version No.2) approved by the Board of Directors of OJSC Rostelecom on September 18, 2009 (pursuant to Minutes No.11 as of September 21, 2009) 10 Regulations on the Strategy Committee of OJSC Rostelecom Board of Directors (restated version No.2) approved by the Board of Directors of OJSC Rostelecom on July 23, 2009 (pursuant to Minutes No.5 as of July 24, 2009) 11 Regulations on Corporate Secretary and Corporate Secretary's office approved by the Board of Directors of OJSC Rostelecom on June 15, 2011 (pursuant to Minutes No.14 as of June 17, 2011) 12 Information Disclosure Policy of OJSC Rostelecom (restated version No.1) approved by the Board of Directors of OJSC Rostelecom on December 29, 2008 (pursuant to Minutes No.14 as of December 30, 2008) 13 Statute of OJSC Rostelecom Internal Audit Department (version No.4) approved by the Board of Directors of OJSC Rostelecom on March 31, 2011 (pursuant to Minutes No.07as of April 04, 2011) 14 Regulations on the Audit Commission of OJSC Rostelecom (restated version No 3) approved by the Annual General Meeting of Shareholders of OJSC Rostelecom on June 14, 2012 (pursuant to Minutes No.1 as of June 18, 2012) 15 Dividend Policy of OJSC Rostelecom (restated version No.2) approved by the Board of Directors of OJSC Rostelecom on December 26, 2011 (pursuant to Minutes No.29 as of December 29, 2011). 16 Regulations on Provision of Access to Insider Information, Safeguarding Its Confidentiality and Exercising Control Over the Law Requirements with Regard to Insider Information Approved by an Order of OJSC Rostelecom # 476 of August 09, 2011.

8 BOARD OF DIRECTORS

APPENDIX NO.2 TO THE ANNUAL REPORT ON RESULTS OF 2012

THE COMPANY GOVERNING AND CONTROLLING BODIES.

BOARD OF DIRECTORS

Ruben Aganbegyan, Member of the Board of Directors since 17.06.2013 Born in 1972. Graduated from Moscow State Academy of Law The following information about positions held by Mr. R. Aganbegyan over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2007 2009 Renaissance Capital Investment General Director Company for Russia 2009 2009 LLC Renaissance Investment Chairman of the Management Board Management 2009 2010 Renaissance Capital Investment President Company 2010 presently Non-Profit Organization National Member of the Board of Directors Association of Securities Market Participants (NAUFOR) 2010 presently Russian Exchange Union Member of the Board of Directors 2010 presently All-Russian Public Organization Member of the Management Board Russian Union of Industrialists and Entrepreneurs 2010 presently National Securities Market Member of the Board of Directors Association (Self-Regulating Non- Profit Organization) 2010 2013 CJSC MICEX Stock Exchange Member of the Board of Directors 2010 2013 CJSC MICEX President 2010 2013 Non-banking Credit Organization Member of the Board of Directors RTS Settlement Chamber (CJSC) 2010 2013 CJSC ACB National Clearing Member of the Supervisory Board Center 2010 2013 CJSC MICEX – Information Member of the Board of Directors Technologies 2013 2013 OJSC Svyazinvest Member of the Board of Directors 2013 presently OJSC TMK (Pipe Metallurgical Member of the Board of Directors Company) 2013 presently OJSC Rostelecom Member of the Board of Directors 2012 presently Otkritie Financial Company General Director As on December 31, 2013 R. Aganbegyan owned no interest in the charter capital of OJSC Rostelecom. In 2013 R. Aganbegyan did not inform OJSC Rostelecom about making any transactions with the Company securities.

Sergey Azatyan, Member of the Board of Directors until 16.06.2013 inclusively Mr. S. Azatyan was born in 1979 in the city of Erevan. In 2000 he graduated from the State Finance Academy. The following information about positions held by Mr. S. Azatyan over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2007 2009 LLC Marshall Consulting Investment Head 2009 2011 Representative Office of MarCap Managing Director

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Advisors Ltd. in Moscow Mayak real Estate Limited, 2009 presently company limited by shares Member of the Board of Directors (Cyprus) Representative Office of MarCap Managing Director, Member of the Board 2011 presently Investments Group Limited LLC in of Directors Moscow 2012 presently GT Gettaxi Limited Member of the Board of Directors 2012 2013 OJSC Rostelecom Member of the Board of Directors 2012 2013 CJSC NVision Group Member of the Board of Directors As on December 31, 2013 Mr. S. Azatyan owned no interest in the charter capital of OJSC Rostelecom. In 2013 Mr. S. Azatyan did not inform OJSC Rostelecom about making any transactions with the Company securities.

Mikhail Alekseev, Member of the Board of Directors since 17.06.2013 Born in 1964. He graduated from Moscow Institute of Finance. The following information about positions held by Mr. M. Alekseev over the past 5 years is available to OJSC Rostelecom: Period Name of Organization Position 2008 presently CJSC UniCredit Bank Chairman of the Management Board 2008 presently Association of Russian Banks Board Member 2008 presently CJSC Lokat Leasing Member of the Board of Directors 2009 presently CJSC United Grain Company Member of the Board of Directors All-Russian Public Organization 2009 presently Russian Union of Industrialists and Member of the Management Board Entrepreneurs 2011 presently Association of regional Banks Board Member OJSC TMK (Pipe Metallurgical 2011 presently Member of the Board of Directors Company) 2013 presently OJSC Aeroflot Member of the Board of Directors 2013 2014 OJSC Rostelecom Member of the Board of Directors As on December 31, 2013 M. Alekseev owned no interest in the charter capital of OJSC Rostelecom. In 2013 M. Alekseev did not inform OJSC Rostelecom about making any transactions with the Company securities.

V. Bondarik, Member of the Board of Directors until 16.06.2013 inclusively Born in 1957. In 1980 he graduated from the Moscow Institute of Physics and Technology where he specialized in radioelectronic devices and obtained an Engineer-Physicist qualification. The following information about positions held by Mr. V. Bondarik over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2008 2009 LLC RoilSystems General Director Member of the Board of Directors, 2009 2013 OJSC Rostelecom Chairman of the Board of Directors Deputy General Director, Member of the 2009 2011 OJSC Svyazinvest Management Board Ministry of Telecom and Mass Pro bono Adviser to the Minister of 2009 presently Communications of the Russian Telecom and Mass Communications of Federation the Russian Federation 2010 2011 OJSC Svyazintek Member of the Board of Directors 2010 2011 OJSC RTComm.RU Member of the Board of Directors 2010 presently OJSC Vitanet Chairman of the Board of Directors 2011 presently OJSC Giprosvyaz General Director, Chairman of the

2 BOARD OF DIRECTORS

Management Board As on December 31, 2013 V. Bondarik owned no interest in the charter capital of OJSC Rostelecom. In 2013 V. Bondarik did not inform OJSC Rostelecom about making any transactions with the Company securities.

Mikhail Zadornov, Member of the Board of Directors since 17.06.2013 Born in 1963. Graduated from Moscow Institute of National Economy (MINKh), general economy department, receiving a qualification of economist and specializing in national economy planning. The following information about positions held by Mr. M. Zadornov over the past 5 years is available to OJSC Rostelecom: Period Organization Position President, Chairman of the Management 2005 presently CJSC VTB24 Board 2012 presently OJSC TransCreditBank Chairman of the Board of Directors 2012 presently ACB Leto-Bank (OJSC) Chairman of the Board of Directors 2012 2013 OJSC Svyazinvest Member of the Board of Directors 2012 presently OJSC Stolichnaya Insurance Group Member of the Board of Directors 2013 presently LLC Insurance Company VTB Chairman of the Board of Directors Insurance 2013 presently ACB Bank of Moscow (OJSC) Member of the Board of Directors 2013 presently OJSC Insurance Group MSK Member of the Board of Directors 2013 2014 OJSC Rostelecom Member of the Board of Directors As on December 31, 2013 Mr. M. Zadornov owned no interest in the charter capital of OJSC Rostelecom. In 2013 Mr. M. Zadornov did not inform OJSC Rostelecom about making any transactions with the Company securities.

