Annu Al Report

1 MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

MOSCOW UNITED ELECTRIC GRID COMPANY

CONTENTS

Speech of the Chairman of the Board Speech of the General of Directors of JSC «MOESK» Director of JSC «MOESK» Schedule of milestones 6 8 10

ABOUT THE COMPANY ð. 12 1 1.1. Position in the field 1.2. Structure and characteristics of electric grid facilities 1.3. Top business targets and development prospects

OPERATING ACTIVITY ð. 20 2 2.1. Transmission and distribution of electric power 2.2. Energy conservation and increase in energy efficiency 2.3. Technological connection 2.4. Maintenance and operation 2.5. Tariffs for transmission of power energy and fee for technological connection 2.6. Industrial and fire safety 2.7. Occupational safety

4 INVESTMENT ACTIVITY ð. 40 3 3.1. Parameters of investment activity 3.2. Allocation and structure of capital investments 3.3. Funding sources for investment program

FINANCIAL AND ECONOMIC ACTIVITY ð. 46 4 4.1. Major results of financial and economic activity 4.2. Analysis of financial status and performance 4.3. Accounts receivable and payable 4.4. Lending policy 4.5. Allocation of net profit 4.6. Dividend policy 4.7. Execution of key persormance indicators 4.8. Information about the auditor

CORPORATEC MANAGEMENT ð. 58 5 5.1.5 Principles of corporate management 5.2.5 Report of the Board of Directors on the results of development of core areas of activity 5.3. Governing and supervisory authorities 5.4. Criteria for calculation and amount of remuneration paid to persons being members of governing authorities and Auditing commission 5.5. Securities 5.6. Participation in business entities and non-profit organizations 5.7. Administration of ownership ð. 247 ð. 245 ð. 236 ð. 184 ð. 180 ð. 178 ð. 141 6 Appendix 7.Contactinformation forshareholders andinvestors Appendix 6.Historyoftransactions executedbytheCompanyasof2010 Appendix 5.Dataoncompliance withtheCodeofCorporateConduct Reporting Standards (IFRS) Appendix 4.Reportsasof2010 executedincompliancewithInternationalFinancial Appendix 3.OpinionofAuditingcommission Appendix 2.Auditor’sopinion Standards (RAS) Appendix 1.Accountingreports asof2010executedincompliancewithRussianAccounting ð. 140 APPENDIXES ð. 104ð 6.5. Informationtechnologiesandtelecommunications 6.4. Managementofbusinessprocesses 6.3. Riskmanagementsystem 6.2. Internalcontrol system 6.1. Qualitymanagementsystem6 MANAGEMENT OFIN-COMPANYPROCESSESM 7 9 A G ð. 138ð ABBREVIATIONS GLOSSARY OFMAJORTERMSAND ð. 120ð S 7.3. Environmental safety 7.2. Socialpolicy 7.1. HRmanagement7. ð. 134ð P P SOCIAL RESPONSIBILITY AND EXHIBITIONACTIVITY PUBLIC AUTHORITIESANDCONGRESS PUBLIC RELATIONS,RELATIONSWITH 8 8.2. Resultsofprocurement activity 8.1. Procurement8. policy P ð. 130ð 1 PROCUREMENT ACTIVITY 5 MOESK ANNUALA REPORT 201010 MOSCOW UNITED ELECTRIC GRID COMPANY

DEAR SHAREHOLDERS,

The largest Russian Interregional Distribu- tion Grid Company JSC «MOESK», notwithstanding the complicated operating conditions caused by natural disasters, managed to dem- onstrate positive results in follow-up of the year 2010. Such achievements became possible due to coordinated work of the members of the Board of Directors and management staff of JSC «MOESK». In 2010 the interests of shareholders in the 6 Board of Directors of JSC «MOESK» were represented by officials of such companies as JSC «IDGC Holding», «FGC UES», JSC, «SO UPS», CJSC «Leader», Gazprombank (OJSC) as well as Ministry of Energy of the Russian Federation, SPEECH OF THE CHAIRMAN Governments of the city of Moscow and Moscow Region. OF THE BOARD OF DIRECTORS Special attention in 2010 was paid to im- OF JSC «MOESK» plementation of energy conservation policy and increase in energy efficiency, adoption of tariff management system for electric power transmission services subject to the method of return on invested capital as well as approval of a range of programs, statutes, plans: Risk management policy, Internal control policy, HR management program as amended, Plan of first-rank events for increase in antiterrorist and anti-sabotage security of electric grid facilities. be allocatedforthemaintenancecampaign. riod of2011-20125.2bln.rub.wereplannedto In thecourseofpreparationforfall-winterpe- with simultaneousmodernizationoffixedassets. power transmissionovertheCompanygrid increase inreliabilityandqualityofservicesfor A long-termpricingpolicywillcontributetothe fied asasuccessfulcompletionoftheyear2010. turn oninvestedcapitalcanforcertainbequali- management systembasedonthemethodofre- «MOESK» sinceJanuary1st,2011ofanewtariff of MoscowandRegionadoptionbyJSC bln. rub.,andnetprofit–15.6rub. to RussianAccountingStandardsmadeup110.6 significant financialindices:proceedsaccording up oftheyearCompanymanagedtoreach gets setupbytheBoardofDirectors.Infollow- high levelofefficiencyuponexecutiontar- Company managementstaffwhodisplayeda were implementedbytheGeneralDirectorand and marketcapitalizationthereof. crease ininvestmentprospectsofJSC«MOESK» holders’ balanceofconvenienceandaimedatin- executed withregardtotheCompanyandshare- ute onDividendPolicy oftheCompanywhichwas ments, specialattentionshallbepaidtotheStat- Approval bytheregulatorybodiesofcity Decisions adoptedbytheBoardofDirectors Among theoverallamountofapproveddocu- Company. ficiency offinancialandoperatingactivitythe ency withaccountofpublicsupervisionoveref- in investmentprospects,reliabilityandtranspar- nience ofshareholdersandconsumers,increase further aspiretoachievethebalanceofconve- the periodof2011-2014. re-registration ofrightsforuselandplots tion oftitletorealestateobjects,registration/ territory ofMoscowandRegion;registra- owned byOJSC«Mosenergo»andlocatedonthe facilities; consolidationofelectricgridfacilities anti-sabotage securityofCompanypowergrid prospect eventsforincreaseinantiterroristand Company areasofactivityforthenear-term The BoardofDirectorsJSC«MOESK»will The BoardofDirectorsscheduledasthecore Chairman oftheBoard ofDirectors Yours faithfully, N.N. Shvets 7 MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

