Report on compliance of IDGC of Centre with the Code of Corporate Conduct
(prepared in accordance with Order of the Federal Commission for Securities Market № 03-849/r of 30.04.2003 "On methodological recommendations on the composition and presentation of information on compliance with the Code of Corporate Conduct in the annual reports of joint stock companies")
| Code of Corporate Conduct Provision | In Compliance or Not in Compliance | Note (including an explanation of the reasons why certain recommendations are not followed) |
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| General Shareholders’ Meeting |
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| Notice to shareholders of the General Shareholders’ Meeting is given not later than 30 days before the date of the meeting, regardless of the issues on its agenda, unless the law provides for a longer period | In Compliance | Specified with Clause 11.5, Article 11 of the Company’s Articles of Association |
| Shareholders have the opportunity to get acquainted with the list of persons entitled to participate in the General Shareholders ’Meeting, beginning from the date of notice of the General Shareholders’ Meeting until the closing of the General Shareholders ’Meeting in presence, and in the case of absentee General Shareholders’ Meeting — before the end of receipt of ballots for voting | In Compliance | The Company complies with the requirements of Article 51 of the Federal Law “On Joint Stock Companies”, the list of persons entitled to participate in the General Shareholders’ Meeting is made available by the Company for review at the request of the persons included in this list and who have not less than 1 percent of the vote. However the details of documents and postal address of the individuals included in this list shall be provided only with the consent of those persons |
| Shareholders have the opportunity to get acquainted with the information (materials) to be provided in preparation for the General Shareholders’ Meeting through electronic means, including via Internet | In Compliance | Specified with Clause 11.7 Article 11 of the Company’s Articles of Association Pursuant to Clause 4.1 of the Regulations on the procedure for preparation and holding of General Shareholders’ Meeting, the informational materials on the agenda of the General Shareholders’ Meeting must be published on the website of the Company on the Internet no later than the period of notice of shareholders to hold the General Shareholders’ Meeting |
| Shareholder has the opportunity to put the issue on the agenda of the General Shareholders ’Meeting or to require the convening of the General Shareholders’ Meeting without giving extracts from the register of shareholders, if the registration of rights to shares is exercised in the Company’s shareholder register, and if his right to the shares is accounted for on the depot account — it is sufficient to have an extract from the depot account for the implementation of the above rights | In Compliance partially | Specified with Sub-Clause 2 Clause 6.2 Article 6, 13.1 of the Company’s Articles of Association |
| The presence in the Articles of Association or the internal documents of the Company the requirement of compulsory attendance at the General Shareholders’ Meeting General Director, members of the Management Board, members of the Board of Directors, members of the Auditing Committee and the Auditor of the Company | In Compliance partially | The Articles of Association and internal documents of the Company do not have this provision, since the Russian legislation does not establish requirements for mandatory attendance at a general meeting of shareholders of such persons. According to the established practice, General Director of the Company, Chairman of the Board of Directors and members of the Board of Directors are present at General Meetings of Shareholders held. In accordance with Clause 10.10 Article 10 of the Company’s Articles of Association Chairman of the Board of Directors shall preside at the General Shareholders’ Meeting. In the absence of Chairman of the Board of Directors and his Deputy any member of the Board of Directors may preside at the General Shareholders ’Meeting by the decision of the Board of Directors of the Company or by the decision of those members of the Board of Directors who are present at the General Shareholders’ Meeting |
| The obligatory presence of candidates for consideration at the General Shareholders’ Meeting of issues about the election of members of the Board of Directors, General Director, members of the Management Board, members of the Auditing Committee, as well as the issue of approval of the auditor of the Company | In Compliance partially | Russian law does not set the mandatory attendance at a general meeting of shareholders of the candidates. In practice, when considering at the General Shareholders’ Meeting of the issues about the election of members of the Board of Directors, General Director, members of the Management Board, of the Auditing Committee, the candidates are sent an invitation to the General Meeting of Shareholders |