Anton Zlatopolsky Born in 1966 in Moscow. In 1988 he graduated from Lomonosov Moscow State University, where he specialized in jurisprudence. Mr. Zlatopolsky holds a Ph.D. degree in law. The following information about positions held by Mr. Mr. A. Zlatopolsky over the past 5 years is available to OJSC Rostelecom: Period Organization Position Branch of FGUP “VGTRK” “TV- 2006 presently Director channel “Rossiya” 2011 presently OJSC Rostelecom Member of the Board of Directors As on December 31, 2013 Mr. A. Zlatopolsky owned no interest in the charter capital of OJSC Rostelecom. In 2013 Mr. A. Zlatopolsky did not inform OJSC Rostelecom about making any transactions with the Company securities.

Anton Inshutin, Member of the Board of Directors until 16.06.2013 inclusively Born in 1974 in the city of Moscow. In 1996 he graduated from the Russian Government’s State Academy of National Economy where he specialized in financial management. The following information about positions held by Mr. A. Inshutin over the past 5 years is available to OJSC Rostelecom: Period Organization Position CJSC United Financial Group Ltd. / 2002 2007 Executive Director, TMT, Russia & CIS Deutsche Bank 2007 2012 Morgan Stanley Executive Director, TMT, Russia & CIS 2012 presently InVenture Partners Managing Partner 2012 presently GT Gettaxi Limited (Cyprus) Member of the Board of Directors 2012 presently Happlink Ltd. (Cyprus) Member of the Board of Directors

3 BOARD OF DIRECTORS

2012 2013 OJSC Rostelecom Member of the Board of Directors As on December 31, 2013 Mr. A. Inshutin owned no interest in the charter capital of OJSC Rostelecom. In 2013 Mr. A. Inshutin did not inform OJSC Rostelecom about making any transactions with the Company securities.

Sergey Kalugin, President, Chairman of the Management Board, Member of the Board of Directors since 17.06.2013 Born in 1966. Graduated from Lomonosov Moscow State University, department of economics. The following information about positions held by Mr. S. Kalugin over the past 5 years is available to OJSC Rostelecom: Period Organization Position OJSC National 2009 2012 General Director Telecommunications 2009 presently WebMediaGroup Managing Partner President, Chairman of the Management 2013 presently OJSC Rostelecom Board, Member of the Board of Directors 2013 2013 LLC MOBITEL Chairman of the Board of Directors 2013 presently CJSC NSS Member of the Board of Directors 2013 presently CJSC BaikalWestCom Chairman of the Board of Directors 2013 presently CJSC Eniseytelecom Chairman of the Board of Directors 2013 presently CJSC Volgograd-GSM Chairman of the Board of Directors 2013 presently CJSC SkyLink Chairman of the Board of Directors 2013 presently OJSC RTComm.RU Member of the Board of Directors 2013 presently CJSC AKOS Chairman of the Board of Directors As on December 31, 2013 Mr. S. Kalugin owned no interest in the charter capital of OJSC Rostelecom. In 2013 Mr. S. Kalugin did not inform OJSC Rostelecom about making any transactions with the Company securities.

Yury Kudimov Born in 1953. In 1979 he graduated from Lomonosov Moscow State University where he specialized in journalism. In 1998 Mr. Yu. Kudimov graduated from Dauling College (USA) where he received a master degree in Banking and International Monetary Systems. The following information about positions held by Mr. Yu. Kudimov over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2008 2009 ACB NRBank (OJSC) Chairman of the Board of Directors 2006 presently CJSC BaltAutoPoisk Member of the Board of Directors 2010 presently LLC VEB Capital General Director 2010 2014 OJSC Rostelecom Member of the Board of Directors 2011 2013. OJSC Svyazinvest Member of the Board of Directors OJSC Sheremetievo International 2011 presently Member of the Board of Directors Airport As on December 31, 2013 Mr. Yu. Kudimov owned no interest in the charter capital of OJSC Rostelecom. In 2013 Mr. Yu. Kudimov did not inform OJSC Rostelecom about making any transactions with the Company securities.

Sergey Kuznetsov, Member of the Board of Directors until 16.06.2013 inclusively Born in 1953. He graduated from Northwestern Polytechnic Institute where he specialized in computer technologies and received an engineer qualification. Mr. S. Kuznetsov was trained in Columbia University business school (USA) and completed a business administration course at Duke University’s Fuqua School of Business (USA).

4 BOARD OF DIRECTORS

The following information about positions held by Mr. S. Kuznetsov over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2005 2013 OJSC Rostelecom Member of the Board of Directors 2005 2009 OJSC CenterTelecom Member of the Board of Directors 2006 2009 OJSC VolgaTelecom Chairman of the Board of Directors 2006 2009 OJSC SibirTelecom Member of the Board of Directors 2007 2010 CJSC BaltAvtoPoisk Chairman of the Board of Directors Russian Union of Industrialists and Member of the National Register of 2007 presently Entrepreneurs Independent Directors As on December 31, 2013 Mr. S. Kuznetsov owned no interest in the charter capital of OJSC Rostelecom. In 2013 Mr. S. Kuznetsov did not inform OJSC Rostelecom about making any transactions with the Company securities.

Sergei Kulikov, Member of the Board of Directors since 17.06.2013 Born in 1975. Graduated from Moscow State Academy of Law. The following information about positions held by Mr. S. Kulikov over the past 5 years is available to OJSC Rostelecom: Period Organization Position OJSC Southern 2004 2011 Member of the Board of Directors Telecommunication Company 2006 2008 OJSC OGK-5 Member of the Board of Directors 2007 2011 OJSC MOEK Member of the Board of Directors OJSC Multiregional Grid 2007 2008 Distribution Company (MRSK) Member of the Board of Directors South 2007 presently OJSC OGK-2 Member of the Board of Directors Association for Investor Right 2007 presently Executive Director Protection 2008 2011 OJSC North-West Telecom Member of the Board of Directors 2009 2011 CJSC BaikalWestCom Member of the Board of Directors 2009 2011 OJSC OEK Member of the Board of Directors 2010 2011 OJSC Dalsvyaz Member of the Board of Directors 2010 2011 OJSC Uralsvyazinform Member of the Board of Directors 2010 2011 OJSC CenterTelecom Member of the Board of Directors 2010 2011 OJSC VolgaTelecom Member of the Board of Directors 2010 presently OJSC MRSK North-West Member of the Board of Directors 2010 presently OJSC MRSK Volga Member of the Board of Directors 2013 2014 OJSC Rostelecom Member of the Board of Directors As on December 31, 2013 S. Kulikov owned no interest in the charter capital of OJSC Rostelecom. In 2013 S. Kulikov did not inform OJSC Rostelecom about making any transactions with the Company securities.

Mikhail Leschenko, Member of the Board of Directors until 16.06.2013 inclusively Born in 1975. In 1997 he graduated from Saint Petersburg State University of Economics and Finance where he specialized in world economy and received an economist qualification. The following information about positions held by Mr. M. Leschenko over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2007 2008 LLC Marshall Consulting Deputy General Director Ministry of Telecom and Mass Adviser to Minister of Telecom and Mass 2008 2009 Communications of the Russian Communications of the Russian Federation Federation

5 BOARD OF DIRECTORS

2009 2009 OJSC Sviaz-Bank Member of the Board of Directors 2009 2010 OJSC Rostelecom Member of the Board of Directors 2009 2010 OJSC North-West Telecom Member of the Board of Directors 2009 2010 OJSC Uralsvyazinform Member of the Board of Directors 2009 2010 OJSC CenterTelecom Member of the Board of Directors 2009 2010 OJSC SibirTelecom Member of the Board of Directors 2009 2010 OJSC Dalsvyaz Member of the Board of Directors 2009 2010 OJSC Central Telegraph Member of the Board of Directors 2009 2010 OJSC Svyazinvest Member of the Board of Directors 2009 2011 OJSC VolgaTelecom Member of the Board of Directors OJSC Southern 2009 2011 Member of the Board of Directors Telecommunication Company 2009 2011 OJSC Giprosvyaz Member of the Board of Directors 2009 2013 OJSC Svyazinvest Deputy General Director 2009 2013 OJSC Svyazinvest Member of the Management Board 2009 2011 CJSC BaikalWestCom Chairman of the Board of Directors 2010 2010 CJSC Stack GSM Chairman of the Board of Directors 2011 2011 OJSC North-West Telecom Member of the Board of Directors 2011 2011 OJSC Uralsvyazinform Member of the Board of Directors 2011 2011 OJSC CenterTelecom Member of the Board of Directors 2011 2011 OJSC SibirTelecom Member of the Board of Directors 2011 2011 OJSC Dalsvyaz Member of the Board of Directors 2011 2013 OJSC Rostelecom Member of the Board of Directors LLC Southern-Ural Telephone 2011 2012 Member of the Board of Directors Company 2011 2011 OJSC NTK Member of the Board of Directors 2011 2012 CJSC CenterTelecom Service Member of the Board of Directors 2011 2012 LLC MOBITEL Member of the Board of Directors As on December 31, 2013 M. Leschenko owned no interest in the charter capital of OJSC Rostelecom. In 2013 M. Leschenko did not inform OJSC Rostelecom about making any transactions with the Company securities.