DEAR SHAREHOLDERS,

Last year JSC «MOESK» confirmed the Com- pany's status as the entity which has held one of the leading positions within the power grid complex of the country for five years. The year of 2010 became a serious test for viability of JSC «MOESK». We were examined by climatic cataclysms such as heat waves and widespread fires in summer and «icy rain» in winter. Nevertheless, the power engineers of the Company managed to pass this examination «with honours» having demonstrated capability to work in any environment. On the whole we can describe the year of 2010 as a successful one. Productive supply of 8 electric power in 2010 increased up to 74.2 bln. kWh. The core Company activities to have been focused on in 2010 were support of reliable and SPEECH OF THE GENERAL continuous power supply for consumers of the DIRECTOR OF JSC «MOESK» Moscow Region, optimization of capital investment structure and increase in operating efficiency. In 2010 the Company implemented a large- scale investment program in the amount of 19.5 bln. rub. The value of connected capacity reached 991 MW. Increase in efficiency of capital construction provided an opportunity to reduce the amount of work in progress by approximately 10 bln. rub. For the purpose of increase in operating efficiency, JSC «MOESK» introduced process-oriented methods for management, standardization and optimization of major business-processes. For resolution of various issues we created matrix elements – corporate teams of highest performance. HR managementsystem. Company workedforthecreationofappropriate production reliabilityandefficiencyin2010the cluded anewCollectiveagreement.To ensure mentation ofefficientsocialpolicyhavingcon- component inthetariff. expenses andincreasetheshareofinvestment provide forefficientmanagementofoperating of returnoninvestedcapitalwhichshallfurther of anewtariffmanagementscheme–method of arrangementsforadoptionbyJSC«MOESK» the levelof15.6bln.rub. ance withitsannualaccountingreportsreached amount of7bln.rub.theCompanyincompli- having doublednetprofit:withitsestimated accounts payableby12bln.rub.,andnearly aged tooptimizetheleveragehavingdecreased sition ofJSC«MOESK».Thus,theCompanyman- nomic indicessuggestsanopinionofasteadypo- corporate siteoftheCompany. for requeststobetrackedbythecustomervia logical connection,tointroducethemechanisms for recordandhandlingofrequeststechno- nor consumers,toimprovetheelectronicsystem Company madeeffortstooptimizeworkwithmi- consumers inMoscowandRegion.The nological connectiontothepowergridof17787 term prospect,JSC«MOESK»providedfortech- sphere oftechnologicalconnectioninthenear regional distributioncompaniesinRussiathe proach. Eagertojointheleadersamonginter- cy aimedatpromotionofcustomer-orientedap- In 2010JSC«MOESK»proceededwithimple- Special attentionshallbepaidtocompletion Positive dynamicsofthekeyfinancialandeco- JSC «MOESK»in2010proceededwiththepoli- and commitment. who displayedanexampleofexcellentteamwork come totherescueandindependentcontractors ing companiesofJSC«IDGCHolding»whohave disasters aswellcolleaguesfromotheroperat- elimination ofsevereconsequencesnatural to theCompanyemployeesparticipatingin the field. position ofonetheleadingcompanieswithin set upbyJSC«MOESK»andthereforekeepthe shall provideforsuccessfulcompletionoftasks financial andproductionresources capacity, we cansurelyclaimthataccumulatedworking nological connection; region; ning; and increaseinthequalityofinvestmentplan- tivity bymeansofreductioninconstructioncosts customer interruptionandqualityindices; rendered asdeterminedbygenerallyaccepted 2020: account ofdevelopmentplansuptotheyear implementation ofthepurposesasfollows,with We wouldliketofurtherexpressourgratitude In follow-upoftheCompanyactivityin2010 – capitalizationgrowth. – ensuringofavailabilityservicesfortech- – innovationsandenergyefficiency; – expansionofCompanyrepresentationinthe – increaseintheefficiencyofinvestmentac- – reductioninoperatingexpenses; – ensuringofreliabilityandqualityservices The Companyintendsin2011toproceedwith General Director Yours faithfully, A.P. Konovalov 9 MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

SCHEDULE OF MILESTONES

JANUARY ◆ JSC «MOESK» held a conference of the veterans of war and labor. ◆ JSC «MOESK» improved power supply for Melikhovo mansion house in the Chekhov district in Moscow area.

FEBRUARY ◆ Completion of overhead transmission line of 220 kV «TPP-26 – Yasenevo».

MARCH ◆ Andrey Pavlovich Konovalov was elected the General Director of JSC «MOESK». ◆ JSC «MOESK» paid out coupon profit for bonds of series 01 in the amount of 40 rubles 14 copecks for one bond at the tariff of 8.05%. The overall amount of payments for the seventh coupon made up 94.6 mln rub. ◆ The annual report of JSC «MOESK» was ranked the first in the nomination «The Best Annual Report» as of the results of the VIth competition of annual reports and corporate sites of the electric power industry enterprises in «Energorynok» periodical. ◆ Completion of major equipment installation for «MGU» substation of 110/20 kV located in the Western district of Moscow.

