5.3 COMMITTEES OF THE BOARD OF DIRECTORS

The Committees aim to improve the efficiency of the Board of Directors via preliminary discussions of the most important questions that fall within the competency of the Board of Directors, and by developing recommendations on these questions.

In 2010 there were four committees attached to the Board of Directors:

  • Strategy Committee;
  • Investment Committee;
  • Audit Committee;
  • HR and Remuneration Committee.

Operations for all these committees are governed by respective Regulations on the Committees outlining the composition, competencies, work procedure and rights and responsibilities of the Committees’ members.

Strategy Committee

The Committee’s functions include considering and developing recommendations for the Board of Directors on questions related to the development of the UES of Russia.

The Committee’s composition, as approved by a decision of the Company's Board of Directors, as of 22 September, 2010 (positions held at the time of election):

Alexey Makarov Chairman , Member of the Board of Directors of Federal Grid
Company, Director of RAS’ Energy Research Institute
Nikolay Shulginov First Deputy Chairman of the Management Board of SO UES
Roman Berdnikov Deputy Chairman of the Company’s Management Board
Alexander Bobrov First Deputy Chairman of the Company’s Management Board
Anatoly Dyakov President of the Not-for-Profit Partnership Scientific and Technical Council of UES
Igor Kozhukhovsky Director General of APBE
Victor Kudryavy Advisor to the President of Eurocement Group
Yuri Lipatov Chairman of the Power Energy Committee of the State Duma of the Russian Federation
Valentin Mezhevich First Deputy Chairman of the Commission on Natural Monopolies for the Federation Council of the Russian Federal Duma
Vladimir Sitnikov General Director of Institute Energosetproekt
Vladimir Fortov Member of the Presidium of the RAS
Oleg Dunin Deputy Director of the Department of Electric Power Industry Development at the Russian Ministry of Energy

The Committee’s 2010 operations
In 2010 the Committee held five meetings, of these three were conducted in the presence of shareholders. The meetings approved the following recommendations of the Board of Directors:

  • On the creation of the Committee on Implementing Current and Promising Innovative Projects, attached to the Chairman of the Management Board;
  • On the implementation of the project entitled The Development of Russia’s Smart Energy System Based on Active Adaptive Network Principles, which involves IDGC Holding
  • On the approval of the organizational structure for the executive office of the Company;
  • On the approval of the Company Innovative Development Program.

Investment Committee

The Committee’s functions include considering and developing recommendations for the Board of Directors on questions related to the corporate investment policy and informing the Board of Directors about risks associated with investment activities.

The Committee’s 2010 operations
In 2010 the Committee held ten meetings, of this number four were held in the presence of shareholders. The meetings approved the following recommendations for the Board of Directors:

  • On the approval of the Company 2010-2014 Investment Program;
  • On the approval of the Company 2010 business plan;
  • On the consideration of target figures for 2011-2012 business plan;
  • On the approval of the new version of Regulations on the Dividend Policy;

The Committee’s composition, as approved by a decision of the Company's Board of Directors, as of 22 September, 2010 (positions held at the time of election):

Andrey Malyshev Chairman, Member of the Company's Board
of Directors, Deputy CEO of the Russian State
Nanotechnologies Corporation
Alexander Ilyenko Director of the UES Asset Management for SO UES
Roman Berdnikov Deputy Chairman of the Company’s Management Board
Alexander Bobrov First Deputy Chairman of the Company’s Management Board
Vladimir Mayorov General Director of ECMC UES
Victor Lebedev Deputy Department Head at the Russian Ministry of Economic Development
Alexey Makarov Member of the Company’s Board of Directors,
Director of the Energy Research Institute of the RAS
Vasily Nikonov Director of the Department of Electric Power Industry
Development for the Russian Ministry of Energy
Vladimir Fortov Member of the Presidium of the Russian Academy of Sciences
Yuri Soloviev Member of the Company’s Board of Directors, President of VTB Capital
Igor Khvalin Member of the Company’s Board of Directors,
General Director of Volga Engineering Group
Sergey Serebryannikov Rector of the State Educational Institute of Higher Professional Education MPEI (TU)
Maria Tikhonova Director of the Department of Economic Regulation and Property Relations in the Fuel and Energy Complex of the Russian Ministry of Energy

Audit Committee

The Committee’s functions include developing recommendations for the Board of Directors on selecting an independent audit company and on improving the Company’s reporting systems and internal control.