Anatoly Milyukov Born in 1972 in Moscow. In 1994 he graduated from Lomonosov Moscow State University where he specialized in international economy, and in 2001 from MBA School of Harvard University. The following information about positions held by Mr. A. Milyukov over the past 5 years is available to OJSC Rostelecom: Period Organization Position Managing Company CJSC 2006 2013 Gazprombank - Assets Member of the Board of Directors Management 2006 2013 OJSC Gazprombank Executive Vice President GBP Asset Management S.A. 2007 presently Member of the Board of Directors (Luxembourg) 2008 presently CJSC New Instrumental Solutions Member of the Board of Directors 2010 2010 OJSC Uralsvyazinform Member of the Board of Directors OJSC Southern 2011 2011 Member of the Board of Directors Telecommunication Company 2011 presently OJSC Rostelecom Member of the Board of Directors OJSC National 2011 2012 Member of the Board of Directors Telecommunications As on December 31, 2013 A. Milyukov owned no interest in the charter capital of OJSC Rostelecom. In 2013 A. Milyukov did not inform OJSC Rostelecom about making any transactions with the Company securities.

6 BOARD OF DIRECTORS

Alexander Provotorov, Member of the Board of Directors until 16.06.2013 inclusively Born in 1974. In 1996 he graduated from Lomonosov Moscow State University with a degree in Law, and receiving a lawyer qualification. The following information about positions held by Mr. A. Provotorov over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2006 2008 LLC Marshall Capital General Director MarCap Advisors Limited, Moscow 2009 2009 Senior Managing Director Representative Office 2009 2010 CJSC PTT First Deputy General Director 2009 2013 OJSC MGTS Member of the Management Board 2009 2011 CJSC AKOS Member of the Board of Directors 2009 2009 LLC MobiTel Member of the Board of Directors 2009 2010 OJSC Svyazinvest Member of the Board of Directors 2009 2011 CJSC NSS Member of the Board of Directors 2009 2011 CJSC NSS Member of the Board of Directors 2009 2011 OJSC CenterTelecom Member of the Board of Directors 2009 2010 OJSC Uralsvyazinform Chairman of the Board of Directors 2009 2013 OJSC North-West Telecom Member of the Board of Directors Member of the Board of Directors, 2009 2011 OJSC Svyazinvest Chairman of the Board of Directors Member of the Board of Directors, 2009 2010 OJSC Rostelecom Chairman of the Board of Directors Member of the Board of Directors, 2010 2013 OJSC Central Telegraph Chairman of the Board of Directors 2010 presently OJSC Rosinfocominvest Member of the Fund Board General Director, President, Chairman of 2010 2013 OJSC GIPROSVYAZ the Management Board, Member of the Board of Directors 2011 2011 CJSC AKOS Chairman of the Board of Directors 2011 2013 OJSC Svyazinvest Member of the Board of Directors 2012 2013 OJSC NTK General Director As on December 31, 2013 A. Provotorov owned no interest in the charter capital of OJSC Rostelecom. In 2013 A. Provotorov did not inform OJSC Rostelecom about making any transactions with the Company securities.

Alexander A. Pchelintsev, Member of the Board of Directors since 17.06.2013 Born in 1970. Graduated from Irkutsk Institute of Economy and received Ph.D. in economics. The following information about positions held by Mr. A. Pchelintsev over the past 5 years is available to OJSC Rostelecom: Period Organization Position Deputy Head of Trust Asset Management 2006 2011 Gazprombank (OJSC) – Head of Sales Division Managing Company Gazprombank 2011 presently General Director – Asset Management 2013 2014 OJSC Rostelecom Member of the Board of Directors 2013 presently Gazprombank (OJSC) Vice President As on December 31, 2013 A. Pchelintsev owned no interest in the charter capital of OJSC Rostelecom. In 2013 A. Pchelintsev did not inform OJSC Rostelecom about making any transactions with the Company securities.

7 BOARD OF DIRECTORS

Ivan Rodionov Born in 1953. In 1978 he graduated from Lomonosov Moscow State University where he specialized in national economy planning and obtained a qualification of an economist specializing in synthetic planning. The following information about positions held by Mr. I. Rodionov over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2000 presently OJSC «IBS Group Holding» Member of the Board of Directors 2001 2011 OJSC North-West Telecom Member of the Board of Directors State University Higher School of Professor, Chair of Enterprise Economics 2003 presently Economics and Finance 2004 2006 AIG-Interros RCF Advisor Managing Director 2004 presently OJSC FosAgro Member of the Board of Directors 2005 2007 OJSC MGTS Member of the Board of Directors OJSC Energo – Machine-building Member of the Board of Directors, 2005 presently Alliance Chairman of the Board of Directors Russian State University for the 2006 presently Professor, Finance and Credit Chair Humanities 2009 2010 OJSC Rostelecom Member of the Board of Directors 2009 2013 OJSC Svyazinvest Member of the Board of Directors 2009 presently OJSC IC Rusinvest Member of the Board of Directors Chairman of the Board of Directors, 2011 2013 OJSC Rostelecom Member of the Board of Directors OJSC Interagency Analytical 2011 presently Member of the Board of Directors Center 2011 presently OJSC Amofos Member of the Board of Directors As on December 31, 2013 I. Rodionov owned no interest in the charter capital of OJSC Rostelecom. In 2013 I. Rodionov did not inform OJSC Rostelecom about making any transactions with the Company securities.

Vadim Semenov Born in 1965 in Leningrad. In 1987 he graduated with a degree in Law from A. A. Zhdanov Leningrad State University awarded with Orders of Lenin and Red Banner of Labor. The following information about positions held by Mr. V. Semenov over the past 5 years is available to OJSC Rostelecom: Period Organization Position Head of Legal Department, Head of Legal 2003 2009 OJSC MegaFon Office, Director for Legal Matters, Deputy Director for Legal Matters OJSC Gazprom, Deputy General Director for Legal Matters 2009 2009 ElectroGaz Subsidiary and Corporate Relations Adviser to General Director, Deputy General Director for Corporate 2009 2010 OJSC Rostelecom Development, Vice-President for Legal and Corporate Development 2010 2011 CJSC Westelcom Member of the Board of Directors 2010 2011 CJSC GlobalTel Member of the Board of Directors 2010 2011 CJSC INCOM Chairman of the Board of Directors 2010 2011 Malachite Recreation Facility Member of the Board of Directors General Director, Chairman of the 2010 2013 OJSC Svyazinvest Management Board 2010 2012 CJSC SkyLink Chairman of the Board of Directors Non-State Pension Fund Telecom- 2010 2013 Member of the Board of the Fund Soyuz 2011 2011 OJSC Central Telegraph Chairman of the Board of Directors

8 BOARD OF DIRECTORS

2011 2012 CJSC Delta-Telecom Chairman of the Board of Directors 2011 2012 CJSC MCC Chairman of the Board of Directors 2011 2011 OJSC CenterTelecom Chairman of the Board of Directors 2011 2011 OJSC North-West Telecom Chairman of the Board of Directors OJSC Southern 2011 2011 Chairman of the Board of Directors Telecommunication Company 2011 2011 OJSC SibirTelecom Chairman of the Board of Directors 2011 2011 OJSC Uralsvyazinform Chairman of the Board of Directors 2011 2011 OJSC Dalsvyaz Chairman of the Board of Directors 2011 2011 OJSC VolgaTelecom Chairman of the Board of Directors 2011 2011 OJSC RTComm.RU Member of the Board of Directors 2011 2011 CJSC NSS Member of the Board of Directors 2011 presently OJSC Bashinformsvyaz Member of the Board of Directors 2011 presently OJSC MMTS-9 Chairman of the Board of Directors Member of the Board of Directors, 2011 presently OJSC Rostelecom Chairman of the Board of Directors 2011 presently OJSC Giprosvyaz Chairman of the Board of Directors 2012 presently OJSC Echo Moscow Member of the Board of Directors As on December 31, 2013 V. Semenov owned no interest in the charter capital of OJSC Rostelecom. In 2013 V. Semenov did not inform OJSC Rostelecom about making any transactions with the Company securities.