APRIL ◆ The 1st of April, 2010 was the 5th anniversary since incorporation of JSC «MOESK». ◆ The Board of Directors of JSC «MOESK» approved the Business-plan including Company investment program for the year 2010. ◆ JSC «MOESK» held a research-to-practice conference with the participation of power 10 engineers from Germany.

MAY ◆ Power engineers of JSC «MOESK» expeditiously eliminated consequences of hurricane in the Moscow Region. ◆ JSC «MOESK» provided for power supply of a new section of Lyublinskaya metro line – metro stations «Maryina Roshcha» and «Dostoyevskaya». ◆ A new Collective agreement was signed by JSC «MOESK».

JUNE ◆ JSC «MOESK» was awarded with a diploma of a participant of international «Echwatech-2010» exhibition. ◆ The Board of Directors of JSC «MOESK» approved the Annual complex program for competitive and governed non-competitive procurement of JSC «MOESK» for 2010. On June 30, 2010 JSC «MOESK» held an annual General shareholders’ meeting in follow-up of the year 2009. ◆ Following reconstruction «Semyonovskaya» substation was put into operation in the south-west of Moscow. ◆ JSC «MOESK» initiated a campaign «Fair kilowatt» to detect cases of unauthorized connection to the power grid of JSC «MOESK».

JULY ◆ Affiliated branch of JSC «MOESK» – High-Voltage Cable Networks ensured connection of two cable lines of 110 kV: «Butovo – Grach» and «Novo-Orekhovo – Borisovo». ◆ Power was supplied to a new residential complex in Khamovniki district. ◆ A Social report of JSC «MOESK» as of 2009 was published.

AUGUST ◆ Power engineers of JSC «MOESK» restored power supply of socially significant facilities and residential properties in the residential areas of Moscow Region having suffered from fire. ◆ Following reconstruction «Sokolniki» substation of 110/10/6 kV was put into operation in the Eastern administrative district of Moscow. SEPTEMBER NOVEMBER DECEMBER OCTOBER ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ of Pediatric Hematology, OncologyandImmunology. ◆ kV locatedinthecenterofMoscow. and connectedfourregulating transformersatthe«Yelokhovskaya» substationof220/110/10 ◆ ◆ ◆ ◆ ◆ ◆ ◆ as thecompanyappreciably improving itstransparency startingfrom 2008. transparency ofRussiancompanies intheyear 2010,JSC«MOESK»beingmentionedtherein «The BestAnnualReportofElectricPower SupplyIndustrySector». «RTS» theannualreport ofJSC«MOESK»as2009becamethewinnerinnomination completed. to thestandards ISO9001:2008,OHSAS 18001:2007andISO14001:2004wassuccessfully «100 BestRussianCompanies.EcologyandIndustrialSafety». conditions. issues related tooccupational safety. was awarded adiplomaoftheMoscowGovernment foractive assistanceinthesettlementof disturbances atelectricgridfacilities. 2010 ascompared to56thin2009. coupon madeup94.6mlnrubles. copecks foronebondatthetariffof8.05%.Theoverall amountofpayments fortheeighth «MOESK». Yegoryevsk». reconstruction ofhigh-voltage power transmissionline«Shature –Bruski»,«Bruski amount of450mlnrublestothefullestextent. management systemsubject tothemethodofreturn oninvested capital. years 2011–2015. operating andtechnological control systemforelectricgridcomplex ofJSC«MOESK»forthe power supplyinthemodeofcontinuousoperationresidential areas ofMoscow Region. program ofJSC«MOESK»fortheyear 2011. honour andcertificate«For Environmental Safety». of NationalEnvironmental Policy intheRealEconomySector»wasawarded withamedalof of Russia». JSC«MOESK»completedworks forpower supplyoftheFederal Research andClinicalCenter CentralElectricNetworks –affiliatedbranchofJSC«MOESK»completedinstallation,set-up TheInternationalRatingAgencyStandard &Poor’s publishedtheresults ofresearch of According totheresults oftheXIIIthCompetitionannualreports arrangedforbyOJSC Thesecondcomplianceauditinspectionforconformanceofthemanagementsystems Substation«Podushkino» wasputintooperationinOdintsovsky district. JSC«MOESK»wasawarded withagoldmedalandDiplomaofAwardee ofthecompetition JSC«MOESK»received apassportconfirmingitscapabilityforworking incoldweather JSC«MOESK»tookpartintheexhibition«OccupationalSafetyMoscow».TheCompany JSC«MOESK»conductedcomprehensive decision-related staffexercises foreliminationof JSC«MOESK»moved tothe39thplaceinratingofbusinessleaders«Finance-500» JSC«MOESK»paidoutcouponprofit forbondsofseries01intheamount40rubles14 TheBoard ofDirectors ofJSC«MOESK»approved theStatuteonDividendPolicy ofJSC AffiliatedbranchofJSC«MOESK»Western ElectricNetworks completedalarge-scale JSC«MOESK»paidoutdividendsforshares oftheCompanyinfollow-up2009 TheFederal Tariff SystemofRussiaacceptedadecision forJSC«MOESK»toadoptatariff TheBoard ofDirectors approved theProgram fordevelopment andincrease inreliability of Asaresult ofanomalousweather phenomenathepower engineersofJSC«MOESK»restored TheBoard ofDirectors ofJSC«MOESK»approved aBusiness-planincludinginvestment JSC«MOESK»subjecttotheresults ofAll-RussianEcologicalConference «New Priorities JSC«MOESK»tookpartintheInternationalspecial-purpose exhibition«ElectricNetworks SCHEDULEOFMILESTONES 11

