Open joint-stock company territorial generating company no. 9 (стр. 4 )

At the present moment, the loyalty of the consumers accounting for no less then 10 percent of the total proceeds from the sales of the Company’s heat and electric energy is high due to significant costs that the consumer may incur when shifting to power supply from a competitor generating company or to own sources.

Therefore, the Company considers insignificant the risk of possible loss of consumers accounting for no less then 10 percent of the total proceeds of the Company and believes that the issue of possible shift by consumers to alternative or own sources should not materially affect the Company’s activities.

The Company is exposed to the risk of inability to independently raise loan funds.

As the Company carries out its operating activities only since December 9, 2004, insufficient credit history may have a negative impact on the ability to raise loan funds. However, the Company fully complies with the current obligations to credit institutions.

Therefore, the Company considers the risk of inability to raise loan funds insignificant and believes that the possible issue of raising loan funds should not materially affect the Company’s activities.

3. CORPORATE GOVERNANCE

3.1. Principles and Documents

Corporate governance is understood by the Company as a complex of processes providing its activity management and governance and including relationships between shareholders, Board of Directors and executive bodies of the Company for the benefit of shareholders. The Company considers corporate governance as a tool for effectiveness improvement, the Company profile raising and reduction of cost of capital by the Company.

The corporate governance of the Company is based on the following principles:

Accountability. The Corporate Governance Code accepted by the Company provides for accountability of the Board of Directors of the Company to all the shareholders in accordance with the applicable law and serves as a guidance for the Board of Directors while developing the policy, managing and supervising the Company’s executive bodies activity.

Justice. The Company undertakes to protect the rights of shareholders and to provide an equal attitude to all shareholders. The Board of Directors provides all shareholders with efficient protection in case of their rights violation.

Transparency. The Company provides a prompt disclosure of true information concerning all material facts of its activity, including its financial status, social and environmental performance, results of operations, ownership and management structure of the Company, as well as a free access to such information of all parties concerned.

Responsibility. The Company acknowledges the rights of all parties concerned stipulated by the applicable law, and aims at collaboration with such parties for the purpose of its development and financial stability provision.

Specific structures, procedures and practice of the corporate governance are regulated by the Articles of Association and internal regulations of the Company, including:

Regulations on Procedure of Preparation and Holding the General Meeting of Shareholders;

Regulations on Procedure of Convening and Holding the Meetings of the Board of Directors;

Regulations on Committees of the Board of Directors;

Regulations on Audit Commission;

Corporate Governance Code;

Regulations on Insider Information;

Regulations on Communications Policy;

Regulations on Dividend Policy;

Corporate Governance Policy;

Financial Policy.

The Company’s internal regulations mentioned above are developed in accordance with the legislation taking into consideration basic regulations of the Corporate Code of Conduct recommended to be applied by the Federal Commission for the Securities Market (FCSM Order No 421/р dated April 4, 2002). All documents mentioned above can be viewed on the Company’s web-site: http://www. *****

3.2. Management and Supervisory Bodies

The Company’s management bodies according to the Articles of Association are:

- General Meeting of Shareholders;

- Board of Directors;

- General Director.

General Meeting of Shareholders

General Meeting of Shareholders is the supreme management body of the Company through which the shareholders exercise their right to participate in the Company management at least annually and to obtain regular and prompt information on the Company’s activities within the scope and procedure corresponding to the legal requirements.

On June 31, 2011 the Annual General Meeting of Shareholders of OJSC TGC-9 took place, where:

The Annual Report and annual financial statements, including the Profit And Loss Statement of the Company for 2010 were approved.

The profit (loss) distribution of the Company for 2010 fiscal year was approved.

The shareholders of Open Joint-Stock Company TGC-9 resolved not to pay dividends on ordinary shares of the Company upon the results of 2010.

A new Board of Directors of 13 persons and new Audit Commission of 5 persons were elected.

Closed Joint-Stock Company KPMG was approved as the Company’s Auditor.

The revised version of the Company’s Articles of Association was approved.