9 PRESIDENT AND MANAGEMENT BOARD

President and the Management Board of the Company Mr. A. Provotorov until 27.03.2013 inclusively was the Company President and Chairman of the Management Board. As of 28.03.2013 Mr. Sergey Kalugin has been the Company President and Chairman of the Management Board For information about S. Kalugin and A. Provotorov please refer to the Board of Directors section of this Appendix.

Natalia Albrekht, Member of the Management Board since 18.02.2013 until 31.07.2013 inclusively Born in 1972. In 1995 she graduated from Bauman Moscow State Technical University, specializing in machine dynamics and strength. The following information about positions held by Ms. N. Albrekht over the past 5 years is available to OJSC Rostelecom: Period Organization Position OJSC Russian State Insurance 2006 2008 Head of Center Company Representative Office of СТС Director for Organizational Development 2008 2012 Media, Inc. (USA) and Business Administration Vice President, Member of the 2012 2013 OJSC Rostelecom Management Board As on December 31, 2013 N. Albrekht owned no interest in the charter capital of OJSC Rostelecom. In 2013 N. Albrekht did not inform OJSC Rostelecom about making any transactions with the Company securities.

Alexander Abramkov, Member of the Management Board since 01.08.2013 Born in 1977. In 2000 he graduated from Saint-Petersburg State University, specializing in management. The following information about positions held by Mr. A. Abramkov over the past 5 years is available to OJSC Rostelecom: Period Organization Position OJSC National Deputy General Director for Economics 2008 2009 Telecommunications and Finance Deputy General Director for Internal 2009 2010 OJSC National Media Group Control and Risk Management 2010 2013 OJSC INTER RAO UES Head of Internal Audit Area OJSC INTER RAO - 2011 2013 Member of the Board of Directors Electrogeneration 2011 presently OJSC Mosenergosbyt Member of the Board of Directors 2012 2013 OJSC Petersburg Retail Company Member of the Board of Directors 2012 presently OJSC INTER RAO – LED systems Member of the Board of Directors Vice President, Vice President – Director 2013 presently OJSC Rostelecom of Moscow Macro-regional Branch, Member of the Management Board 2013 presently Malachite Recreation Facility Member of the Board of Directors 2013 presently CJSC INCOM Member of the Board of Directors As on December 31, 2013 A. Abramkov owned no interest in the charter capital of OJSC Rostelecom. In 2013 A. Abramkov did not inform OJSC Rostelecom about making any transactions with the Company securities.

10 PRESIDENT AND MANAGEMENT BOARD

Andrey Balatsenko, Member of the Management Board since 01.08.2013 until 21.02.2014 Born in 1965. In 1987 he graduated from Novosibirsk Electro-technical Institute of Telecommunications, specializing in automatic telecommunications. The following information about positions held by Mr. A. Balatsenko over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2009 2011 OJSC Dalsvyaz. General Director Vice President and Director of Far East Macro-regional Branch; Vice President 2011 presently OJSC Rostelecom and Director of North-West Macro- regional Branch As on December 31, 2013 A. Balatsenko owned a 0.000036% interest in the Charter Capital and 0.0000393% of ordinary shares of OJSC Rostelecom. In 2013 A. Balatsenko did not inform OJSC Rostelecom about making any transactions with the Company securities.

Pavel Zaytsev, Member of the Management Board until 31.07.2013 Born in 1977 in Ekaterinburg. In 2000 he graduated from Ural State Technical University with a degree in Information Systems in Economics. The following information about positions held by Mr. P. Zaytsev over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2008 2009 CJSC Uraltelecomservice General Director 2009 2010 OJSC Uralsvyazinform Member of the Management Board Deputy General Director – Commercial 2009 2010 OJSC Uralsvyazinform Director LLC Southern-Urals Telephone 2010 2013 Member of the Board of Directors Company Vice President – Commercial Director, 2010 2013 OJSC Rostelecom Senior Vice President, Member of the Management Board Member of the Board of Directors , 2010 2013 CJSC WESTELCOM Chairman of the Board of Directors Member of the Board of Directors, 2011 2013 CJSC GlobalTel Chairman of the Board of Directors Member of the Board of Directors, 2011 2013 OJSC NTK Chairman of the Board of Directors Chairman of the Board of Directors, 2011 2013 CJSC Severen Telecom Member of the Board of Directors Member of the Board of Directors, 2011 2013 CJSC AKOS Chairman of the Board of Directors Member of the Board of Directors, 2011 2013 CJSC BIT Chairman of the Board of Directors Member of the Board of Directors, 2011 2013 CJSC NSS Chairman of the Board of Directors 2011 2012 OJSC MMTS-9 Member of the Board of Directors Member of the Board of Directors, 2011 2013 CJSC BaikalWestCom Chairman of the Board of Directors Member of the Board of Directors, 2011 2013 CJSC Eniseytelecom Chairman of the Board of Directors 2011 2012 OJSC RTS Member of the Board of Directors Member of the Board of Directors, 2011 2012 CJSC Orenburg-GSM Chairman of the Board of Directors Member of the Board of Directors, 2011 2013 CJSC Volgograd-GSM Chairman of the Board of Directors

11 PRESIDENT AND MANAGEMENT BOARD

Member of the Board of Directors, 2012 2013 LLC Rostelecom - Retail Systems Chairman of the Board of Directors Member of the Board of Directors, 2012 2013 CJSC GNC-Alfa Chairman of the Board of Directors Member of the Board of Directors, 2012 2012. CJSC MCC Chairman of the Board of Directors Member of the Board of Directors, 2012 2012 CJSC Delta-Telecom Chairman of the Board of Directors Member of the Board of Directors, 2012 2013 CJSC SkyLink Chairman of the Board of Directors Member of the Board of Directors, 2012 2013 CJSC AMT Chairman of the Board of Directors Member of the Board of Directors, 2012 2013 OJSC NKS Chairman of the Board of Directors As on December 31, 2013 P. Zaytsev owned a 0.008587% interest in the Charter Capital and 0.009368% of ordinary shares of OJSC Rostelecom. In 2013 P. Zaytsev did not inform OJSC Rostelecom about making any transactions with the Company securities.

Ivan Zima Born in 1971. In 1994 he graduated from Irkutsk State Technical University where he specialized in radio engineering. The following information about positions held by Mr. I. Zima over the past 5 years is available to OJSC Rostelecom: Period Organization Position Deputy General Director and Director of Far-Eastern Branch; Vice President and Director of Far-Eastern Branch; Director 2006 presently OJSC Rostelecom of Network Planning and Development Department, Vice President and Technical Director, Member of the Management Board, 2011 presently OJSC NTK Member of the Board of Directors 2011 presently CJSC BaikalWestCom Member of the Board of Directors 2011 2013 CJSC Eniseytelecom Member of the Board of Directors 2012 2013 CJSC NSS Member of the Board of Directors 2012 2013 CJSC Volgograd-GSM Member of the Board of Directors 2012 presently CJSC AKOS Member of the Board of Directors 2012 presently CJSC BIT Member of the Board of Directors 2012 presently CJSC Orenburg-GSM Member of the Board of Directors 2012 presently CJSC ROSTELEGRAPH Member of the Board of Directors 2012 presently OJSC AC Mobiltelecom Member of the Board of Directors 2012 presently OJSC RTComm.RU Member of the Board of Directors 2012 2013 CJSC SkyLink Member of the Board of Directors 2012 presently CJSC Novgorod Datacom Member of the Board of Directors 2012 presently OJSC Giprosvyaz Member of the Board of Directors As on December 31, 2013 I. Zima owned no interest in the charter capital of OJSC Rostelecom. In 2013 I. Zima did not inform OJSC Rostelecom about making any transactions with the Company securities.

