CORPORATE GOVERNANCE

Governance System

5.3


5.3.5. Dividend Policy

In 2005, in the context of the electricity industry reform, OAO RAO "UES of Russia" ensured observance of the interests of shareholders of the Company, its SDCs with respect to dividend payments.

The Company pursues its dividend policy with respect to the Parent Company and its SDCs according to the Dividend Policy Principles approved by the Board of Directors of OAO RAO "UES of Russia".

In 2005, OAO RAO "UES of Russia" allocated a total of RUB2,757 million for payment of dividends to shareholders in respect of 2004, up RUB358 million on the amount of dividends paid for 2003. Of that amount, RUB1,294 million was paid to the state, and RUB1,463 to the minority shareholders of OAO RAO "UES of Russia". In 2004, the dividend payments to the Company’s shareholders totalled RUB2,399 million, of which RUB1,099 was paid to the state and RUB1,300 to the minority shareholders.

AMOUNT OF DIVIDENDS PAID BY OAO RAO "UES OF RUSSIA" (millions of RUB)
Dividends Paid in 2003 (for 2002) Paid in 2004 (for 2003) Paid in 2005 (for 2004)
Total 1,988 2,399 2,757
including:       
dividends on ordinary shares 1,383 1,925 2,294
dividends on preferred shares 605 474 463
 

On 25 March 2005, the Board of Directors of RAO "UES of Russia" approved the revised Dividend Policy Principl es for SDCs of RAO "UES of Russia". The Principles take into account certain regulatory changes, the requirement for the SDCs to pay interim dividends, and alignment of the dividend burden among the SDCs with and without preferred shares.

Simultaneously, the revised Principles for the companies engaged in the core business (regional energos, power plants, WGCs, TGCs, OAO "UES FGC", OAO "UES SO-CDA"), the Board of Directors of OAO RAO "UES of Russia" approved the dividend policy with regard to the repair and maintenance and energy retail energy subsidiaries. The policy uses the same methodology as that of the core business companies, but takes into account the peculiarities of their business.

For the purpose of securing the interests of shareholders and minimizing the financial burden on the unbundled energy companies during the first months of operation in 2005, OAO RAO "UES of Russia" continued to practice interim dividend payments. The Board of Directors of OAO RAO "UES of Russia" approved interim dividend payments in 2005 for those SDCs (WGCs, power plants, and RGCs) where dividend payments for 2005 could be affected due to the restructuring. The amount of interim dividends declared by the subsidiaries of OAO RAO "UES of Russia" in 2005, including the taxes, totalled RUB4,380 million, which includes of RUB2,697 million of dividends payable on the shares owned by OAO RAO "UES of Russia". The total dividends paid by the SDCs in 2005 (including the dividends payable for 2004) made RUB10,118 million.

AMOUNT OF DIVIDENDS DECLARED BY THE SDCS OF RAO "UES OF RUSSIA" (millions of RUB)
Dividends Paid in 2003
(for 2002)		 2004 2005
      Total for 2003 for 2004 * Total for 2004 for 2005 *
Total

6,019

 11,781 5,909 5,872 10,118 5,738 4,380
including:                
dividends paid to OAO RAO "UES of Russia"

3,600

 8,179 3,749 4,430 5,241 2,544 2,697
* interim dividends

RUB5,872 million of interim dividends were declared in 2004, which normally would have been declared at AGMs of the Holding Company’s SDCs and paid in 2005. Thus, the dividends declared by the SDCs of OAO RAO “UES of Russia" in 2005 doubled to RUB11,610 million compared to 2004.

 

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