Corporate Governance and Securities of the Company

Principles of Corporate Governance

JSC "Lenenergo" understands corporate governance to be a set of processes providing management and control of its activity and comprising relations between shareholders, the Board of Directors and the executive bodies of the Company in the interests of shareholders. The company considers corporate governance to be a means of increasing the efficiency of the Companys activity, strengthening its reputation and decrease costs for attracting capital.

Corporate governance in the Company is based on the following principles:

Accountability. The accountability of the Companys Board of Directors to all shareholders according to the applicable laws provides guidance to the Board of Directors in the course of development of strategy and performing management and control over the activity of executive bodies of JSC "Lenenergo".

Constitutional and legal and organizational documents of the Company accurately regulate mutual relations of JSC "Lenenergo" and shareholders, the submission to control of the Board of Directors and executive bodies to the General Meeting of Shareholders is provided, and competence between the Meeting of Shareholders, the Board of Directors and the executive bodies is differentiated.

The General Meeting of Shareholders elects an Audit commission that performs the internal financial and economic control of activity of the Board of Directors, control bodies and officials of the Company for conformity to the legislation of the Russian Federation, the Charter and internal documents of JSC "Lenenergo".

The Company annually approves the business plan and the investment program, which allow for effectively performing constant control of financial and economic activity.

For audit and approval of the annual accounting reporting of JSC "Lenenergo", the General Meeting of Shareholders annually approves an Auditor, who performs the audit of financial and economic activity of the Company according to requirements of the legislation of the Russian Federation and on the basis of the concluded agreement.

There is an Internal Control and Audit Department within JSC "Lenenergo" which functions on the basis of:

  • Regulations on procedures of internal control of JSC "Lenenergo" approved by the Board of Directors on 09.12.2008 (Minutes No.6 dated December 9, 2008), which defines the internal control procedures to check the financial and economic activities of the Company. The Internal Control Department controls compliance with the procedures.
  • Policy of risk management in JSC "Lenenergo", approved by the Board of Directors on 18.06.2010 (Minutes No.22 dated June 18, 2010) which determines main principles of the organization, implementation, and control of risk management processes in JSC "Lenenergo", as well as prime actions on forming of the risk management system.
  • Policy of internal control in JSC "Lenenergo", approved by the Board of Directors on 18.06.2010 (Minutes No.22 dated June 18, 2010) which determines the main principles of the organization of the internal control system of JSC "Lenenergo" obligatory for observance, and establishing a uniform approach to implementation of the processes of internal control in the Company.

Fairness. The Company undertakes to protect the rights of shareholders and to ensure the equal treatment of all shareholders. The Board of Directors provides all shareholders with the possibility of getting effective protection in case of infringement of their rights.

Shareholders are entitled to participate in management of the joint-stock company by decision-making on the most important issues of activity of JSC "Lenenergo" at the General Meeting of Shareholders.

The notice of carrying out the General Meeting of Shareholders is directed to persons entitled to participation no later than 30 days prior to the date of carrying out of the General Meeting of Shareholders.

The shareholder (shareholders) who owns (own) not less than 1 (one) percent of voting shares of the Company has (have) the possibility to get familiar with the list of the persons entitled to participate in the General meeting of shareholders.

Shareholders are provided with accounting of ownership rights on the shares according to the applicable laws. The register of shareholders of JSC "Lenenergo" on the basis of the decision of the Board of Directors is transferred to the Registrar JSC "Central Moscow Depositary" (up to 14.12.2010), and JSC "R.O.S.T. Registrar" (from 15.12.2010).

The place and time for carrying out the General meetings of shareholders is determined providing that shareholders have a real and convenient possibility to take part in them, that each shareholder has the possibility to implement his (her) voting power by the method most simple and convenient for him (her). According to item 10 of the Charter of the Company, the General meeting of shareholders can be conducted at the JSC "Lenenergo" location (St. Petersburg), or in Moscow.

The Company provides regular and timely granting to shareholders of complete and trustworthy information about JSC "Lenenergo". This right is implemented by the following ways:

  • Granting to shareholders of exhaustive information on each issue on the agenda during preparation of the General meeting of shareholders;
  • Inclusions in the Annual report, given to shareholders, of the necessary information, allowing to estimate the results of activity of JSC "Lenenergo" for the year;
  • Entering the post of the corporate secretary, whose tasks comprise organization of events for preparation and carrying out of the General meeting of shareholders, meetings of the Board of Directors within the limits of his (her) competence.

Transparency. The Company provides in due time disclosure of trustworthy information on all material facts concerning its activity, including on its financial position, social and environmental performance, results of its operating performance, structure of ownership and management of JSC "Lenenergo", as well as an accessible approach to such information of all stakeholders.