Maxim Kudryavtsev, Member of the Management Board since 01.08.2013 until 21.02.2014 Born in 1975. In 1998 he graduated from Novosibirsk State Technical University where he studied topology and design of electronic devices, specializing in radio-technical and telecommunications devices. In 2002 he received a second higher education diploma when he graduated from Novosibirsk State Academy of Economics and Management specializing in finance and credit.

12 PRESIDENT AND MANAGEMENT BOARD

The following information about positions held by Mr. M. Kudryavtsev over the past 5 years is available to OJSC Rostelecom: Period Organization Position Deputy General Director and Director of 2009 2011 OJSC SibirTelecom Omsk Branch Vice President and Director of Siberia 2011 presently OJSC Rostelecom Macro-regional Branch, Member of the Management Board 2011 2014 CJSC BaikalWestCom Member of the Board of Directors 2011 2014 CJSC Eniseytelecom Member of the Board of Directors As on December 31, 2013 M. Kudryavtsev owned a 0.005577% interest in the Charter Capital and 0.006084% of ordinary shares of OJSC Rostelecom. In 2013 M. Kudryavtsev did not inform OJSC Rostelecom about making any transactions with the Company securities.

Sergei Lukash, Member of the Management Board until 18.02.2013 Born in 1957 in Rubtsovsk, the Altai territory. In 1976 he graduated from the Alma-Ata communications technical school, and in 1986 from the All-Union Extramural Electrotechnical Institute with a degree in Radio and Broadcasting. In 1997 Mr. Lukash graduated from the Russian Academy of Public Service under the Russian President with a degree in State and Municipal Administration. The following information about positions held by Mr. S. Lukash over the past 5 years is available to OJSC Rostelecom: Period Organization Position Federal Unitary Enterprise First Deputy General Director, 2008 2009 Communications-Security Acting General Director Deputy General Director, Member of the 2009 2010 OJSC Svyazinvest Management Board General Director, Chairman of the 2010 2011 OJSC Uralsvyazinform Management Board, Member of the Board of Directors Director of Ural Macro-regional Branch; 2011 2013 OJSC Rostelecom Vice President, Member of the Management Board 2011 2011 OJSC Svyazinvest Member of the Board of Directors 2011 2011. OJSC NTK Member of the Board of Directors As on December 31, 2013 S. Lukash owned no interest in the Charter Capital of OJSC Rostelecom. In 2013 S. Lukash did not inform OJSC Rostelecom about making any transactions with the Company securities.

Mikhail Magrilov, Member of the Management Board until 31.07.2013 Born in 1975 in Saint-Petersburg. In 1997 he graduated from the Baltic State Technical University in Saint- Petersburg, where he specialized in Automatic Control Systems. In 1999 he graduated from Universitetet I Nordland in Norway where he received a Master degree in Economics. The following information about positions held by Mr. M. Magrilov over the past 5 years is available to OJSC Rostelecom: Period Organization Position Moscow Representative Office of 2006 2008 Manager A.T. Kearney Branch of Pricewaterhouse 2008 2012 Director (Partner) Coopers Russia B.V. 2012 presently OJSC Rostelecom Vice President As on December 31, 2013 M. Magrilov owned no interest in the Charter Capital of OJSC Rostelecom. In 2013 M. Magrilov did not inform OJSC Rostelecom about making any transactions with the Company securities.

13 PRESIDENT AND MANAGEMENT BOARD

Kai-Uwe Mehlhorn, Member of the Management Board since 01.08.2013 Born in 1966. In 1985 he graduated from Martin Luther University (Halle, Germany), and in 1992 Moscow State Institute of International Relations (MGIMO), department of international economic relations and external trade. In the fall of 2011 he was trained on skill improvement program in Harvard Business Scholl in Boston. The following information about positions held by Mr. K-U. Mehlhorn over the past 5 years is available to OJSC Rostelecom: Period Organization Position Moscow Representative Office of 2007 2009 TELE2 Russia International Cellular Financial Director B.V. (the Netherlands) Deputy General Director for Finance and 2009 2011 OJSC MegaFon Economics Matters 2012 2013 LLC Privat-Trade Deputy General Director Senior Vice President - Financial Director, 2013 presently OJSC Rostelecom Vice President - Financial Director, Member of the Management Board 2013 presently CJSC SkyLink Member of the Board of Directors 2013 presently CJSC NSS Member of the Board of Directors 2013 presently CJSC BaikalWestCom Member of the Board of Directors 2013 presently CJSC BIT Member of the Board of Directors 2013 presently CJSC Volgograd-GSM Member of the Board of Directors 2013 presently CJSC Eniseytelecom Member of the Board of Directors 2013 presently CJSC MTs NTT Member of the Board of Directors 2013 presently OJSC RTComm.RU Member of the Board of Directors 2013 presently LLC Rostelecom–Retail Systems Member of the Board of Directors 2013 presently CJSC AKOS Member of the Board of Directors 2014 presently LLC T2 RTC Holding Member of the Board of Directors As on December 31, 2013 K-U. Mehlhorn owned no interest in the charter capital of OJSC Rostelecom. In 2013 K-U. Mehlhorn did not inform OJSC Rostelecom about making any transactions with the Company securities.

Vladimir Mironov Born in 1956. He graduated from the Academician V.N. Obraztsov Leningrad Institute of Railway Engineers with a degree in railway transport electrification The following information about positions held by Mr. V. Mironov over the past 5 years is available to OJSC Rostelecom: Period Organization Position Deputy General Director, Vice President, 2002 presently OJSC Rostelecom Member of the Management Board 2010 2010 CJSC Globus-Telecom Member of the Board of Directors 2010 presently CJSC INCOM Member of the Board of Directors As on December 31, 2013 V. Mironov owned no interest in the Charter Capital of OJSC Rostelecom. In 2013 V. Mironov did not inform OJSC Rostelecom about making any transactions with the Company securities.

Alexey Nashchekin, Member of the Management Board until 18.02.2013 Born in 1976. In 1999 he graduated from the V.I. Lenin Ivanovo State Power Engineering University where he obtained a qualification of an Engineer-Physicist. In 2006 he graduated from the State Academy of Vocational Training and Improvement of Professional Skills of Executives and Experts of Investment Sphere (GASIS) where he obtained a qualification in Finance and Credit; Ph.D. in Technical Sciences. The following information about positions held by Mr. A. Nashchekin over the past 5 years is available to OJSC Rostelecom:

14 PRESIDENT AND MANAGEMENT BOARD

Period Organization Position Advisor to Director on IT Technologies 2006 2007 FGUP SKC Rosatom and Development Deputy General Director for Development of Power-Generating sector, Deputy 2007 2010 CJSC NVision Group General Director for Development, General Director Adviser to General Director, Deputy General Director for Federal Programs, 2010 2013 OJSC Rostelecom Vice President for Federal Programs, Vice President for Innovative Development, Member of the Management Board 2012 2013 LLC KM-Media Member of the Board of Directors 2012 2013 OJSC MMTS-9 Member of the Board of Directors Member of the Board of Directors, 2012 2013 OJSC RT-Labs Chairman of the Board of Directors As on December 31, 2013 A. Nashchekin owned no interest in the charter capital of OJSC Rostelecom. In 2013 A. Nashchekin did not inform OJSC Rostelecom about making any transactions with the Company securities.

Alexander Rogovoy Born in 1979. In 2001 he graduated from Moscow State Academy of Law. The following information about positions held by Mr. A. Rogovoy over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2003 2009 OJSC MegaFon Head of Legal Department Director for Legal Matters and Corporate 2009 2010 OJSC Khlebprom Development 2009 2010 OJSC Melas Head of the Legal Department Vice President for Legal Matters and Corporate Development, Executive Vice 2010 presently OJSC Rostelecom President, Member of the Management Board 2010 2012 CJSC WESTELCOM Member of the Board of Directors 2011 2011 CJSC Zebra Telecom Member of the Board of Directors 2011 presently CJSC Globus-Telecom Member of the Board of Directors 2011 2011 CJSC GlobalTel Member of the Board of Directors 2011 2011 OJSC NTK Member of the Board of Directors 2011 2012 CJSC AKOS Member of the Board of Directors Member of the Board of Directors, 2011 presently CJSC INCOM Chairman of the Board of Directors 2011 2012 CJSC CenterTelecom Service Member of the Board of Directors 2011 2011 CJSC Severen Telecom Member of the Board of Directors Member of the Board of Directors, 2013 2014 CJSC BIT Chairman of the Board of Directors 2013 2013 OJSC RTS Member of the Board of Directors Member of the Board of Directors, 2013 presently CJSC Severen Telecom Chairman of the Board of Directors Member of the Board of Directors, 2013 presently CJSC GNC-Alfa Chairman of the Board of Directors 2014 presently LLC T2 RTC Holding Member of the Board of Directors As on December 31, 2013 A. Rogovoy owned no interest in the charter capital of OJSC Rostelecom. In 2013 A. Rogovoy did not inform OJSC Rostelecom about making any transactions with the Company securities.