| The presence in the internal documents of the Company the procedure of registration of participants of the General Shareholders’ Meeting | In Compliance | Clause 5.1 of the Regulations on the procedure for preparation and holding of General Shareholders ’Meeting defines the procedure for registration of persons entitled to participate in the General Shareholders’ Meeting |
| Board of Directors |
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| The Company’s Articles of Association provide for the authority of the Board of Directors to approve the annual financial and business plan of the Company | In Compliance | Pursuant to Sub-Clause |
| The presence of the approved by the Board of Directors risk management procedure in the Company | In Compliance | The Board of Directors of the Company approves the Regulations on Internal Control Procedures (Minutes № 01/09 of 13.02.2009). The Risk Management Policy in IDGC of Centre (approved by the decision of the Board of Directors, Minutes № 13/10 of 15.06.2010) |
| The Company’s Articles of Association provide for the right of the Board of Directors to decide on the suspension of the powers of General Director, appointed by the General Meeting of Shareholders | Not in Compliance | Pursuant to Sub-Clause 12, Clause 15.1, Article 15 of the Company’s Articles of Association the competence of the Board of Directors includes the power to elect General Director of the Company and early termination of his powers, including the decision on early termination of an employment contract with him |
| The Company’s Articles of Association provide for the right of the Board of Directors to establish the requirements for qualification and remuneration of General Director, members of the Management Board, the heads of major divisions of the Company | In Compliance partially | In accordance with Sub-Clause 13 Clause15.1 Article 15 of the Company’s Articles of Association the competence of the Board of Directors includes the determination of the number of members of the Management Board, election of members of the Management Board of the Company, the establishment of remuneration and compensation paid to them and termination of their powers |
| The Company’s Articles of Association provide for the right of the Board of Directors to approve the terms of contracts with General Director and members of the Management Board | In Compliance | Pursuant to Clause 21.6, Article 21 of the Articles of Association the employment contract on behalf of the Company shall be signed by Chairman of the Board of Directors or a person authorized by the Board of Directors. In addition, under Clause 21.7, Article 21 of the Articles of Association the Board of Directors or a person authorized by the Board of Directors shall determine the conditions of the employment contract with General Director and members of the Management Board, and in accordance with Clause 21.9, Article 21 of the Company’s Articles of Association shall exercise the rights and obligations of the employer in respect of General Director and members of the Management Board of the Company |
| The presence in the Articles of Association or the internal documents of the Company of the requirement that while approving the conditions of the contracts with General Director (managing organization, manager) and members of the Management Board, voting members of the Board of Directors, who are General Director and members of the Management Board, their votes are not taken into account | Not in Compliance | The Articles of Association and internal documents of the Company do not have the given provision |
| The presence in the Board of Directors of the Company for at least three independent directors who meet the requirements of the Code of Corporate Conduct | In Compliance | The Board of Directors of the Company consists of at least three (3) independent directors |
| The absence in the Board of Directors of the Company of persons who were found guilty of committing crimes in the sphere of economic activity or crimes against the state government, public service and service in local government, or on who administrative penalties for violations in the field of business or in the field of finance, taxes and fees, securities market were invoked | In Compliance | There are no such persons in the Board of Directors of the Company |
| The absence in the Board of Directors of the Company of persons who are party to, general director (manager), a member of the governing body or employee of a legal entity competing with the Company | In Compliance | There are no such persons in the Board of Directors of the Company |
| The Company’s Articles of Association have the requirements on the election of the Board of Directors by cumulative voting | In Compliance | Specified with Clause 16.2, Article 16, Clause 10.8, Article 10 of the Company’s Articles of Association |
| The internal documents of the Company provide for the obligations of the members of the Board of Directors to refrain from actions that will or may potentially lead to a conflict between their interests and the interests of the shareholders of the Company, and in the event of a conflict — the duty to disclose information to the Board of Directors of the conflict | In Compliance | Pursuant to the Code of Corporate Governance (approved by the decision of the Board of Directors of the Company, Minutes № 009/06 of 18.10.2006), a member of the Board of Directors must refrain from actions that, in his opinion, may lead to a conflict of interests and interests of the Company, and shall promptly inform the Board of Directors of such conflicts, which have arisen In addition, within the meaning of Clause3.5. of the Regulations on the procedure for convening and holding of the Board of Directors (approved by the decision of the annual general meeting of shareholders, Minutes № 01/11 of 21.06.2011) members of the Board of Directors in exercising their rights and duties shall act in the interests of the Company to carry out their rights and duties in good faith and reasonably |