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

12 pany». Company «MoscowRegionElectricGridCom- pany uponincorporation–OpenJoint-Stock dated. 29.06.2004No.1).NameoftheCom- shareholders’ meetingofJSC«Mosenergo» ration (minutesofthemeetingGeneral vantages: reorganized Companywitharangeofad- gion wasestablishedwhich provided the grid facilitiesofMoscowand MoscowRe- erating companyonthebasis ofelectric OJSC «MGEsK».Asaresult, aunitedop- reorganized through consolidationwith «MGEsK» withJSC«MOESK». nization through consolidationofOJSC of JSC«MOESK»intheformreorga- Moscow andRegiononthebasis terregional distributiongridcompanyof opted adecisiononincorporationofin- rectors ofOJSCRAO «UES ofRussia»ad- trical Equipment». JSC «MOESK»: filiated companieswitha100%share of Company establishedandregistered 3af- solidation. OnDecember29,2007the structure forthepurposeofbranchcon- events foramendmentoforganization Company». into JSC«MoscowUnitedElectricGrid Electric GridCompany»wasrenamed on June26,2006JSC«MoscowRegion annual Generalshareholders’ meeting city ofMoscowuponthedecision territory ofbothMoscowRegionandthe ergo». separation balancesheerofJSC«Mosen- of JSC«Mosenergo» incompliancewith gard topartoftherightsandobligations ◆ On June30,2008JSC«MOESK»was On February 29,2008theBoard ofDi- ◆ ◆ ◆ In 2007JSC«MOESK»arrangedfor As theCompanyactivitycovers the The Companyisasuccessorwithre- increase inmanageability ofelec- JSC«PlantforMaintenanceofElec- JSC«Moskabelenergoremont»; JSC«Moskabelsetmontazh»; «Mosenergo» through sepa- of reorganization ofJSC on April1,2005asaresult Company» wasincorporated О United Electric Grid United ElectricGrid Company «Moscow Joint-Stock pen ABOUT THECOMPANY 1 .1. POSITIONINTHEFIELD Region. of consumersontheterritory ofMoscow ers ontheterritoryofMoscow and96.6% residing andworking therein. gion ofRussiawithabout 18mlnpeople Region –themostenergy-consuming re- to theconsumersofMoscowand services fortransmissionofpower energy monopolies inthesphere ofrendering companies (TGC). resellers (WCR), totheterritorialgrid prises (MUE)),wholesaleconsumers- networks (municipalunitaryenter- to theCompanygridadjacent ergy totheendconsumersconnected «MOESK» furthertransmitspower en- jects oftheRussianFederation. JSC networks locatedintheadjacentsub- sian) Power Grid(UNPG)andfrom the from theUnifiedNational(All-Rus- jects ofwholesaleandretail markets grid from generatingcompanies–sub- trical grid. technical devicesofproprietory elec- transmission ofpower energy through ganization andtechnologyensuring an actionplanconsolidatedinitsor- cow andMoscowRegionbymeansof power energy ontheterritoryofMos- ing paidservicesfortransmissionof JSC «IDGCHolding». part ofthecompanygroup managedby tribution gridcompanyinRussiaandis «MOESK» isthelargest interregional dis- tion electricgridcomplexofthecountry. Russia owing80percent ofthedistribu- largest infrastructure organization of been heldbyJSC«IDGCHolding»–the majority interest inJSC«MOESK»has dation ofOJSCRAO «UESofRussia»–the opment programs. responsibility; region; of power energy intheterritoryof tricgrid facilities; JSC «MOESK»serves 98.3%ofconsum- JSC «MOESK»isasubjectofnatural The Companyreceives power toits The core Companyactivityisrender- As ofthepresent momentJSC Since July1,2008–thedateofliqui- ◆ ◆ ◆ consolidationofprospective devel- establishmentofasinglepoint creation ofaconsolidatedbalance 1 13

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

1.2. STRUCTURE AND CHARACTERISTICS OF ELECTRIC GRID FACILITIES

As of the present moment,oment,ment, JSC ««MOESK»MOESK» includes 7 affiliatedd brbranches:anches:

Moscow

14 ◆ Northern Electric Networks (NEN); ◆ Southern Electric Networks (SEN); ◆ Western Electric Networks (WEN); ◆ Eastern Electric Networks (EEN); ◆ Central Electric Networks (CEN); ◆ High-Voltage Cable Networks (HVCN); ◆ Moscow Cable Networks (MCN).

Electric grid facilities Moscow of the Company Moscow Basic technical specifications Moscow and Moscow are represented by Region Region overhead and cable transmission lines Total length of overhead transmission lines (in 1 611.8 65 534.5 67 146.3 and transformer chains), km. substations. Length of cable lines, km. 69 960.7 11 532.7 81 493.4

Total amount of high-voltage substations, pcs. 111 496 607

Fixed transformer capacity, MVA 20 832.4 23 208.8 44 041.2

Overall amount of transformer substations of distri- 17 243 14 192 31 435 bution networks, pcs.