15 PRESIDENT AND MANAGEMENT BOARD

Galina Rysakova Ms. G. Rysakova was born in 1967 in Lobnya, Moscow region. In 1999 she graduated from Lomonosov Moscow State University with a degree in Law. The following information about positions held by Ms. G. Rysakova over the past 5 years is available to OJSC Rostelecom: Period Organization Position Director of the Department of Organizational Development and Human Resources Management; Executive Director and Director for Organizational 2003 presently OJSC Rostelecom Development and Human Resources Management; for Organizational Development and Human Resources Management, Member of the Management Board 2008 2009 OJSC RTComm.RU Member of the Board of Directors 2005 2013 CJSC Insurance Company Costars Member of the Board of Directors 2010 presently Malachite Recreation Facility Member of the Board of Directors 2011 presently CJSC RPK Svyazist Member of the Board of Directors 2011 presently OJSC OK Orbita Member of the Board of Directors Non-State Pension Fund Telecom- 2013 presently Member of the Board of the Fund Soyuz As on December 31, 2013 G. Rysakova owned no interest in the charter capital of OJSC Rostelecom. In 2013 G. Rysakova did not inform OJSC Rostelecom about making any transactions with the Company securities.

Olga Rumyantseva, Member of the Management Board until 31.07.2013 Ms. O. Rumyantseva was born in 1973. In 1996 she graduated from Moscow State Technological University “Stankin” where she specialized in automated design systems The following information about positions held by Ms. O. Rumyantseva over the past 5 years is available to OJSC Rostelecom: Period Organization Position Director of the Sales and Customer Service Department, Director of Corporate Sales; Executive Director and Director of 2004 presently OJSC Rostelecom Corporate Sales Department; Vice President for Government and Corporate Business, Member of the Management Board Deputy General Director – Commercial 2010 2010 OJSC Svyazdorinvest Director Member of the Board of Directors, 2011 2013 CJSC Severen-Telecom Chairman of the Board of Directors 2011 2013 CJSC MTs NTT Member of the Board of Directors 2012 presently OJSC RTComm.RU Member of the Board of Directors 2012 presently CJSC Globus-Telecom Member of the Board of Directors 2012 presently OJSC RTS Member of the Board of Directors 2013 presently CJSC BIT Member of the Board of Directors 2013 presently OJSC NTK Member of the Board of Directors As on December 31, 2013 O. Rumyantseva owned no interest in the charter capital of OJSC Rostelecom. In 2013 O. Rumyantseva did not inform OJSC Rostelecom about making any transactions with the Company securities.

16 PRESIDENT AND MANAGEMENT BOARD

Dmitriy Sadkov, Member of the Management Board since 01.08.2013 Born in 1966. In 1989 he graduated from Lomonosov Moscow State University, department of physics. The following information about positions held by Mr. D. Sadkov over the past 5 years is available to OJSC Rostelecom: Period Organization Position Director for Technology Platforms, Consulting Director, Director of Managing 2000 2009 LLC IBS Consulting Department, Deputy General Director 2009 2011 LLC IBS Ekspertiza Deputy General Director 2012 2013 LLC IBS Soft Deputy General Director Vice President and IT Director, Member of 2013 presently OJSC Rostelecom the Management Board As on December 31, 2013 D. Sadkov owned no interest in the Charter Capital of OJSC Rostelecom. In 2013 D. Sadkov did not inform OJSC Rostelecom about making any transactions with the Company securities.

Oleg Senkov, Member of the Management Board until 31.07.2013 Born in 1978. Graduated from the Russian Government’s Academy of Finance, specializing in Global economy, holds a Ph. D. in economics. The following information about positions held by Mr. O. Senkov over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2008 2008 LLC Aria Capital Deputy General Director 2009 2010 LLC Advance Capital Deputy General Director Executive Director – M&A Department 2010 2011 OJSC Svyazinvest Director 2011 2013 OJSC Bashinformsvyaz Member of the Board of Directors 2011 2013 OJSC NTK Member of the Board of Directors. Executive Director and M&A Department 2011 2013 OJSC Rostelecom Director, Member of the Management Board 2012 2013 CJSC SkyLink Member of the Board of Directors, 2012 2013 CJSC BaikalWestCom Member of the Board of Directors 2012 2013 CJSC Eniseytelecom Member of the Board of Directors 2012 2013 CJSC BIT Member of the Board of Directors 2012 2013 CJSC NSS Member of the Board of Directors 2012 2013 CJSC Volgograd-GSM Member of the Board of Directors 2012 2013 CJSC AKOS Member of the Board of Directors As on December 31, 2013 O. Senkov owned no interest in the Charter Capital of OJSC Rostelecom. In 2013 O. Senkov did not inform OJSC Rostelecom about making any transactions with the Company securities.

Victor Strelkov, Member of the Management Board until 18.02.2013 Born in 1968 in Moscow. In 1991 he graduated from Sergo Ordzhonikidze awarded with Order of Lenin Moscow Institute of Aerospace Technology specializing in applied mathematics. The following information about positions held by Mr. V. Strelkov over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2006 2007 LLC INTELOTEC GROUP General Director CJSC SITRONICS Telecom 2007 2009 Head of the Marketing Department Solutions

17 PRESIDENT AND MANAGEMENT BOARD

2009 2009 OJSC SITRONICS Chief Architect Adviser to General Director; Director of the Information Technologies Department, 2009 2013 OJSC Rostelecom Executive Director and IT Director, Member of the Management Board 2010 2013 CJSC Zebra Telecom Member of the Board of Directors 2011 2013 OJSC Svyazintek Member of the Board of Directors 2011 2013 OJSC AC Mobiltelecom Member of the Board of Directors 2010 2013 OJSC Rinet Member of the Board of Directors As on December 31, 2013 V. Strelkov owned no interest in the charter capital of OJSC Rostelecom. In 2013 V. Strelkov did not inform OJSC Rostelecom about making any transactions with the Company securities.

Larisa Tkachuk, Member of the Management Board since 01.08.2013 Ms. L. Tkachuk was born in 1976. In 1998 she graduated from The National Technical University of Ukraine, specializing in industrial marketing. The following information about positions held by Ms. L. Tkachuk over the past 5 years is available to OJSC Rostelecom: Period Organization Position Head of Marketing and Sales 2002 2012 OJSC MegaFon Department, Deputy General Director for Commercial Matters Senior Vice President and Commercial 2013 presently OJSC Rostelecom Director, Member of the Management Board 2013 presently CJSC GNC-Alfa Member of the Board of Directors, Member of the Board of Directors, 2013 presently CJSC MTs NTT Chairman of the Board of Directors 2013 presently LLC Rostelecom–Retail Systems Member of the Board of Directors 2013 presently OJSC Central Telegraph Member of the Board of Directors OJSC Prosveschenie Publishing 2013 presently Member of the Board of Directors House As on December 31, 2013 L. Tkachuk owned no interest in the charter capital of OJSC Rostelecom. In 2013 L. Tkachuk did not inform OJSC Rostelecom about making any transactions with the Company securities.

Maria Florentieva, Member of the Management Board since 01.08.2013 Born in 1969. In 1991 she graduated from Lomonosov Moscow State University, department of economics, and then in 2000 she received MBA from London Business School. The following information about positions held by Ms. M. Florentieva over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2008 2013 LLC April General Director 2013 2013 LLC MOBITEL Member of the Board of Directors Vice President, Member of the 2013 presently OJSC Rostelecom Management Board As on December 31, 2013 M. Florentieva owned no interest in the charter capital of OJSC Rostelecom. In 2013 M. Florentieva did not advise OJSC Rostelecom about making any transactions with the Company securities.