| The internal documents of the Company provide for the obligation of members of the Board of Directors in writing to notify the Board of Directors of the intention to make a deal with equity securities of the Company, the members of whose Board of Directors they are, or its subsidiaries (affiliates), as well as to disclose information on transactions with such securities | In Compliance partially | Pursuant to Clause 2 of Appendix № 5 to the Regulations on insider information of IDGC of Centre (approved by the decision of the Board of Directors of the Company, Minutes № 27/11 of 29.12.2011) members of the Board of Directors are forbidden to perform any transactions with Insider financial instruments of the Company during periods of prohibition. Members of the Board of Directors shall: a) the first time elected for the post within 30 working days after the election in writing to notify the insider information control department about the fact and amount of their own Insider financial instruments of the Company, b) to promptly notify the Company and the competent state bodies responsible for regulating trading in securities, in cases stipulated by law, incurring personal liability; c) within 30 days of the end of the reporting quarter to provide a written confirmation of the number of their owned at the end of the reporting quarter Insider financial instruments of the Company and made transactions by them for the reporting quarter (either directly or through any other acting on their behalf people) with Insider financial instruments of the Company to the insider information control department; d) to comply with the requirements and limitations set forth in this paragraph, up until six months after a person has ceased to be a member of the Board of Directors |
| The internal documents of the Company have the requirement to hold meetings of the Board of Directors at least once every six weeks | In Compliance | Pursuant to Clause 18.2, Article 18 of the Company’s Articles of Association meetings of the Board of Directors shall be held as necessary but at least once every six weeks |
| Holding meetings of the Board of Directors of the Company during the year, for which the annual report of the Company is made, with a frequency of at least once every six weeks | In Compliance | In 2011 29 meetings of the Board of Directors of the Company were held, four of them — in presence (29.03.2011, 10.06.2011, 16.09.2011, 28.12.2011) |
| The internal documents of the Company provide for the procedure of holding meetings of the Board of Directors | In Compliance | Clause 7 of the Regulations on the procedure for convening and holding of meetings of the Board of Directors of IDGC of Centre regulates the procedure of holding meetings of the Board of Directors of the Company |
| The internal documents of the Company have the requirement for approval by the Board of Directors of the Company of deals in the amount of 10 and more percent of the assets of the Company, except for transactions made in the ordinary course of business | In Compliance partially | Specified with Clause 40, Clause 15.1, Article 15 of the Company’s Articles of Association |
| The internal documents of the Company provide for the rights of members of the Board of Directors to receive from the executive authorities and heads of major divisions of the Company information necessary to perform their functions, as well as the liability for failure to provide such information | In Compliance | Pursuant to Clause 3.1.1 of the Regulations for convening and holding of meetings of the Board of Directors of IDGC of Centre members of the Board of Directors within the competence of the Board of Directors shall have the right to receive information about the Company, to study all statutory, regulatory, accounting , reporting, contracts and other documents of the Company in accordance with the laws of the Russian Federation and the Company; Pursuant to Clause 2.3 of the Regulations on insider information of the Company members of the Board of Directors shall have the right of unrestricted access to any insider information of the Company |
| The presence of the Committee of the Board of Directors on strategic planning, or laying the functions of this committee onto another committee (except the Committee for Audit and the Committee for Personnel and Remuneration) | In Compliance | By the decision of the Board of Directors on 30.04.2008 (Minutes № 09/08) the Committee for Strategy and Development was established |
| The presence of the Committee of the Board of Directors (Committee for Audit), which recommends the Board of Directors the Company’s auditor and interacts with him and the Auditing Committee of the Company | In Compliance | By the decision of the Board of Directors on 30.04.2008 (Minutes № 09/08) the Committee for Audit was established |
