The Revised Corporate Governance Code of OAO RAO "UES of
Russia" was approved by the Company's Board of Directors on 26 May 2006. The Company
monitors, on an ongoing basis, compliance with the provisions of the Corporate Governance
Code of RAO "UES of Russia".
| CORPORATE GOVERNANCE CODE
REGULATION |
COMPLIANCE |
COMMENTS |
| Corporate
governance principles and structure |
| Compliance with
the corporate governance principles. |
Yes |
The main corporate governance
principles are set out in the Corporate Governance Code. The Management Board of RAO
"UES of Russia" ensures compliance with these principles. Accountability. The
Board of Directors of the Company is accountable to all shareholders in accordance with
the applicable laws. Fairness. The Company's management bodies ensure protection of
shareholders' rights and legitimate interests. Transparency. The Company discloses
information about all material facts relating to its activities. Responsibility. The
Company recognizes the rights of all stakeholders under the applicable laws. |
| The Company
should have internal regulations governing activities of its management and control bodies
and their compliance with the applicable laws. |
Yes |
OAO RAO "UES of Russia"
has approved the following bylaws: Charter, Regulation on the General Shareholders'
Meeting, Regulation on the Board of Directors; Regulation on Remuneration of Members of
the Board of Directors for the Performance of their Duties and Reimbursement of their
Expenses Relating to the Performance of their Functions as Board Members; Regulation on
the Activities of the Auditing Commission; Regulation on Remuneration of Members of the
Auditing Commission for the Performance of their Duties and Reimbursement of their
Expenses Relating to Visits to the Company's Facilities; Regulation on the Management
Board. All these documents are in compliance with the Russian statutory provisions. The
most recent amendments to the Company's regulations were approved by the shareholders at
the AGM of RAO "UES of Russia" held on 28 June 2006. |
| The regulations
governing the activities of the Company's management and control bodies should be
available on the corporate website. |
Yes |
The following bylaws and
regulations governing the activities of the Company's management and control bodies may be
viewed on the corporate website of RAO "UES of Russia": Charter; Regulation on
the General Shareholders' Meeting; Regulation on the Board of Directors; Regulation on
Remuneration of Members of the Board of Directors for the Performance of their Duties and
Reimbursement of their Expenses Relating to the Performance of their Functions as Board
Members; Regulation on the Activities of the Auditing Commission; Regulation on
Remuneration of Members of the Auditing Commission for the Performance of their Duties and
Reimbursement of their Expenses Relating to Visits to the Company's Facilities; Regulation
on the Management Board of. |
| Company's
Corporate Governance Practices |
| BOARD OF
DIRECTORS |
| The Company
should comply with the procedure for electing and dismissing Board members. |
Yes |
The procedure for election of the
Board of Directors of OAO RAO "UES of Russia" is set out in Section 11.2 of the
Company Charter and Section 1.3 of the Regulation on the Board of Directors. The current
Board members were elected by cumulative voting at the AGM held 28 June 2006. The Board of
Directors has 15 members, two of which are simultaneously members of the Company's
Management Board. The Chairman of the Board of Directors was unanimously elected at the
Board meeting of 28 July 2006 (Board Minutes No. 225). |
| The Company
Charter should contain a provision that Board members may be elected only by cumulative
voting. |
Yes |
As provided by Section 11.2 of
the Company Charter, members of the Board of Directors of OAO RAO "UES of
Russia" are elected by cumulative voting at a general shareholder meeting. |
| There should be
no restrictions as to the number of times a person may be elected a Board member. |
Yes |
As provided by Section 11.2 of
the Company Charter, persons elected members of the Board of Directors of OAO RAO
"UES of Russia" may be re-elected an unlimited number of times. |
| The Board of
Directors of the Company should have at least three independent directors. |
Yes |
Pursuant to the shareholder
resolution adopted by the AGM of RAO "UES of Russia" on 28 June 2006, the
following directors qualifying as independent were elected to the Board of Directors of
the Company: Beryozkin, G. V.; Bugrov, A. E.; Seleznyov, K. G.; and Seppo Remes. |
| The Board of
Directors of the Company should have no more than 25 percent of executive directors that