Fixed transformer capacity of distribution networks, 20 554.4 4 775.6 25 330.0 MVA SERVICES QUALITY OFCOMPANY RELIABILITY AND INCREASE IN SERVICES RENDERED AND QUALITY OF INFRASTRUCTURE OF POWER GRID AVAILABILITY INCREASE IN the Companyisplanningtoprovide for: As partofprospective activitiesaimedatincrease inpower supplyreliability including: To increase power supplyreliability theCompanyimplementsanactionplan The core strategicgoalsoftheCompanyinmidtermare: availability ofdistributiongridinfra- the maximumlevel ofreliability and Federation, JSC«MOESK»aims toensure the metropolitan region oftheRussian The target indicesoftheProgram are: connection inMoscowfortheperiod JSC «MOESK»closedfortechnological for derestriction ofmainsubstations ture, theCompanydeveloped aProgram in availability ofpower gridinfrastruc- sure prioritydevelopment andincrease 1 While providing forpower supplyof ◆ transformers) ontheterritory ofMoscowwithintheperiod2011–2016; ◆ In 2010toarrangeforworks toen- ◆ ◆ ◆ ◆ ◆ self-supporting insulatedwire; ◆ ◆ Governments ofMoscowandRegion; emergencies incollaborationwith«SOUPS»,«FGCUES»,JSC,JSC«Mosenergo», ◆ survived itslifecycle; ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ increase inCompanyinvestment prospects andcapitalization. increase in energy efficiencyduetoreduction oflossesandintroduction ofinnovations; increase inavailability ofpower gridinfrastructure andqualityofservicesrendered; increase inpower supplyreliability; backupofcapacityfortechnological connectionsin2016theamountof2636MVA. input15647MVA oftransformercapacity(withaccount replacement ofoverloaded introduction ofbusinesscontinuitymanagementstandards. increase intheshare ofdiagnosticsaspartrepair stock; introduction ofreliability centered maintenance (RCM); introduction ofautomatedgridmanagementcomplex; increase intheshare ofunattendedequipment; increase intheshare ofcabletransmissionlinesandoverhead lineswiththeuseof increase intheshare oftelemechanizedsubstations; development andimplementationofregional program forprevention of system development andimplementationofprogram forrenovation ofequipment having introduction ofleanproduction methods. introduction ofautomatedgridmanagementcomplex; implementationofwidespread maintenanceandinvestment program; .3. TOP BUSINESSTARGETS ANDDEVELOPMENT PROSPECTS ABOUT THECOMPANY ment. and bestpracticeofcorporatemanage- quality standards forservicesrendered ogies andinnovations, adheringtoworld structure usingenergy efficient technol- in Moscow. connection ofconsumerstopower grid JSC «MOESK»toensure technological and backupoftransformercapacity derestriction ofclosedmainsubstations of 2012–2016,thepurposewhichis 1 15

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

To achieve target indices of the Program were scheduled events for reconstruction of 74 substations of 110-220 kV and 34 power transmission lines of 110-220 kV. As a result of implementation of events in the framework of the Program prior to 2016, 85 main substations of JSC «MOESK» will be derestricted as well as 7 main substations will be closed due to execution of JSC «MOESK» obligations under agreements for technological connection and natural load buildup. To increase customer service quality the Company developed a Program for implementation of actions aimed at promotion of customer-oriented approach of the company.

The core activities ◆ increase in efficiency of the work of Customer Service call-center due to installation stipulated by the of special-purpose equipment; Program are: ◆ reduction of average time for execution of agreements for technological connection due to introduction of lean production tools; ◆ introduction of additional services for increase in the customer awareness of the services rendered by the Company.

Moreover, to increase the transparen- as to track their requests for technologi- cy of information on availability of power cal connection. grid infrastructure, increase of customer Upon further development of Inter- satisfaction the Company developed and net-portal the consumers will be provid- launched an Internet-portal for techno- ed with the information on the backup logical connection to electric networks power and terms of main substations of Moscow which enables preliminary as- derestriction as well as with the oppor- 16 sessment by individual persons and legal tunity to implement the procedure of entities of the possibility of technologi- technological connection via the portal cal connection on the online map as well bypassing the service center.

INCREASE IN ENERGY In the course of the year 2010, within the framework of order «Concerning major EFFICIENCY activities for business development, increase in reliability, level of equipment operation and maintenance, automation and mechanization of operating processes, health maintenance of personnel», JSC «MOESK» implemented an action plan aimed at energy conservation effect including: ◆ shutdown of unloaded transformers; ◆ replacement of wire on the overloaded overhead lines by heavy-gauge wire; ◆ raids in conjunction with OJSC «Mosenergosbyt» for detection of unauthorized connection of consumers, unregistered and non-contractual consumption; ◆ checkup of engineering status of consumer metering devices for the purpose of reliable metering.

To arrange for works ensuring increase in energy efficiency in compliance with the requirements of the Federal Law «Concerning energy conservation and introduction of amendments to particular legislative acts of the Russian Federation» dated 23.11.2009 No. 261-FZ in 2010 the Company developed Programs for energy conservation and increase in energy efficiency of JSC «MOESK» in the territory of Moscow and Moscow Region for the period of 2011 – 2015.

The purposes of the Programs of JSC «MOESK» in the sphere of energy conservation shall be reduction in process losses of electric power upon transmission of electric power within the proprietory power grid.