| The Committee for Audit has only independent and non-executive directors | In Compliance partially | The members of the Committee for Audit include one (1) independent director / non-executive director, as the Regulations on the Committee for Audit does not provide for its formation of only independent and non-executive directors. The Committee has seven persons |
| The Committee for Audit is headed by an independent director | In Compliance | The Committee is headed by an independent director |
| The internal documents of the Company provide for the right of access for all members of the Committee for Audit to any documents and information of the Company subject to nondisclosure of confidential information | In Compliance | Specified with Clause 11.3 of the Regulations on the Committee for Audit |
| Establishment of a committee of the Board of Directors (Committee for Personnel and Remuneration), whose function is to determine the criteria for selection of candidates for members of the Board of Directors and to develop the Company’s policy on remuneration | In Compliance | By the decision of the Board of Directors on 30.04.2008 (Minutes № 09/08) the Committee for Personnel and Remuneration was established, one of whose functions is to define the criteria for selection of candidates for members of the Board of Directors and to develop the Company’s policy on remuneration |
| The Committee for Personnel and Remuneration is headed by an independent director | In Compliance | The Committee is headed by an independent director |
| The Committee for Personnel and Remuneration does not have any officers of the Company | In Compliance | The Committee for Personnel and Remuneration does not have any officers of the Company |
| Establishment of a Committee of the Board of Directors on risks or the imposition of the functions of this committee to another committee (except the Committee for Audit and the Committee for Personnel and Remuneration) | Not in Compliance | Such a committee is not established in the Company |
| Establishment of a Committee of the Board of Directors to resolve corporate conflicts or the imposition of the functions of this Committee to another Committee (except the Committee for Audit and the Committee for Personnel and Remuneration) | Not in Compliance | Such a committee is not established in the Company |
| The Committee on the settlement of corporate conflicts does not have any officers of the Company | Not in Com-pliance | Such a committee is not established in the Company |
| The Committee on the settlement of corporate conflicts is headed by an independent director | Not in Compliance | Such a committee is not established in the Company |
| The presence of the approved by the Board of Directors internal documents of the Company, providing the order of formation and work of the Committees of the Board of Directors | In Compliance | The procedure for establishing the Committees of the Board of Directors is provided for in Article19 of the Company’s Articles of Association. In addition, the formation and work of the committees of the Board of Directors of the Company is regulated by the following provisions:
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| The Company’s Articles of Association have the procedure for determining the quorum of the Board of Directors, which allows to provide the mandatory participation of independent directors in the meetings of the Board of Directors | Not in Compliance | The Company’s Articles of Association complies with the current legislation of the Russian Federation, under which a quorum for a meeting of the Board of Directors of the Company is determined by the Company’s Articles of Association, but shall not be less than half of the elected members of the Board of Directors of the Company. Clause 18.13, Article 18 of the Company’s Articles of Association determines that the quorum for a meeting of the Board of Directors shall be not less than half of the elected members of the Board of Directors of the Company |
| Executive bodies |
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| The presence of the collegial executive body (the Management Board) of the Company | In Compliance | In accordance with Clause 21.1, Article 21 of the Company’s Articles of Association 30.04.2008 the collegial executive body — the Management Board was established |
| The presence in the Articles of Association or the internal documents of the Company of the provision of the requirement for approval of real estate transactions by the Management Board, of loans received by the Company, if such transactions do not refer to large transactions and their performance is not a normal course of business of the Company | In Compliance | In accordance with Sub-Clause7, Clause 22.2, Article22 of the Company’s Articles of Association the competence of the Management Board of the Company includes taking a decision on the conclusion of transactions involving property, works and services, the cost of which ranges from 5 to 25 per cent of the book value of assets of the Company, determined on the date of the decision on the conclusion of the transaction (except as provided by Sub-Clause 40 Clause 15.1 of the Articles of Association) |