It was resolved that Open Joint-Stock Company TGC-9 may issue fifty trillion ninety-four billion seven hundred fourteen million eight hundred thirteen thousand two hundred and twenty (50,094,714,813,220) ordinary registered uncertified shares with par value of three thousandth (0.003) RUB each for the total amount of one hundred fifty billion two hundred eighty-four million one hundred forty-four thousand four hundred and thirty-nine RUB and 66 kopecks (RUB150,284,144,439.66) in addition to previously issued ordinary registered uncertified shares of Open Joint-Stock Company TGC-9.

It was resolved to raise the authorized capital of Open Joint-Stock Company TGC-9 by way of public subscription to additional ordinary registered uncertified shares of Open Joint-Stock Company TGC-9 amounting to fifty trillion ninety-four billion seven hundred fourteen million eight hundred thirteen thousand two hundred and twenty (50,094,714,813,220) shares with par value of three thousandth (0.003) RUB each for the total amount of one hundred fifty billion two hundred eighty-four million one hundred forty-four thousand four hundred and thirty-nine RUB and 66 kopecks (RUB150,284,144,439.66).

Regulation on Remuneration and Compensation of Members of the Board of Directors of Open Joint-Stock Company TGC-9 was approved.

Board of Directors

The Board of Directors influences results of operations of the Company through general strategic management and supervision of the executive bodies activity for the benefit of the Company and its shareholders.

Powers of the Board of Directors are governed by the Company’s Articles of Association in accordance with the applicable law and guidelines of the FCSM Code.

The items related to the competence of the Board of Directors of the Company may not be referred to the General Director.

The quantitative representation of the Board of Directors (13 persons) is predetermined by the Company’s Articles of Association.

Members of the Board of Directors of Open Joint-Stock Company TGC-9 till June 29, 2011 elected by the Annual General Meeting of Shareholders on June 30, 2010 (Minutes No. 17 dated July 5, 2010)[1] are:

1	Pavel Petrovich Shchedrovitsky (Chairman)	Vice President for Human Resources Management and Organization Development of CJSC IES
2	Natalya Valentinovna Bondal	Head of Financial Department of CJSC IES
3	Andrey Nikolaevich Bondarenkov	First Deputy Head of the Economic Security Department of CJSC IES
4	Aleksey Valerievich Zakrevsky	Vice President for Financial Supervision of CJSC IES
5	Arkady Borisovich Kats	Chairman of the Committee on Energy Efficiency and Energy Saving of the Board of Directors of OJSC TGC-9
6	Lev Aleksandrovich Ketkin	Deputy Director of Legal Matters of OJSC SO UES
7	Vladimir Antonovich Molchanov	General Director LLC Urals Metallurgical Company
8	Yulia Gennadievna Ponomaryova	Head of Division of Internal Accounting and Reporting of LLC Renova Active
9	Gerald Joseph Rohan	CEO of RGC, International Business Advisor
10	Natalya Aleksandrovna Ruban	Head of Liquidity Monitoring Department of CJSC IES
11	Maksim Yurievich Surnin	Vice President for Heat Power Business of CJSC IES
12	Vladimir Ilyich Khvostov	Deputy General Director of LLC Renova Active
13	German Feliksovich Tsargasov	Head of Department for Interaction with State Authorities of CJSC IES

On June 29, 2011 during the Annual General Meeting of Shareholders the following members of the Board of Directors were elected (Minutes No. 19 dated July 1, 2011)[2]:

Yakov Savelievich Tesis

(Chairman)

Title: Deputy General Director for Corporate Governance of CJSC IES

Year of Birth: 1974

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

Mikhail Viktorovich Azovtsev

Title: Head of M&A Department of CJSC IES

Year of Birth: 1978

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

Elena Vassilievna Alferova

Title: Deputy General Director for Accounting and Reporting of LLC UFS

Year of Birth: 1971

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

Vyacheslav Valerievich Baitekov

Title: Director of Investment Projects of CJSC IES

Year of Birth: 1969

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

Natalya Valentinovna Bondal

Title: Head of Financial Department of CJSC IES

Year of Birth: 1975

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

Arkady Borisovich Kats

Year of Birth: 1968

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

Yevgeny Permankulyyevich Klychev

Title: Deputy Head of Department for Interaction with State Authorities of CJSC IES