Roman Frolov, Member of the Management Board until 31.07.2013 Born in 1976. In 1997 he graduated from Plekhanov Russian Academy of Economics, where he specialized in Finance and Credit, and in 2000 he completed a Post-Graduate Program at this Academy

18 PRESIDENT AND MANAGEMENT BOARD

The following information about positions held by Mr. R. Frolov the past 5 years is available to OJSC Rostelecom: Period Organization Position Chief Accountant of OJSC Rostelecom, 2006 2014. OJSC Rostelecom Member of the Management Board As on December 31, 2013 R. Frolov owned no interest in the Charter Capital of OJSC Rostelecom. In 2013 R. Frolov did not inform OJSC Rostelecom about making any transactions with the Company securities.

Anton Khozyainov, Member of the Management Board until 31.07.2013 Born in Moscow in 1974. In 1997 he graduated from Moscow Institute of Electronics and Mathematics specializing in Applied Mathematics. The following information about positions held by Mr. A. Khozyainov over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2005 2008 LLC Marshall Capital Partners Financial Director 2009 2009 CJSC MTs NTT Adviser to General Director Deputy General Director – Financial Director, Vice President for Economics 2009 2013 OJSC Rostelecom and Finance, Senior Vice President, Member of the Management Board 2009 2010 CJSC Zebra Telecom Member of the Board of Directors 2009 2011 OJSC MMTS-9 Member of the Board of Directors 2009 2013 OJSC RTComm.RU Member of the Board of Directors 2009 2013 CJSC Globus-Telecom Member of the Board of Directors 2009 2011 CJSC GlobalTel Member of the Board of Directors 2009 2013 CJSC MTs NTT Member of the Board of Directors Malachite Recreation Facility 2010 2012 Member of the Board of Directors Subsidiary 2011 2011 OJSC NTK Member of the Board of Directors 2011 2013 CJSC Severen-Telecom Member of the Board of Directors 2011 2013 CJSC AKOS Member of the Board of Directors 2011 2013 CJSC NSS Member of the Board of Directors 2011 2013 CJSC BaikalWestCom Member of the Board of Directors 2011 2013 CJSC Eniseytelecom Member of the Board of Directors 2011 2013 CJSC Volgograd-GSM Member of the Board of Directors 2011 2012 CJSC Orenburg-GSM Member of the Board of Directors 2011 2013 OJSC RTS Member of the Board of Directors 2011 2011 CJSC Delta-Telecom Member of the Board of Directors 2011 2011 CJSC MCC Member of the Board of Directors 2012 2013 LLC Rostelecom–Retail Systems Member of the Board of Directors As on December 31, 2013 A. Khozyainov owned no interest in the Charter Capital of OJSC Rostelecom. In 2013 A. Khozyainov did not inform OJSC Rostelecom about making any transactions with the Company securities.

Alexander Tseytlin, Member of the Management Board since 01.08.2013 Born in 1958. In 1980 he graduated from Moscow Electro-technical Institute of Telecommunications, department of radio-communications and radiobroadcast. The following information about positions held by Mr. A. Tseytlin over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2008 2008 OJSC Comstar – United Deputy Department Director

19 PRESIDENT AND MANAGEMENT BOARD

Telesystems Deputy General Director for Technical 2008 2008 LLC Trivon Networks Matters First Deputy General Director – Technical 2008 2009 OJSC NTK Director 2009 2009 OJSC NKS Deputy General Director 2009 2011 OJSC Mostelecom General Director 2011 2012 OJSC NKS Adviser to General Director Senior Vice President for Network 2013 presently OJSC Rostelecom Operation, Member of the Management Board 2013 presently CJSC SkyLink Member of the Board of Directors 2013 presently CJSC Volgograd-GSM Member of the Board of Directors As on December 31, 2013 A. Tseytlin owned a 0.0000031% interest in the Charter Capital and 0.0000034% of ordinary shares of OJSC Rostelecom. In 2013 A. Tseytlin did not inform OJSC Rostelecom about making any transactions with the Company securities.

Andrey Cheglakov, Member of the Management Board since 01.08.2013 Born in 1966. В 1988 graduated from Lomonosov Moscow State University, specializing in mechanics. The following information about positions held by Mr. A. Cheglakov over the past 5 years is available to OJSC Rostelecom: Period Organization Position Deputy General Director, Adviser to 2003 2013 GOZNAK Association General Director Senior Vice President, Member of the 2013 presently OJSC Rostelecom Management Board Chairman of the Board of Directors, 2013 2013 OJSC RT-Labs Member of the Board of Directors As on December 31, 2013 A. Cheglakov owned no interest in the Charter Capital of OJSC Rostelecom. In 2013 A. Cheglakov did not inform OJSC Rostelecom about making any transactions with the Company securities.

No members of the Management Board of the Company have faced administrative charges for offences in the spheres of finance, taxes and levies, securities market, or criminal charges (no member of the Management Board of the Company has any previous conviction record) for crimes in the sphere of economics or for crimes against the state authority, and among the members of the Company’s Management Board there are no persons who held any positions in managing bodies of profit-making entities over the period when bankruptcy proceedings were initiated against, and/or any bankruptcy procedures were applied in respect of such entities pursuant to the Russian laws and regulations.

20 AUDIT COMMISSION

The Company Audit Commission

Svetlana Bocharova Born in 1970. She graduated from Lomonosov Moscow State University with qualification of a lawyer. She holds a Ph.D. degree in Law. The following information about positions held by Ms. S. Bocharova over the past 5 years is available to OJSC Rostelecom: Period Organization Position Deputy Chief Accountant (as of end of 2011). Head of Taxation Division, 2008 2013 OJSC Svyazinvest Department of Accounting, Tax Accounting and Statistics Accounting 2007 2009 OJSC North-West Telecom Chairperson of the Audit Commission 2008 2011 OJSC VolgaTelecom Member of the Audit Commission 2008 presently OJSC Rostelecom Member of the Audit Commission 2009 2010 OJSC North-West Telecom Member of the Audit Commission 2010 2011 OJSC North-West Telecom Chairperson of the Audit Commission 2011 2011 CJSC Severen-Telecom Member of the Audit Commission 2011 2012 OJSC Central Telegraph Member of the Audit Commission 2011 2012 CJSC Delta-Telecom Member of the Audit Commission 2012 2013 OJSC Giprosvyaz Member of the Audit Commission As on December 31, 2013 S. Bocharova owned no interest in the charter capital of OJSC Rostelecom. In 2013 S. Bocharova did not inform OJSC Rostelecom about making any transactions with the Company securities.

Valentina Veremyanina Born in 1966. В 1988 graduated from she graduated from Voronezh State University specializing in law. The following information about positions held by Ms. V. Veremyanina over the past 5 years is available to OJSC Rostelecom: Period Organization Position Executive Director – Director of Corporate Governance and Legal Support Department, Director Corporate 2006 2013 OJSC Svyazinvest Governance and Legal Support Department, Deputy Director of Corporate Governance and Legal Support Department 2010 2013 OJSC Svyazinvest Member of the Management Board 2008 2011 OJSC Uralsvyazinform Member of the Audit Commission 2007 2010 OJSC Dalsvyaz Member of the Audit Commission 2011 presently OJSC Giprosvyaz Member of the Board of Directors 2011 presently OJSC Central Telegraph Member of the Board of Directors 2011 2012 CJSC SkyLink Member of the Board of Directors OJSC Southern 2008 2011 Member of the Board of Directors Telecommunication Company 2010 2011 OJSC North-West Telecom Member of the Board of Directors 2009 2011 CJSC NSS Member of the Board of Directors 2009 2011 CJSC Eniseytelecom Member of the Board of Directors Adviser to, Member of the Audit 2011 presently OJSC Rostelecom Commission

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2011 presently OJSC ORK Member of the Board of Directors 2011 2011 CJSC MTs NTT Member of the Board of Directors 2011 2011 OJSC OK Orbita Member of the Board of Directors 2011 2011 CJSC RPK Svyazist Member of the Board of Directors 2012 2014 OJSC Chukotkasvyazinform Chairman of the Board of Directors 2013 presently OJSC Bashinformsvyaz Member of the Board of Directors 2011 presently OJSC Giprosvyaz Member of the Board of Directors 2011 presently OJSC Central Telegraph Member of the Board of Directors Deputy General Director for Legal Matters 2014 presently OJSC Severneftegasprom and Corporate Governance As on December 31, 2013 V. Veremyanina owned no interest in the charter capital of OJSC Rostelecom. In 2013 V. Veremyanina did not inform OJSC Rostelecom about making any transactions with the Company securities.