| The internal documents of the Company have the procedure for agreement of transactions that go beyond the financial and business plan of the Company | In Compliance | The Company has adopted internal documents regulating the process of business planning and management of cash flow: Standard of business planning of IDGC of Centre (approved by the decision of the Board of Directors of IDGC of Centre, Minutes № 02/08 of 31.01.2008) and Regulations on cash flow management of IDGC of Centre (approved by the decision of the Board of Directors IDGC of Centre, Minutes № 08/08 of 08.04.2008). In accordance with Clause |
| The executive bodies do not have persons who are party to, general director (manager), a member of the governing body or employee of a legal entity competing with the Company | In Compliance | The indicated persons are not present in the executive bodies of the Company |
| The absence in the executive bodies of the Company of officials, who were found guilty of committing crimes in the sphere of economic activity or crimes against the state government, public service and service in local government, or on who the administrative penalties for violations in the field of business or in the finance, taxes and levies, securities market were invoked. If the function of a sole executive body is executed by a management organization or manager — the compliance of General Director and members of the management board of the managing organization or manager with the requirements of General Director and members of the Management Board of the Company | In Compliance | The indicated persons are not present in the executive bodies of the Company |
| The presence in the Articles of Association and internal documents of the Company of the prohibition for the managing organization (manager) to perform similar functions in a competing Company, and to be in any other proprietary relationship with the Company, in addition to providing services as the managing organization (manager) | In Compliance | Specified with Sub-Clause 2 Clause V of the Code of Corporate Governance of the Company |
| The internal documents of the Company provide for the obligation of executive bodies to refrain from actions that will or may potentially lead to a conflict between their interests and the interests of the Company, and in the case of such a conflict — the obligation to inform the Board of Directors about it | In Compliance partially | Pursuant to Sub-Clause 2 Clause V of the Code of Corporate Governance of the Company, General Director shall refrain from any action which might lead to a conflict of interests and the interests of the Company. General Director shall promptly inform the Board of Directors of a conflict of his interests and the interests of the Company. In addition, Clause 21.14, Article 21 of the Articles of Association provides that General Director, members of the Management Board of the Company in exercising their rights and duties while exercising their rights and duties shall act in the interests of the Company in good faith and reasonably |
| The presence in the Articles of Association and internal documents of the Company of the selection criteria of the managing organization (manager) | In Compliance | Specified with Sub-Clause 2 ClauseV of the Code of Corporate Governance of the Company |
| Presentation by the executive bodies of the Company of monthly reports on their activities to the Board of Directors | In Compliance partially | In compliance with Sub-clause 36 of Сlause 15.1, Article 15 of the Company’s Articles of Association, the Board of Directors considers the reports of General Director on the Company’s activities (including reports concerning the performance of his/her official duties), and on the performance related to the decisions of the General Shareholders’ Meeting and the Company’s Board of Directors. General Director regularly (monthly, quarterly, once every half-year, or annually) submits the following reports for consideration to the Board of Directors of the Company:
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| Contracts, concluded by the Company with General Director (managing organization, manager) and members of the Management Board, provide for the responsibility for the violation of the provisions on the use of confidential and proprietary information | In Compliance | Contracts with members of the Management Board and General Director provide for the responsibility for violation of the provisions on the use of confidential and proprietary information |
| Corporate Secretary |
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| The Company has a special officer (Corporate Secretary), whose task is to ensure that authorities and officials of the Company to comply with the procedural requirements to ensure the realization of rights and legitimate interests of the shareholders of the Company | In Compliance | The Company has elected Corporate Secretary (Minutes № 16/11 of 18.07.2011). In accordance with Clause 1 of the Regulations for the Corporate Secretary (approved by the decision of the Board of Directors of IDGC of Centre, Minutes № 009/06 of 18.10.2006) the corporate secretary is an authorized person, whose main task is to ensure that authorities and officials of the Company to comply with the procedural requirements to ensure the realization of rights and legitimate interests of the shareholders of the Company |