Considering the fact that JSC «MOESK» is a major consumer of power resources within the framework of the above Programs the Company scheduled activities for increase in efficiency of use of power resources for business operations. DEVELOPMENT INNOVATIVE PROVISION FOR By thedevelopmentofProgram thefollowinginnovativeareas are considered: ship incarryingoutactivitiesasfollows: ergy ServiceCompanies». of JSC«MOESK»intheNon-Profit Partnership «AllianceofEnergy AuditorsandEn- dination ofeffortsforimplementation the Committeeisexpertwork andcoor- of innovative activity. Thepurposeof tions –acollegialbodyformanagement tee forEnergy Conservation andInnova- ity JSC«MOESK»establishedaCommit- purpose ofcarryingoutinnovative activ- August 19,2010. tivity approved bytheCompanyCEOon is aStatuteonCompanyinnovative ac- of innovations andR&DofJSC«MOESK» of anytierparticipatinginintroduction tions, rightsandliabilityofsubdivisions gal status,goals,targets, functions,rela- tation ofCompanyprograms inthefield «R&D CenterofIDGC»uponimplemen- and development facilitiesofOJSC partnership participantsandresearch use professional experienceofother of theCompanyfacilitiesaswell asto portunity toconductenergy inspection Service Companies»istogaintheop- liance ofEnergy AuditorsandEnergy «MOESK» ofNon-Profit Partnership «Al- The purposeofpartnershipactivityisassistancetothemembersPartner- On November 25,2010theBoard ofDirectors adoptedadecisiononparticipation transmission lines; ◆ of circuit anglesofpower plantvoltage (PMU-technologies); approaches andmanagementalgorithms,emergency control devicesandmeasurement and decrease theriskofdestabilization thereof withtheuseofcontemporarytechnical to thepower gridinthenormalandmaintenancemodestoprevent «locked»power synchronous power plantstability(includingplantsofminorgeneration)connected ◆ ◆ In compliancewiththeStatutefor The majordocumentdeterminingle- The core target oftheentry byJSC sphere ofenergy efficiencyandenergy conservation. ◆ in theenergy intensityinproduction; efficient andenergy savingtechnologies,non-hazardous power production, reduction ◆ services; ◆ technologiesformonitoring andincrease ofultimatethermalcapacitypower increase inultimateloadofpower supplyequipmentofJSC«MOESK» in termsof technologiesforrestriction of short-circuit current tariffsinthepower grid; development ofproposals tointroduce amendmentstothecurrent legislationinthe interactionandcollaborationintheissuesofdevelopment andintroduction ofenergy increase in qualityofworks inthesphere ofenergy auditandprovision ofenergy ABOUT THECOMPANY opment program. and implementationofInnovative devel- JSC «MOESK»arrangedfordevelopment high level ofcommercial commitment ment withahighestimatedreturn and prospective areas ofinnovative develop- cies andacademiccommunity. field-specific stateministriesandagen- ees ofJSC«MOESK»,representatives of pany energy efficiency. tive development andincrease inCom- delivery ofproposals forareas ofinnova- Company scientificandtechnicalpolicy, of innovative development program and green housegasesintheair. ing stationswhichreduces discharge of of generatedelectricityatthegenerat- and asaconsequence–intheamount provides fordecrease inthegridoutput ficiency intermsofreduction oflosses conservation andincrease inenergy ef- tivities withintheProgram forenergy ciency. of energy conservation andenergy effi- To aggregate resources forthemost The Committeeencompassesemploy- The effectofimplementationac- 1 17

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

◆ technologies for increase in ultimate load, reduction of overall dimensions, environmental safety, control of transformer status at the substations;

◆ technologies for automated selective remote control over power consumption (automated load management systems – ALMS);

◆ new types of manageable reactive power compensation devices and voltage management devices with the use of power electronics (including FACTS technologies);

◆ new principles of automated dispatcher process management and emergency control devices with all the necessary real-time electric computations using contemporary information technologies (including packet switching and service integration for various sub-systems of «smart power grid» of JSC «MOESK»);

◆ technologies for use of distributed generation, hydrogenous energy storage units and high-capacity accumulators with their installation at the substations;

◆ technologies of undersized cubicle switchboards requiring minimum construction and installation works;

◆ technologies for the development of «smart» power metering and power management systems (smart metering);

◆ technologies for reduction in specific consumption of power resources in the buildings, structures, constructions owned by JSC «MOESK» by no less than 5% per annum for achievement of industry average indices typical for similar foreign companies;

◆ information technologies to increase the efficiency of production and business process management;

◆ organizational methods for reduction of losses and improvement of production and 18 business processes. To assess expedience of innovative the Ministry of Energy of the Russian projects JSC «MOESK» in 2010 arranged Federation. for work on innovative project review The technological platform represents engaging field-specific scientific insti- a public-private partnership in the field of tutions. innovations and is aimed at the creation In the fiscal period JSC «MOESK» of prospective commercial technologies, joined the technological platform new products (services) as well as engage- «Smart Power System of Russia». The ment of additional resources for research originators of the technological plat- and development for the purpose of inform were «FGC UES», JSC and Federal troduction thereof at the Russian power State Institution «Russian Energy grid facilities to increase efficiency, reli- Agency», the platform coordinator is ability and safety of its activity.

INNOVATIVE ◆ Introduction of high-temperature superconducting cable line at the section from PROJECTS BEING «Dynamo» substation (partners: OJSC «All-Russian Research and Development Institute IMPLEMENTED BY JSC for Cable Industry», OJSC «Energy Institute named after G.M. Krzhizhanovsky», OJSC «MOESK»: «Science and Technology Center of Electric Power Engineering», State Technical University Moscow Aviation Institute).

◆ Introduction of the system for control over wire status of overhead transmission lines as a means for management of loaded elements of grid infrastructure in normal and post-fault operation modes and increase in the throughput of overhead lines.