are simultaneously employees of the Company. |
Yes |
Out of the 15 Board members, two
are Company employees (Chairman of the Company's Management Board Anatoly Chubais and
Deputy Chairman of the Management Board Yakov Urinson), which makes less than 25 percent. |
| The Company
should comply with the principle that the Company's chief executive may not hold the
position of the Board Chairman. |
Yes |
The Company's chief executive
(Chairman of the Management Board) is Anatoly Chubais. The Board meeting held 28 July 2006
(Board Minutes No. 225) elected Alexander Voloshin as Chairman of the Board of Directors. |
| The Company's
Board of Directors should have the following Committees: Audit Committee, HR and
Remunerations Committee, Strategy and Reform Committee, and Appraisal Committee. |
Yes |
The Company has the following
committees under the Board of Directors: Audit Committee, HR and Remunerations Committee,
Strategy and Reform Committee, and Appraisal Committee. The Committees' activities are
governed by the approved regulations. |
| The Audit
Committee and HR and Remunerations Committee should be headed by independent directors. |
Yes |
The Board meeting held 28 July
2006 elected Seppo Remes as Chairman of the Audit Committee. Mr. Remes is a member of the
Company's Board of Directors meeting the independence requirements. The Board meeting held
28 July 2006 elected A.E. Bugrov as Chairman of the HR and Remunerations Committee. Mr.
Bugrov is a member of the Company's Board of Directors meeting the independence
requirements. |
| The Company
should have an approved schedule for holding Board meetings. |
Yes |
On 28 July 2006, the Board of
Directors of RAO "UES of Russia" approved the tentative list of matters to be
considered at the Board meetings in July 2006 to June 2007. Also, the Company's Board of
Directors approves Board meeting schedules for each quarter. |
| The Board of
Directors of the Company should hold its meetings no less frequently than once a quarter. |
Yes |
As provided by Section 7.2 of the
Regulation on the Board of Directors of RAO "UES of Russia", Board meetings are
held as needed, but no less frequently than once a quarter. In the second half of 2006,
the Board of Directors held 15 meetings (Board Minutes No. 225-239). |
| The Company's
internal regulations should set out the procedure for holding meetings of the Board of
Directors of the Company. |
Yes |
The rules of procedure for the
preparation for and holding of Board meetings are set out in the Regulation on the Board
of Directors of RAO "UES of Russia" approved by the general shareholders'
meeting on 28 June 2002 (as amended). |
| Information on
the amounts of remuneration paid to the members of the Company's Board of Directors is
available to the general public on the corporate website. |
Yes |
The provisions concerning payment
of remuneration to the Board members is set out in the Regulation on Remuneration of
Members of the Board of Directors for the Performance of their Duties and Reimbursement of
their Expenses Relating to the Performance of their Functions as Board Members approved on
26 June 2002 (as amended), which may be viewed on the corporate website. |
| No loans should
be provided to Board members. |
Yes |
During the reporting period, no
loans were provided to the members of the Board of Directors of the Company. |
| The Board
members should comply with their responsibilities set out in the Company's regulatory
documents. |
Yes |
The members of the Board of
Directors of RAO "UES of Russia" are in compliance with their obligations
provided by Section 3 of the Regulation on the Board of Directors of the Company. |
| MANAGEMENT
BOARD AND CHAIRMAN OF THE MANAGEMENT BOARD |
| Compliance with
the procedure for election of the Chairman and members of the Management Board. |
Yes |
As provided by Section 11 of the
Company Charter and Section 2 of the Regulation on the Management Board of RAO "UES
of Russia", Management Board members are nominated by the Management Board Chairman
and appointed by the Board of Directors. During the reporting period, the Board of
Directors of the Company approved the appointment of Victor Pauli as Management Board
member on the nomination of the Management Board Chairman (Board minutes No. 237, dated 8
December 2006). The procedure for the appointment of Victor Pauli was complied with. |
| The rules of
procedure for the activities of the Management Board of the Company should be complied
with. |
Yes |
Pursuant to Section 5 of the
Regulation on the Management Board of RAO "UES of Russia", meetings of the
Management Board are held according to the plan approved by the Management Board Chairman.