| The presence in the Articles of Association and internal documents of the Company of the order of appointment (election) of Corporate Secretary and duties of Corporate Secretary | In Compliance | Specified with Clause 4.2 of the Regulations for convening and holding of meetings of the Board of Directors, as well as in Clause 3 of the Regulations for the Corporate Secretary of the Company, they determine the procedure for electing the corporate secretary. Clause 4.3 of the Regulations for convening and holding of meetings of the Board of Directors, as well as Clause 3 of the Regulations for the Corporate Secretary of the Company determine the responsibilities of the Corporate Secretary |
| The Company’s Articles of Association have the requirements for candidacy of Corporate Secretary | In Compliance partially | In accordance with Clause 20.6, Article 20 of the Articles of Association the Company specifies that the regulations on the activity, the order of appointment and termination of the term of office, rights and responsibilities of the Corporate Secretary are defined by the Regulations for the Corporate Secretary, approved by the Board of Directors of the Company. The Regulations for the Corporate Secretary provide for the requirements for candidacy of Corporate Secretary |
| Essential Corporate Actions |
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| The presence in the Articles of Association and internal documents of the Company of the requirement for approval of a major deal prior to its conclusion | In Compliance | The competence of the Board of Directors and General Shareholders’ Meeting to take decisions on the approval of major transactions is referred to the Articles of Association of the Company in cases stipulated in Chapter X of the Federal Law “On Joint Stock Companies” (Sub- Clause 26 Clause 15.1 of the Company’s Articles of Association) and Article 79 of the Federal Law “On Joint-Stock Companies” (Clause 17.10.2 of the Company’s Articles of Association |
| Mandatory involvement of an independent appraiser to estimate the market value of the property, which is the subject of a major transaction | In Compliance | Performed in practice in accordance with the requirements of the Federal Law “On Joint Stock Companies” |
| The Company’s Articles of Association provide for the prohibition while performing the acquisition of large blocks of shares of a joint stock company (takeover) to take any action aimed at protecting the interests of the executive bodies (members of these bodies) and members of the Board of Directors of the Company, as well as those that worsen the situation of the shareholders compared to the existing ones (in particular, the ban on adoption by the Board of Directors of the decision before the expected date of acquisition of shares on issue of additional shares, on issue of securities convertible into shares or securities granting the right to acquire shares of the Company, even if the right of taking such a decision is provided to it by the Articles of Association) | Not in Compliance | The given requirements in the Articles of Association of the Company are not defined |
| The Company’s Articles of Association have the mandatory involvement of an independent appraiser to assess the current market value of shares and possible changes in their market value as a result of takeover | Not in Compliance | Performed in practice in accordance with the requirements of the Federal Law “On Joint Stock Companies” |
| The absence in the Articles of Association of the Company the release of the purchaser from the obligation to offer to shareholders to sell their common shares of the Company (issued securities convertible into ordinary shares) at takeover | In Compliance | Such a requirement in the Articles of Association of the Company is not present |
| The presence in the Articles of Association and internal documents of the Company of the mandatory involvement of an independent appraiser to determine the ratio of conversion of shares at reorganization | Not in Compliance | The Articles of Association and internal documents of the Company do not have the given requirement, since the General Meeting of Shareholders of the Company and/or board of directors did not take an appropriate decision. Performed in practice in accordance with the requirements of the Federal Law “On Joint Stock Companies” |
| InformationDisclosure |
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| The presence of the approved by the Board of Directors internal document that defines the rules and approaches of the Company to information disclosure (The Regulations for the Information Policy) | In Compliance | The Regulations for the Information Policy of IDGC of Centre were approved by the decision of the Board of Directors of the Company (Minutes № 22/11 of 17.10.2011) |
| The internal documents of the Company have the requirements on disclosure regarding placement of shares, on persons who intend to acquire shares being placed, including a large stake, and also about whether the top officials of the Company to participate in the acquisition of the shares of the Company | Not in Compliance | Disclosures is made in accordance with the requirements of Russian legislation and the Regulations for the Information Policy of the Company |