Vasiliy Garshin Born in 1980. In 2002 he graduated from Lomonosov Moscow State University, specializing in physics, and in 2002 he graduated from Russian School of Economics, master of economics. The following information about positions held by Mr. V. Garshin over the past 5 years is available to OJSC Rostelecom: Period Organization Position Head of Section for Integration of Subsidiary Banks, Strategic Planning and Modeling Division, Business Planning Office, Finance Department; Director of 2006 2012 OJSC Bank VTB Control Inspections in Subsidiaries and Dependent Entities, Office of Coordination of Internal Control Systems, Internal Control Department 2010 2012 OJSC Bank VTB (Azerbaijan) Chairman of Audit Committee 2010 2012 OJSC Bank VTB (Georgia) Member of Audit Committee CJSC VTB Capital Assets 2012 2012 Financial Inspector Management Closed Joint-Stock Company 2011 2012 Member of the Audit Commission Specialized Depositary Deputy Head of Innovative Corporate Federal Agency for State Property 2012 2012 Technologies and Industrial Complex Management Organizations Federal Agency for State Property 2012 presently Head of Internal Control Management 2013 presently OJSC Rostelecom Member of the Audit Commission 2013 presently OJSC Rosneftegaz Member of the Audit Commission OJSC United Ship-building 2013 presently Member of the Audit Commission Company 2013 presently OJSC Bread Bakery No1 Member of the Audit Commission 2013 presently OJSC Rosnano Member of the Audit Commission OJSC Production Association 2013 presently Member of the Audit Commission Kristall As on December 31, 2013 V. Garshin owned no interest in the charter capital of OJSC Rostelecom. In 2013 V. Garshin did not inform OJSC Rostelecom about making any transactions with the Company securities.

Bogdan Golubitsky Born in 1979. In 2000 he graduated from Moscow Technical University of Communications and Informatics specializing in economics and management of telecommunications companies with a qualification of an economist-manager

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The following information about positions held by Mr. B. Golubitsky over the past 5 years is available to OJSC Rostelecom: Period Organization Position Director of the Department of Economics and Finance (since late 2011), Executive Director - Director of the Department of 2008 2013 OJSC Svyazinvest Economic Planning and Budgeting, Director of the Department of Economic Planning and Budgeting 2008 2009 OJSC Central Telegraph Member of the Board of Directors 2008 2009 OJSC Dalsvyaz Member of the Board of Directors OJSC Southern 2008 2009 Chairperson of Audit Commission Telecommunication Company 2009 2009 OJSC Dalsvyaz Chairman of the Board of Directors 2009 2011 OJSC RTComm.RU Member of the Board of Directors 2009 2011 OJSC SibirTelecom Member of the Board of Directors 2009 presently OJSC Rostelecom Member of the Audit Commission 2010 2012 CJSC SkyLink Member of the Board of Directors 2010 2012 CJSC Urals Telephone Company Member of the Audit Commission 2010 2013 OJSC Svyazinvest Member of the Management Board 2011 presently OJSC Giprosvyaz Member of the Board of Directors 2011 2012 CJSC Zebra Telecom Member of the Board of Directors 2011 2012 CJSC Parma-Inform Member of the Board of Directors 2011 2011 CJSC BIT Member of the Board of Directors Non-Commercial Partnership 2011 2012 Member of the Management Board “Russian Telecom Club” Russian Telecommunications 2011 2012 Member of the Management Board History Foundation Not-for-Profit Partnership 2011 presently Chairman of the Partnership Board Telecomcenter 2012 presently OJSC Central Telegraph Member of the Board of Directors 2013 2014 OJSC Chukotkasvyazinform Member of the Board of Directors 2013 presently OJSC Rostelecom Adviser As on December 31, 2013 B. Golubitsky owned a 0.0025% interest in the Charter Capital and 0.0010% of ordinary shares of OJSC Rostelecom. In 2013 B. Golubitsky did not inform OJSC Rostelecom about making any transactions with the Company securities.

Olga Koroleva, Chairperson of the Audit Commission Born in 1950. In 1972 she graduated from Tomsk State University where she specialized in economy. She holds a Ph.D. in Economics. In 1985 she completed a post-graduate course at All-Union Extramural Financial and Economic Institute The following information about positions held by Ms. O. Koroleva over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2008 2011 OJSC VolgaTelecom Chairperson of Audit Commission 2008 2011 OJSC Dalsvyaz Chairperson of Audit Commission 2008 2013 OJSC Svyazinvest Chief Accountant 2008 2011 OJSC CenterTelecom Chairperson of Audit Commission 2008 2011 OJSC SibirTelecom Chairperson of Audit Commission 2008 2011 OJSC Uralsvyazinform Member of the Board of Directors Non-State Pension Fund Telecom- 2008 2013 Chairperson of Audit Commission Soyuz 2008 presently OJSC Rostelecom Chairperson of Audit Commission

23 AUDIT COMMISSION

2007 2009 OJSC North-West Telecom Member of the Board of Directors 2009 2009 OJSC North-West Telecom Chairperson of the Board of Directors 2009 2010 OJSC North-West Telecom Chairperson of Audit Commission 2011 presently OJSC Giprosvyaz Member of the Board of Directors 2011 presently OJSC Central Telegraph Chairperson of Audit Commission 2013 presently OJSC MMTS 9 Chairperson of Audit Commission 2013 2014 OJSC Chukotkasvyazinform Chairperson of Audit Commission 2013 2013 OJSC Ingushelectrosvyaz Member of the Board of Directors 2013 presently OJSC Bashinformsvyaz Member of the Audit Commission As on December 31, 2013 O. Koroleva owned a 0.0219% interest in the Charter Capital and 0.0239% of ordinary shares of OJSC Rostelecom. In 2013 O. Koroleva did not inform OJSC Rostelecom about making any transactions with the Company securities.

Vyacheslav Ulupov Born in 1952. In 1979 he graduated from Lomonosov Moscow State University, Economics Department, as an economist and teacher of political economics. The following information about positions held by Mr. V. Ulupov over the past 5 years is available to OJSC Rostelecom: Period Organization Position State Corporation “Bank for Development and Foreign Internal Control Director, 2007 presently Economic Affairs Vhesheconombank (Vnesheconombank)” 2010 presently OJSC Rostelecom Member of the Audit Commission As on December 31, 2013 V. Ulupov owned no interest in the charter capital of OJSC Rostelecom. In 2013 V. Ulupov did not inform OJSC Rostelecom about making any transactions with the Company securities.

Alexander Shevchuk Born in 1983. He graduated the Russian Government Academy of Finance. The following information about positions held by Mr. A. Shevchuk over the past 5 years is available to OJSC Rostelecom: Period Organization Position 2006 2011 OJSC Dalsvyaz Member of the Board of Directors 2007 2009 OJSC MRSK of Northern Caucasus Member of the Board of Directors 2007 2009 OJSC MRSK of Northern Caucasus Member of the Board of Directors 2009 2011 CJSC NSS Member of the Board of Directors 2010 2011 OJSC CenterTelecom Member of the Board of Directors OJSC Southern 2010 2011 Member of the Board of Directors Telecommunication Company 2010 2011 OJSC SibirTelecom Member of the Board of Directors 2011 2012 OJSC Volgogradgorgas Member of the Board of Directors 2011 2012 OJSC MRSK of Northern Caucasus Member of the Board of Directors 2011 2012 OJSC Urengoytruboprovodstroy Member of the Board of Directors Association for Investor Right 2008 presently Executive Director Protection 2011 presently OJSC MRSK South Member of the Board of Directors 2011 presently OJSC MRSK Center Member of the Board of Directors 2012 presently OJSC MOSTOTREST Member of the Board of Directors 2013 2014 OJSC UAZ Member of the Board of Directors 2013 presently ROSNANO Member of the Audit Commission 2013 presently OJSC Rostelecom Member of the Audit Commission

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As on December 31, 2013 A. Shevchuk owned no interest in the charter capital of OJSC Rostelecom. In 2013 A. Shevchuk did not inform OJSC Rostelecom about making any transactions with the Company securities.

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