INCREASE One of the major reasons for increase in investment prospects of JSC «MOESK» is IN COMPANY adoption by the Company of RAB-management system which enables to include in INVESTMENT the tariff a substantiated tariff of return on invested capital making investments PROSPECTS AND in shares and debentures of JSC «MOESK» attractive to investors. CAPITALIZATION TARGETS: OBJECTIVES AND THE COREWORK «MOESK» COMPLEX OFJSC OF POWER GRID DEVELOPMENT PROSPECTIVE capitalization may include: The majorfactors forincrease inCompanyinvestmentprospects and shall serve ground forlong-term in- and higherfortheperiod upto2020 Region withthevoltage of110(35) kV ment schemeforpower gridofMoscow work foractualizationofthedevelop- gram forcostreduction. the amountofleverage, reduced expenses fordebtmanagement,implementedthepro- prospects: developed andintroduced acorporateriskmanagementsystem,decreased for power gridofMoscowRegionwith actualization ofdevelopment scheme OJSC «Institute«Energosetproject» for «MOESK» concludedanagreement with complex onNovember 18,2010JSC prospective development ofpower grid to ensure appropriate andcoordinated power industry»dd.17.10.2009No.823 for prospective development ofelectric «Concerning schemesandprograms Government oftheRussianFederation ◆ ◆ ◆ Decisions adopteduponexecution of In 2010theCompanyimplementedanactionplanaimedatincrease ininvestment ◆ be includedintheinvestment program of JSC«MOESK»; re-equipment ofcurrent power gridfacilitiesasaresult thereof proposals are offered to assessment ofdemandininvestment resources forcommissioningofnewandtechnical prospects upto2020withdelivery ofproposals forreduction thereof aswell as substations/power plantsofMoscowpower systemfortheperiodupto2015with of 110(35)kVandhighertypicalforpower system,calculationoffaultcurrent for ◆ Moscow region asawholeuponavailability ofreliable power supplyoftheconsumers; based thereon ofthedevelopment schemeforpower gridofseparateenterprisesand higher withintheperiodupto2015withprospects upto2020andactualization ◆ equipment withintheperiodupto2015withprospects upto2020; (35) kVandhighertoberecommended forexpansion,reconstruction andtechnicalre- ◆ In compliancewithResolutionofthe a limitedlevel ofshort-circuit current. ◆ power compensationwithinthepower system; balance adjustmentofMoscowpower systemandelaborationofactivitiesforreactive of overhead power transmission linesintocablelines,assessmentofreactive power ◆ ◆ decrease inthecostofborrowed capital; increase ofcredit rating; reduction ofrisks; decrease inoperatingexpenses. Electriccomputationinnormalandpost-faultoperationmodesofthepower grid Systemresearch underlyingsubstantive development ofpower gridof110(35)kVand Amendmentofthelistnewlyerected aswell ascurrent power gridfacilitiesof110 Elaborationofapproaches forthedevelopment ofpower gridofMoscowRegionwith Analysisofprospective layout of the gridof110-220kVwithaccountrearrangement Actualizationofelectricpower balanceofMoscowpower system; ABOUT THECOMPANY Region. power industryofMoscowand schemes andprograms forelectric execution ofprospective development well asshallbeaccountedfor upon vestment program ofJSC«MOESK»as and OJSC«Gazprom promgaz». «APBE» (Energy Forecasting Agency) Dispatching Office,«FGCUES»,CJSC branch of«SOUES»MoscowRegional Region, JSC«IDGCHolding»,affiliated mittee forFuelandEnergy ofMoscow and Energy EconomyofMoscow,Com- ticipation oftheDepartmentfor This project wasdeveloped withthepar- JSC «MOESK»fortheperiodupto2020. the voltage of110(35)kVandhigher Fuel 1 19

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

20 2009 –2010: electric power in Actual lossesof as of2010: operating activity Results ofCompany in 2009–2010: power transmission related toelectric scope ofservices Dynamics ofthe 2009 (%). 2 grid output. 0.14% asrelated totheelectricpower losses amountedto116.9 mlnkWhor put by4.17%reduction ofelectricpower riod of2009withthegrowth ofgridout- output. Ascompared tothesimilarpe- 9 power gridofJSC«MOESK»madeup higher. pared totheindicesof2009(69920.4mlnkWh)isby2401.7kWhor3.43% related toelectricpower transmissionamounted to72322.1mlnkWhwhichascom- Total forJSC«MOESK» Moscow Region Moscow ocw46021.847461.0860.02 -0.3 -0.14 8.6 -122.2 -116.9 11.20 11.10 11.15 4794.6 4519.9 9314.5 11.18 11.40 11.29 4650.2 4400.9 9051.1 Total forJSC«MOESK» Moscow Region Moscow ocw4 0. 8005474611.20 11.10 11.15 4794.6 4519.9 9314.5 38010.5 36197.1 74207.6 42805.1 40717.0 83522.1 Total forJSC«MOESK» Moscow Region Moscow , 314.5 mlnkWhor11.15%ofthegrid Actual lossesofelectricpower inthe year the in losses actual and (%) 2010 year ** Calculatedasadjustment(%)multipliedbyactualgridoutput in2010anddividedby100%. the in losses actual between difference a as Calculated * Calculatedasadifferencebetweenactuallossesintheyear2010 (%)andactuallossesintheyear * Summarizing theresults ofwork ofJSC«MOESK»in2010thescopeservices S .1. TRANSMISSIONANDDISTRIBUTIONOFELECTRICPOWER Name Name Name i i th l W l W l W* %* mlnkWh** % mlnkWh % mln kWh Grid output,mln 69 920.4 33 083.0 36 837.4 lt 092010 2009 kWh OPERATING ACTIVITY Scope ofservicesrelated toelectricpower transmission,mlnkWh 0921 Adjustment 2010 2009 f k Productive supply, f 232124173.43 4.66 2.33 2401.7 1543.1 858.6 72 322.1 34 626.1 37 696.0 J mln kWh SC of theyear 2009by68.2mlnkWh. es ofthefiscalyear are lower thanlosses ble astopower consumptionactual loss- Under theconditionsof2010 compara- appropriate increase ofvariable losses. consumption (gridoutput)by2.89%and was stipulatedbythegrowth inpower as related tothesamein2009Moscow Losses ofelectricpower MO Growth ofelectricpower lossesin2010 ES K i l W % mln kWh mln kWh 20 10 t Adjustment h Losses f % i 2 21