The Company complies with the requirement to disclose information in due time by submitting all accounting documents and information sheets to the Federal Agency for Financial Markets of the Russian Federation, by publishing the information, which is to be disclosed in accordance with the current legislation of the Russian Federation in the Nevskoye Vremya newspaper, in the news line of the Interfax news agency as well as on the Companys website on the Internet at www.lenenergo.ru.

The Company discloses information as follows:

  • information which is disclosed while issuing securities;
  • prospectus of the stock issue;
  • quarterly report;
  • information on material facts;
  • information which can substantially affect the value of the Companys securities;
  • annual report of the Company;
  • annual accounting documents and other financial information of the Company;
  • information on the provisions of the Companys Charter and other internal enactments which regulate the activities of the Company, including changes and amendments;
  • information on the Companys affiliates;
  • prices for electricity, which are differentiated depending on the conditions stipulated by Russian legislation. The transfer costs of electricity are indicated separately, as well as the costs for other services, which are integral components in the process of delivering electricity to the end user;
  • main provisions of the contract for the delivery of electricity;
  • and others.

The disclosure and use of the information within the Company is regulated by the documents as follows:

  • Memorandum of Corporate Governance of JSC "Lenenergo" (approved by the Board of Directors of JSC "Lenenergo" on 04.07.2000);
  • Regulations on the Insider information of JSC "Lenenergo" (approved by the Board of Directors of JSC "Lenenergo" on 28.02.2006);
  • Regulations on the Information policy of JSC "Lenenergo" (approved by the Board of Directors of JSC "Lenenergo" on 09.12.2008);
  • Corporate Governance Code of JSC "Lenenergo" (the new edition was approved by the Board of Directors of JSC "Lenenergo" on 16.12.2008).

Responsibility. The Company acknowledges the rights of all stakeholders, which are envisaged by the current legislation of the Russian Federation, and strives for cooperation with such privies in view of its further development and enhancement of financial stability.

Members of the Board of Directors, the Management Board, Director General, Acting Director General, and the managing organization (managing director) bear responsibility towards JSC "Lenenergo" for the losses to the Company caused by their actions (or failure to act) (item 15.4. of Article 15, item 21.23. of Article 21 of the Charter of JSC "Lenenergo").

The following internal documents within the Company regulate the activities of the management and control bodies of the Company:

  • Regulations on the procedure of preparation and arrangement of the General Meeting of Shareholders (Minutes No.1 dated 26.06.2006 of GMS);
  • Regulations on the procedure of convocation and arrangement of meetings of the Board of Directors (Minutes No.1 dated 26.06.2006 of GMS);
  • Regulations on the procedure of convocation and arrangement of meetings of the Management Board (Minutes No.1 dated 30.05.2008 of GMS);
  • Regulations on the Internal Audit Commission (Minutes No.1 dated 23.05.2002 of GMS);
  • Regulations on the procedures of internal control of the Company (Minutes No.6 dated 09.12.2008 of the meeting of the Board of Directors);
  • Regulations on payment of remuneration and compensation to the members of the Board of Directors (Minutes No.1 dated 30.05.2008 of GMS);
  • Regulations on payment of remuneration and compensation to the members of the Internal Audit Commission (Minutes No.1 dated 30.05.2008 of GMS).
  • Regulations on the activities of the Committees under the Board of Directors.
  • Regulations on the activities of the Councils under the Management Board.

Compliance with the Corporate Behavior Code stipulated by the Federal Committee on the Securities Market (FCSM)

The activities of JSC "Lenenergo" are performed in compliance with the principles and recommendations of the Corporate Behavior Code, which was approved at the Meeting of the Government of the Russian Federation on 28.11.2002 (Minutes No.49) and recommended for use by joint-stock companies by the Order of FCSM No.421/r dated 04.04.2002, and the Corporate Governance Code which was approved by the Companys Board of Directors on 26.12.2008 (Minutes No. 7 dated 29.12.2008).

Complete information concerning the compliance of JSC "Lenenergo" with the provisions of the Corporate Behavior Code and the Code of Corporate Governance Code is given in Appendices 12.5 and 12.6 to the present report.

Following the results of every half-year, the Board of Directors considers a report on fulfillment of the Corporate Governance Code with its subsequent publishing on the website of JSC "Lenenergo".


Information on major transactions, interested-party transactions, and other significant transactions performed by the Company in 2010

The Company did not perform any transactions this year which can be categorized as major transactions in accordance with the Federal Law "On Joint-Stock Companies".

Information on interested-party transactions categorized in accordance with the Federal Law "On Joint-Stock Companies" and performed by the Company in 2010 is given in Appendix 12.8 to the present report.

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