| The internal documents of the Company have a list of information, documents and materials to be provided to shareholders to address the issues submitted to a General Meeting of Shareholders | In Compliance | In accordance with Sub-Clause “e”, Clause 2.2 of the Regulations on the procedure for preparation and holding of General Shareholders’ Meeting of IDGC of Centre, the list of information, documents and materials to be provided to shareholders to address the issues submitted to a General Meeting Shareholders is approved by the Board of Directors of the Company in preparation for the General Shareholders’ Meeting |
| The presence of the Company’s web site on the Internet and regular disclosure by the Company on this website | In Compliance | The Company has a website that discloses information about the Company. Web-site: www.mrsk-1.ru. The Company provides a timely update of its corporate site, including the disclosure of information in accordance with the applicable legislation of the Russian Federation and the Regulations for the Information Policy of the Company |
| The internal documents of the Company have the requirements on disclosure of information about the transactions of the Company with the persons belonging in accordance with the Articles of Association to the top officials of the Company, as well as the transactions of the Company with the organizations in which senior officials of the Company directly or indirectly own 20 percent or more of the share capital of the Company or on which such persons may otherwise have a material effect | In Compliance | Pursuant to Sub-Clause 5.2.8.2 and 5.2.8.3 of the Regulations for the Information Policy, the Company discloses information about the ownership of shares of the Company by the members of management bodies and persons affiliated with them, as well as of its subsidiaries and dependent companies, with the indication of the number and category of shares, as well as information about the transactions between these entities and the Company |
| The internal documents of the Company have the requirements on disclosure of all transactions that may affect the market value of the shares of the Company | In Compliance | Clause 5.2.10 of the Regulations for the Information Policy of IDGC of Centre provides for the Company to disclose information about major transactions. At the same time a major transaction is understood as a deal, which could have a significant impact on the Company’s activities |
| The presence of the approved by the Board of Directors internal document on the use of essential information about the activities of the Company, shares and other securities and transactions with them, which is not public and the disclosure of which could have a significant impact on the market value of shares and other securities of the Company | In Compliance | The Company has approved the Regulations on insider information (approved by the decision of the Board of Directors, Minutes № 27/11 of 29.12.2011) |
| Control over the Company’sFinancial and Economic Activity |
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| The presence of the approved by the Board of Directors procedures of internal control over financial and economic activities of the Company | In Compliance | The Board of Directors of the Company approved the Regulations on the internal control procedures of IDGC of Centre (Minutes № 01/09 of 13.02.2009) and Internal control policy of IDGC of Centre (Minutes № 13/10 of 15.06.2010) |
| The presence of a special division of the Company, ensuring compliance with internal control procedures (Auditing Service) | In Compliance | The Company has a special division — the Department of Internal Audit and Risk Management, providing compliance with internal control procedures |
| The internal documents of the Company have the requirement of determining the structure and composition of the control and audit service of the Company by the Board of Directors | Not in Compliance | The internal documents of the Company do not have the given requirement |
| The absence in the control and audit service of persons who were found guilty of committing crimes in the sphere of economic activity or crimes against the state government, public service and service in local government, or on who administrative penalties for violations in the field of business or finance and taxes and levies, securities market were invoked | In Compliance | Such persons in the Department of Internal Control and Audit are not present |
| The absence in the control and audit service of persons belonging to the executive bodies of the Company, as well as individuals, parties, general director (manager), members of governing bodies or employees of the legal entity competing with the Company | In Compliance | Such persons in the Department of Internal Control and Audit are not present |