|
| The Company
should have in place a system of remuneration of the Management Board approved by the
Board of Directors. |
Yes |
The system for incentivizing
(remunerating) members of the Management Board was approved by the Board of Directors of
RAO "UES of Russia" (Board Minutes No. 172, dated 25 June 2004, as amended). |
| Members of the
Management Board have an obligation to avoid any actions that present a potential or
actual conflict between their interest and the interests of the Company; if such conflict
occurs, it should be disclosed to the Board of Directors of the Company. |
Yes |
There were no violations during
the second half of 2006. |
| The members of
the Management Board should disclose to the Company any information regarding their
business activities not related to the Company's interests. |
Yes |
There were no violations during
the second half of 2006. |
| INTERACTION BETWEEN THE
BOARD OF DIRECTORS AND THE EXECUTIVE BODIES |
| The Management
Board should report on its activities to the Board of Directors of the Company. |
Yes |
During H2 2006, two quarterly
reports on the activities of the Management Board of the Company were submitted to the
Board of Directors, in Q2 and Q3 2006 (Board Minutes No. 225 of 28 August 2006 and No. 234
of 27 October 2006, respectively). |
| Company
Shareholders |
| SHAREHOLDER
RIGHTS, PROTECTION OF SHAREHOLDER RIGHTS |
| Observance of
the shareholders' right to receive timely information. |
Yes |
The Company provides information
to shareholders in the manner and within the time frame required by the Russian laws,
Charter and Regulation on the Information Policy of RAO "UES of Russia". |
| The Company
should comply with the information disclosure requirements, including through the
Internet. |
Yes |
The Company discloses information
in the manner and within the time frame required by the Russian securities laws, including
publication on the website of RAO "UES of Russia". |
| GENERAL
MEETING OF SHAREHOLDERS |
| Shareholders
should receive notice of the General Shareholder Meeting of the Company. |
Yes |
The procedure for notifying
shareholders of a General Shareholder Meeting of RAO "UES of Russia" is set
forth in Section 10.5 of the Company Charter. In H2 2006, the Company held an
Extraordinary General Meeting of shareholders. The notice of the EGM held on 6 December
2006 was published on 26 September 2006 in the Izvestia newspaper and posted on the
website of RAO "UES of Russia". |
| The procedure
for making modifications to the agenda items of a General Shareholder Meeting should be
complied with. |
Yes |
The procedure for making
modifications to the agenda items of a General Shareholder Meeting of RAO "UES of
Russia" is set forth in Section 10.6 of the Company Charter. The Company received no
motions from its shareholders to modify the agenda items. |
| The Company
shareholders should be given a possibility to review the list of persons entitled to
participate in the General Shareholder Meeting of the Company, beginning on the date of
notice of the General Shareholder Meeting and until the meeting is closed (in case of a
physical meeting), or until the closing date for receipt of ballots (where the voting is
conducted without a physical meeting). |
Yes |
Pursuant to Section 10.4. of the
Company Charter, the Company makes the list of persons entitled to participate in the
General Shareholder Meeting available for review upon request of such persons, provided
that they are entitled to at least 1 percent of votes. However, the document and mailing
address details of the individuals included on the list may not be provided without their
consent. |
| The Company
shareholders should have a possibility to review the documents relating to the General
Shareholder Meeting through electronic communications media, including the Internet. |
Yes |
As provided by Article 52 of the
Law On Joint Stock Companies, shareholders of RAO "UES of Russia" will
have 20 days before the General Shareholder Meeting, or 30 days, if the Meeting agenda
includes a proposal to reorganize the Company, to review the documents relating to the
General Meeting of Shareholders through the Internet. RAO UES Order No. 29 of 23 January
2007 sets out the procedure for the publication of such information on the corporate
website. The documents relating to the Extraordinary General Meeting of shareholders were