Year of Birth: 1974

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

Vladimir Antonovich Molchanov

Title: General Director of Research and Production Company LLC Urals Metallurgical Company

Year of Birth: 1946

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

Andrey Petrovich Primak

Title: Chief Specialist of the Corporate Property Office of Corporate Property Departments, Legal Director Block of Renova Management AG (Switzerland) in the RF

Year of Birth: 1980

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

Valery Pavlovich Romanov

Title: Director for Economic Security and Operations of CJSC IES

Year of Birth: 1959

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

Gerald Joseph Rohan

Title: President of Rohan Global Consulting

Year of Birth: 1942

Education: BA, IONA College, MBA, IONA College NewYork Certificate in Strategy, Kennedy College, Switzerland

Does not hold a stake in the authorized capital/ordinary shares of the Company

Mikhail Yevgenievich Kharitonov

Title: Head of Asset Accounting and Procurement of Corporate Activities of CJSC IES

Year of Birth: 1976

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

Vladimir Ilyich Khvostov

Title: Deputy General Director, Controller of LLC Renova Active

Year of Birth: 1965

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

In 2010 remuneration of members of the Board of the Company Directors amounted to RUB1,270,000.

Committees of the Board of Directors

During 2010 the following Committees of the Board of Directors were operating, elected:

- by Resolution of the Board of Directors dated August 2, 2010 (Minutes No. 2(169) dated August 4, 2010) new Committees of the Board of directors were elected:

Audit Committee:

Chairman Vladimir Antonovich Molchanov	General Director of LLC Research and Production Company Urals Metallurgical Company
Aleksey Valerievich Zakrevsky	Senior Vice President for Economy and Finance of CJSC IES
Yulia Gennadievna Ponomaryova	Head of Division of Internal Accounting and Reporting of LLC Renova Active
Gerald Joseph Rohan	CEO of RGC, International Business Advisor

Priority Investment Projects Committee:

Chairman Vyacheslav Valerievich Baitekov	Vice President, Head of Facilities Development Department of CJSC IES
Andrey Mikhailovich Vachegin	Head of Projects Administration Department of CJSC IES
Dmitry Aleksandrovich Ivanov	Director of Technological Development Dispatching Department of the Branch of OJSC SO UES, Urals Interregional Dispatching Office

Committee on Energy Efficiency and Energy Saving:

Chairman Arkady Borisovich Kats	Member of the Board of Directors of OJSC TGC-9
Sergey Evgenievich Emelchenkov	Executive Vice President – Head of Retail Division of CJSC IES
Roman Valentinovich Nizhankovsky	Executive Vice President – Head of Generation Urals Division of CJSC IES

and it was resolved not to organize the Committee on Budgets and Finances; Committee on Strategy, Development, Capital Investments and Restructuring; Committee on Management Systems Improvement, Human Resources and Remuneration of the Company’s Board of Directors.

- by Resolution of the Board of Directors dated July 21, 2011(Minutes No. 25(192) dated July 21, 2011) the Audit Committee of the Board of Directors was formed:

Audit Committee:

Chairman Gerald Joseph Rohan	President of Rohan Global Consulting
Vladimir Antonovich Molchanov	General Director of Research and Production Company LLC Urals Metallurgical Company
Natalya Valentinovna Bondal	Head of Financial Department of CJSC IES
Elena Vassilievna Alferova	Deputy General Director for Accounting and Reporting of LLC UFS
Andrey Petrovich Primak	Chief Specialist of the Corporate Property Office of Corporate Property Departments, Legal Director Block of Renova Management AG (Switzerland) in the RF

Other Committees were not formed.

Executive Bodies of the Company

Powers of the Sole Executive Body of the Company were transferred to the management organization:

Full Company name: Closed Joint-Stock Company Integrated Energy Systems

Abbreviated Company name: CJSC IES

Powers are delegated under: Contract on transfer of powers of the sole executive body of Joint-Stock Company to the management organization and provision of management services No. 1360/2009 dated June 30, 2009

Location: Bldg 3 LLC Vega-Line Complex, 26th km of Baltiya Highway, Krasnogorsk District, Moscow Region, Russia, 143421.