The Committee’s 2010 operations
In 2010 the Committee held six meetings, of this number two were held in the presence of shareholders. Among other decisions, the meetings approved 2011 Insurance Coverage Program and the Regulations on Liability Insurance for members of the Board of Directors, members of the Management Board, the Chief Accountant and officers.

The Committee’s composition, as approved by a decision of the Company's Board of Directors, as of 22 September, 2010 (positions held at the time of election):

Rashid Sharipov Chairman, Member of the Company's Board of Directors,
Deputy General Director of KFK-Consult
Igor Khvalin Member of the Company's Board of Directors,
General Director of Volga Engineering Group»
Ernesto Ferlenghi Member of the Company's Board of Directors,
Head of the Representative Office of Eni Russia and the CIS

HR and Remuneration Committee

The Committee’s functions include developing recommendations for the Board of Directors on aspects of the remuneration system and cash incentives for top corporate executives and the Internal Audit Commission, and defining candidate selection criteria for the Company’s management bodies.

The Committee’s 2010 operations
In 2010 the HR and Remuneration Committee held four meetings, of this number three were held in the presence of shareholders and one was held in absentia. The following decisions were made at these meetings:

  • To approve principles and criteria for remuneration and cash rewards to members of the Company’s Management Board and the Chairman of the Management Board;
  • To approve the Methods of Calculating and Evaluating Key Performance Indicators (KPIs) Achieved by the Company’s Managers;
  • To provide recommendations on upgrading Regulations on the Stock Option, considering comments made during the Committee’s meeting.

The Committee’s composition, as approved by a decision of the Company's Board of Directors, as of 22 September, 2010 (positions held at the time of election):

Dmitry Ponomarev Chairman, Member of the Company's Board of Directors,
Chairman of the Management Board of the Market Council
Yuri Soloviev Member of the Company's Board of Directors,
President of VTB Capital
Rashid Sharipov Member of the Company's Board of Directors,
Deputy General Director of KFK-Consult

Participation of Directors in 2010 Meetings of the Board of Directors and Its Committees

Board of Directors Audit Committee Strategy Committee HR and Remuneration Committee Investment Committee
Name Executive Independent * Participation in meetings **
Boris Ayuyev No 27/27 - 2/5 - 5/5
Oleg Budargin Yes 13/13 - - - -
Evgeny Dod2 No X 10/14 - - - -
Mikhail Kurbatov2 No 5/14 - - - -
Georgy Kutovoy1 No 9/13 - - - -
Alexey Makarov No 20/27 - 5/5 - 4/5
Andrey Malyshev No 26/27 - 1/5 - 10/10
Sergey Maslov2 No 14/14 - - - 5/5
Dmitry Ponomarev No 25/27 - - 4/4 2/5
Yuri Solovyev1 No Ő 13/13 0/2 - 2/2 4/5
Vladimir Tatsiy2 No Ő 14/14 3/6 - 2/2 5/5
Rashid Sharipov No Ő 20/27 6/6 - 4/4 -
Sergey Shmatko÷ No 27/27 - - - -
Igor Khvalin1 No Ő 13/13 1/1 - - 4/5
Ernesto Ferlenghi No Ő 25/27 4/6 - - -

1Was not a member of the Board of Directors prior to the AGM
2Was a member of the Board of Directors only prior to the AGM
*It is advised that members of the Board of Directors meet the following requirements to be deemed independent:
(1)During the last three years were not and are not officers (managers) or employees of the Company or officers or employees of the Company’s management organization;
(2)Are not officers of another company in which any of the Company’s o? cers are a member of the HR and Remuneration Committee
(3)Are not affiliated persons to an officer (manager) of the Company (or an officer of the Company’s management organization)
(4)Are not affiliated persons of the Company or affiliated persons of said affiliated persons
(5)Are not involved in obligations with the Company that enable them to acquire property (obtain monetary funds), the cost of which is equal to 10 and more percent of the total annual income of said persons, other than for director compensation;
(6)Are not a large contractor for the Company (a contractor that has the total number of deals with the Company throughout the year exceeding 10 and more percent of the balance sheet value of the Company’s assets);
(7)Are not representatives of the state
An independent director who has served on the Company’s Management Board for a period of seven years can no longer be viewed as independent (RussianFCSM's Resolution “On Recommendations on the Use of the Corporate Governance Code” No. 421/r dated 04.04.2002 (together with the Corporate Governance Code dated 05.04.2002)
**The first figure shows the number of meetings that the member of the Board of Directors participated in and the second one shows the number of meetings which he/she could potentially have participated in (likewise for Committees).