published on the Company website in the Section "Shareholder and Investor
Relations". |
| The General
Shareholder Meeting must be attended by the then current members of the Board of
Directors, the Management Board, members of the executive bodies, the Auditing Commission,
and the Company Auditors. |
Yes |
The Extraordinary General Meeting
of RAO "UES of Russia" of 6 December 2006 was held by postal vote (without a
physical meeting), which means that the directors, officers and auditors were not expected
to attend. |
| DIVIDEND POLICY |
| The Company
should have an approved Regulation on the Dividend Policy. |
Yes |
The current methodology used by
RAO "UES of Russia" in the calculation of dividends was approved by the Board of
Directors on 28 January 2005 (Board Minutes No. 186). |
| The Company
should comply with the procedure and time frame for dividend payment. |
Yes |
Under Section 8.1. of the Charter
of RAO "UES of Russia", the Company may, once a year, decide on the dividend
payment. The dividends are paid out of the Company's net income for the current year. The
Company shareholders decide on payment of the annual dividends and the dividend amount to
be paid on different classes of shares at the General Meeting as recommended by the Board
of Directors. The AGM of RAO "UES of Russia" held on 28 June 2006 approved the
dividend payment amounts and set 1 December 2006 as the dividend payment deadline. The
Company paid the dividends to its shareholders by that deadline. |
| Information Disclosure and
Transparency |
| INFORMATION
DISCLOSURE POLICIES AND PRACTICES |
| The Company
should have an approved Regulation on the Information Policy. |
Yes |
On 23 June 2006, the Board of
Directors of RAO "UES of Russia" approved the Restated Regulation on Information
Policy of the Company (Board Minutes No. 224). |
| Information
disclosure on the corporate website |
Yes |
The Company updates its website
on a daily basis. Managers of RAO "UES of Russia" ensure information disclosure
pursuant to the Regulation on Information Policy and Order On implementing a new
structure of the corporate website and ensuring regular disclosure of information on the
activities of OAO RAO "UES of Russia" on its website. |
| Information
disclosure in Annual and Quarterly reports. |
Yes |
Pursuant to the Regulation on
Information Policy, RAO "UES of Russia" regularly discloses information on the
Company's activities in its annual and quarterly reports. Order No. 739 of 23 October 2006
currently in effect governs the procedure for making available the information which is
needed for the issuer's quarterly report. During the reporting period, the Company issued
quarterly issuer reports for Q2 and Q3 2006. The reports are published on the corporate
website of RAO "UES of Russia" in the Shareholder and Investor Relations
section. |
| Availability of
an English website. |
Yes |
The website of RAO "UES of
Russia" has an English version. |
| Availability of
a document approved by the Board of Directors of the Company which regulates the use of
the insider information (i.e. material information about the Company's activities, its
shares and other securities, and securities transactions which is not publicly available
and may have a material effect on the market value of the Company's shares and other
securities). |
Yes |
At its meeting held 27 May 2005,
the Board of Directors approved the Procedure for the declaration of insider deals in
securities of OAO RAO "UES of Russia" and its SDCs by the persons with access to
insider information (Board Minutes No. 196). |
| FINANCIAL
STATEMENTS |
| The Company
should maintain accounting records and prepare statutory financial statements (accounts)
in accordance with the Russian Accounting Standards. |
Yes |
The Company prepares statutory
financial statements in accordance with the Russian Accounting Standards on a quarterly
basis. |
| The Company
should release its financial statements (accounts) in accordance with the IFRS. |
Yes |
The Consolidated Interim
Financial Statements of RAO UES Group for the six months ended 30 June 2006 were signed
and released on 5 December 2006. The Consolidated Financial Statements of RAO UES Group
for the first nine months of 2006 and for 2006 are under preparation as of the time this
Annual Report is being prepared. |