| The internal documents of the Company have the date of submission to the control and audit service of documents and materials to assess the implementation of financial and business operations, as well as the responsibility of officers and employees of the Company for its failure to submit within the specified time | In Compliance partially | Pursuant to Clause 7.5 of the Regulations on the Auditing Committee of IDGC of Centre, the requested documents and materials must be submitted to the members of the Auditing Committee of the Company within 2 (two) working days from receipt of the request. Pursuant to Clause 6.1.2 of the Regulations on the internal control procedures of IDGC of Centre the provision of necessary documents to perform inspections is made by heads of divisions of the Company, subsidiaries and representative offices within the 3 (three) days’ period at the request of a division of the Company, authorized to perform internal control/audit |
| The internal documents of the Company have the obligations of the control and audit service to report on violations to the Committee for Audit, and in its absence — to the Board of Directors of the Company | In Compliance | Specified with Clause 6.1.4 of the Regulations on the internal control procedures of IDGC of Centre |
| The Company’s Articles of Association have the requirement of the preliminary assessment by the control and audit service of appropriateness of transactions not covered by the financial and business plan of the Company (non-standard transactions) | Not in Compliance | The Articles of Association of the Company do not have the given requirement |
| The internal documents of the Company have a procedure to agree on a non-standard transaction with the Board of Directors | In Compliance | Non-standard transactions (beyond the financial and business plan) are to be included in the adjustment of the Business plan and Cash Flow. Pursuant to Sub-Clause 19, Clause 15.1, Article 15 of the Articles of Association the approval of the adjusted Business plan is the responsibility of the Board of Directors. Pursuant to Sub- Clause 2, Clause 22.2, Article 22 of the Articles of Association the approval of the adjusted Cash Flow is the responsibility of the Management Board. In accordance with Sub-Clause 4.2.5 of the Regulations on Cash Flow management of the Company, no later than one day from the date of approval of the final adjustment of the adjusted Cash Flow the adjusted Cash Flow is forwarded to the members of the Board of Directors of the Company |
| The presence of the approved by the Board of Directors internal document that defines the procedure for conducting audits of financial and business operations of the Company by the Auditing Committee | In Compliance | The Extraordinary General Meeting of Shareholders (Minutes № 1429/pr1 of 30.03.2006) approved the Regulations on the Auditing Committee of IDGC of Centre |
| The Committee for Audit performs assessment of the auditor’s report before submitting it to shareholders at the General Shareholders’ Meeting | In Compliance | Pursuant to Clause 3.1 of the Regulations on the Committee for Audit, the Committee oversees the performance of the annual independent audit of consolidated financial statements and accounting (financial) statements of the Company, and the assessment of the auditor’s opinion. The assessment of the auditor’s opinion is presented as a material for the Annual General Meeting of Shareholders |
| Dividends |
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| The presence of the approved by the Board of Directors internal document that guides the Board of Directors when making recommendations about the amount of dividends (The Regulations on Dividend Policy) | In Compliance | The Board of Directors of the Company (Minutes № 18/10 of 03.09.2010) approved the Regulations on Dividend Policy in the new edition, which guides the Board of Directors when making recommendations about the amount of dividends |
| The presence in the Regulations on Dividend Policy of the procedure for determining the minimum share of net profit of the joint stock company for dividends, and the conditions under which dividends are not paid or partially paid on preferred shares, the dividend amount on which is defined in the Articles of Association of the Company | In Compliance partially | In accordance with Clause4.1. of the Regulations on Dividend Policy the decision on dividend payment is made in the performance of both the following criteria: — availability of the net profit for the fiscal period; — availability of the net profit for the fiscal period, excluding the revaluation of financial investments; — the ratio of debt (end of period) to EBITDAEarnings Before Interest, Tax, Depreciation and Amortisation; indicator showing the profit of the Company before deduction of income taxes, accrued interest on loans and depreciation indicator (the indicator is calculated based on the current status of the credit policy) is less than three - if there is non-compliance with this criterion the repayment of borrowed funds is the priority over the payment of dividends |
| Publication of information on the dividend policy of the Company and changes in it in periodicals, stipulated by the Articles of Association of the Company to publish notices of General Meetings of Shareholders, as well as to place information on the website of the Company on the Internet | In Compliance partially | The Company provides the placement of the Regulations on Dividend Policy and any changes to it in the constant access on the Company’s website at the address: www.mrsk-1.ru (Clause 9.1 of the Regulations on Dividend Policy) |