INN:

OGRN:

Telephone: (4

Fax: (4

E-mail: *****@***com

Sole executive body of the management organization is the General Director of CJSC IES:

Evgeny Nikolaevich Olkhovik

Title: General Director of CJSC IES

Year of birth: 1955

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

During 2010 no transactions with shares of OJSC TGC-9 were performed between the Company and Sole Executive Body (Management Organization).

In accordance with the Contract on transfer of powers of Sole Executive Body of Joint-Stock Company to the management organization and provision of management services, the amount of remuneration paid to the management organization in 2011 was RUB912,838,000, including VAT 18%.

Audit Commission of the Company

Audit Commission of the Company is a permanent internal control body of the Company exercising regular supervision over the financial activities and operations of the Company, its separate subdivisions, officers of the Company’s management bodies and structural subdivisions of the Company’s executive body in accordance with the laws of the Russian Federation, the Company’s Articles of Association and internal regulations of the Company, and with respect to an independent evaluation of the information concerning the Company’s financial status.

Members of the Audit Commission of OJSC TGC-9 till June 29, 2011 elected at the Annual General Meeting of Shareholders on June 30, 2010 (Minutes No 18 dated July 5, 2010)[3]:

1	Aleksandr Yurievich Budanov	Deputy Head of the Internal Audit Department of CJSC IES
2	Vladimir Borisovich Vakhmistrov	Chief Specialist of the Audit Division of the Internal Audit Department of CJSC IES
3	Maksim Nikolaevich Danilov	Head of the Internal Audit Department of CJSC IES
4	Irina Ivanovna Kashpitar	Head of the Audit and Supervision Division of the Internal Audit Department of CJSC IES
5	Vladimir Aleksandrovich Yudin	Head of the Internal Audit Department of the Perm Branch of OJSC TGC-9

On June 29, 2011 The Annual General Meeting of Shareholders elected the following members of the Audit Commission (Minutes No. 19 dated July 1, 2011)[4]:

Aleksandr Yurievich Budanov

Title: Deputy Head of the Internal Audit Department of CJSC IES

Year of birth: 1977

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

Vladimir Borisovich Vakhmistrov

Title: Chief Specialist of the Audit Division of the Internal Audit Department of CJSC IES

Year of birth: 1969

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

Maksim Nikolaevich Danilov

Title: Head of the Internal Audit Department of CJSC IES

Year of birth: 1977

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

Aleksandr Lvovich Matyushov

Title: Manager of the Internal Audit Department of CJSC IES

Year of Birth: 1964

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

Vladimir Aleksandrovich Yudin

Title: Head of the Internal Audit Department of the Perm Branch of OJSC TGC-9

Year of birth: 1966

Education: higher professional

Does not hold a stake in the authorized capital/ordinary shares of the Company

In 2011 the remuneration to the members of the Company Audit Commission was not paid.

Under the Resolution of the Annual General Meeting of Shareholders of OJSC TGC-9 dated June 30, 2009 (Minutes No. 17 dated July 10, 2009) Regulation on Remuneration and Compensation Payment to the Audit Commission members of OJSC TGC-9 was declared void.

Information on Observation of the Corporate Conduct Code Recommended by the FSCM RF

The information concerning observation of the Corporate Conduct Code is provided as Attachment 5 to the Annual Report.

Information on Major Transactions and Related Party Transactions

Information on major transactions performed by the Company in 2011.

No major transactions in accordance with the Federal Law On Joint-Stock Companies were performed by OJSC TGC-9 in 2011.

General Information on Related Party Transactions Performed by the Company in 2011.

Description	Total number	Total monetary amount (RUB)
Related party transactions performed by the Company during the reporting period and transactions required approval by the Company’s authorized body	34	3,540,533,075.05
Related party transactions performed by the Company during the reporting period and transactions approved by the General Meeting of Shareholders of the Company	-	-
Related party transactions performed by the Company during the reporting period and transactions approved by the Board of Directors of the Company	34	3,540,533,075.05
Related party transactions performed by the Company during the reporting period and transactions required approval by the Company’s authorized body, but not approved	-	-

Detailed information on related party transactions made by the Company in 2011 is provided as Attachment 6 to the Annual Report.