| CONTROL OF
BUSINESS ACTIVITIES |
| The Company
should have an internal control policy approved by the Board of Directors setting out the
internal control framework for the Company activities. |
Yes |
The Regulation on Internal
Control Procedures of RAO "UES of Russia" was approved by the Board of Directors
on 16 March 2006 (Board Minutes No. 217). |
| The Company
should have a dedicated internal control department to oversee compliance with the
Regulation on Internal Control. |
Yes |
The Company has dedicated
departments in charge of the internal control compliance. |
| The Company
should have an internal regulation approved by the shareholders which sets out the
policies for the review of the Company's activities by the Auditing Commission. |
Yes |
The Regulation in the Activities
of the Auditing Board of RAO "UES of Russia" was approved by the AGM held on 22
June 2002. |
| The Company
should ensure compliance with the regulation setting out the policies for the review of
the Company's activities by the Auditing Commission. |
Yes |
The Regulation on the Activities
of the Auditing Commission of the Company is being complied with. |
| The Auditor's
Report should be reviewed by the Audit Committee of the Company before the report is
submitted for approval by the Company shareholders. |
Yes |
The Audit Committee under the
Board of Directors of the Company will review the Company's financial statements
(accounts) for 2006 and prepare its opinion of the Auditor's report on these statements
prior to submitting its opinion to the General Shareholder Meeting scheduled for 27 June
2007. |
| OWNERSHIP
STRUCTURE |
| The Company
should disclose information on the beneficial owners holding 5 or more percent of its
voting shares. |
Yes |
Pursuant to the Regulation on
Information Policy, the Company endeavours to disclose information on the beneficial
owners of 5 or more percent of its voting shares based on the information provided by the
registered holders of the 5 or more percent of the Company's voting shares. |
| Company
Restructuring and Relationships with its Subsidiaries and Dependent Companies |
| COMPANY
RESTRUCTURING |
| The Company
should have an approved reorganization concept statement. |
Yes |
The principal document setting
out, at the corporate level, the objectives and goals of the electricity industry reform
and the concept for the Company reorganization is the Strategy Concept of RAO "UES
of Russia" for Years 2003-2008 "5+5", which was adopted by the Board of
Directors on 29 May 2003. On 3 February 2006, the Board of Directors of RAO "UES of
Russia" unanimously approved the Supplement "Territorial Generation Companies
to be Established on the Basis of the Assets of RAO UES Holding Company" to the
Company's Strategy Concept for Years 2003-2008, and on 26 February 2006, the Supplement
"Wholesale Companies of the Electricity Market". |
| The Company
should ensure observance of the rights of the Company's shareholders in the reorganization
process. |
Yes |
In order to safeguard the rights
and interests of the Company shareholders, shares of the new companies created in the
process of the Company's reorganization are distributed to its shareholders pro rata to
their holdings in compliance with the applicable Russian laws and regulations. The Company
shareholders who do not take part in the voting or vote against the reorganization are
entitled to require the Company to purchase all or part of their shares, which provides an
additional safeguard of shareholders' rights in the course of the Company's
reorganization. Such shares are to be purchased at a price determined by the Board of
Directors of RAO "UES of Russia" with the involvement of an independent
appraiser. The procedure for such share repurchase is established by the Federal Law On
Joint Stock Companies and is set out in the notice of the General Shareholder Meeting
of the Company circulated to the shareholders. |
| PRINCIPLES
AND PRACTICES OF RELATIONSHIPS WITH THE SUBSIDIARIES AND DEPENDENT COMPANIES |
| The Company
should have approved Rules for the interaction with the Subsidiaries and Dependent
Companies. |
Yes |
The Board of Directors approved
the Restated Procedure for Interaction with Business Companies Whose Shares (Ownership
Interests) are Held by RAO "UES of Russia" on 21 April 2006 (Board Minutes
No. 220). |
| *
H2 2006 |