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Compliance with Electric power losses allowed losses of Allowed losses for the Name Actual losses in 2010 Adjustment electric power for year 2010 the year 2010: mln kWh %* mln kWh % mln kWh*** %** Moscow 4 741.7 11.35 4 794.6 11.20 -64.2 -0.15

Moscow Region 4 600.9 11.41 4 519.9 11.10 -126.2 -0.31 Total for OJSC «MOESK 9 342.6 11.38 9 314.5 11.15 -192.1 -0.23

* A percentage of allowed losses is specified which is approved in the tariff and balance decisiondecision. ** Calculated as the difference between actual losses in the year 2010 (%) and allowed losses in the year 2010 (%). *** Calculated as adjustment (%) multiplied by actual grid output in 2010 and divided by 100%.

Execution of the Electric power losses business plan on Name Plan for 2010 Actual losses in 2010 Adjustment part mln kWh % mln kWh % mln kWh** %* of non-exceedance Moscow 4 762.0 11.20 4 794.6 11.20 0 0 of the level of electric power Moscow Region 4 457.6 11.20 4 519.9 11.10 -40.7 -0.1 losses as of 2010: Total for OJSC «MOESK 9 219.6 11.20 9 314.5 11.15 -41.8 -0.05 22

* CCalculated l l d as a diffdifference bbetween actual l and d estimated i d llosses iin the h year 202010 0 (%)(%). ** Calculated as adjustment (%) multiplied by actual grid output in the year 2010 and divided by 100%. Tariff of electric power losses for the 11.20% of the grid output. In follow-up of year 2010 approved by the Board of Direc- the year 2010 actual electric power losses tors in the Company business plan for the are by 41.8 mln kWh or 0.05% lower than year 2010 made up 9 219.6 mln kWh or those approved in the business plan.

2.2. ENERGY CONSERVATION AND INCREASE IN ENERGY EFFICIENCY In compliance with the requirements of the Federal Law «Concerning energy conservation and increase in energy efficiency and amendment to the particular legislative acts of the Russian Federation» dated 23.11.2009 No. 261-FZ as well as requirements approved by the resolution of the Regional Energy Commission of the city of Moscow dated 01.01.2010 No. 108 and instruction of the Committee for Fuel and Energy of the Moscow Region dated 23.09.2010 No. 40 in 2010 the Company elabo- rated drafts of Programs in the field of energy conservation and increase in energy efficiency of JSC «MOESK» on the territory of Moscow and Moscow Region for the period of 2011-2015. In compliance with the requirements of the regulatory bodies programs in the field of energy conservation were developed for the term of Company investment programs.

The target indices for implementation of Program of JSC «MOESK» in the field of energy conservation on the territory of Moscow are: ◆decrease in electric power losses upon transmission of power through distribution grid up to 9.4% of the grid output in 2015. Reduction of losses for the period of 2011 – 2015 shall amount to 929 897 thousand kWh; cold-water supply thermal power electric power including: tracts (contractsforsale) on thebasisofsupplycon- Power resources supplied Name following projects forenergy conservationandincrease inenergy efficiency: Achievement oftarget indicesisplannedduetoimplementationofthe Moscow Regionare: The target indicesforimplementationofProgram ontheterritoryof of energy efficiencyandenergy con- Company todetermineactualindices ties andtechnologicalprocesses ofthe istrative buildings,production facili- conduct energy inspectionofadmin- In 2011JSC«MOESK»isplanningto rub. incl.VAT rub. incl.VAT rub. incl.VAT rub. incl.VAT thous. kWh thous. m thousand thousand thousand thousand measure- Units of for proprietoryandeconomicneeds. ◆ ◆ ◆ ◆ ◆ ◆ ◆ up to9.3%ofthegridoutputin2015. ◆ ◆ 2015 by1411thousandkWh. 2015 by466thousandkWh. ment installationofenergysavinglampsforthepurposereductioninpowerconsumption adoptionofahigher voltageclass; developmentofdistributionpowergrid20kV, implementationofactivitiesforfiscalpowermetering; increaseinthethroughputofpowertransmissionlines35-220kV; replacementofoverloadedandobsoletetransformers6-10kV; replacementofoverloadedandobsoletetransformers35-220kV;    Gcal decrease intheelectricpowerconsumptionforeconomicneedsperiodof2011– decrease intheelectricpowerconsumptionforeconomicneedsperiodof2011– decrease inelectricpowerlossesupontransmissionofthroughdistributiongrid 3 9 2. 6 9. 60055 6. 2 2. 109926.8 128020.1 59269.9 373285.5 66000.5 365478.8 169196.7 254315.3 194 020.6 231378.0 627600.8 596 856.8 7402161091 7. 2 3. 9. 166.8 3769.2 199.5 4078.4 21039.6 125934.1 12651.1 26923.6 28120.6 17270.7 35576.3 33298.7 126100.9 38637.7 8504.2 17 470.2 39123.3 44618.3 16420.3 13818.1 12 582.6 14623.4 59677.3 15592.6 40 741.7 72738.9 15402.2 51 168.9 47922.1 54 525.5 lne culPandAta lne Actual Planned Actual Planned Actual Planned AND ECONOMICNEEDSOFJSC«MOESK»IN2010 DATA ONPOWER CONSUMPTIONFOROPERATING S MEK ocwMoscowRegion Moscow JSC «MOESK» OPERATING ACTIVITY tive ones. energy savingactivitiesbymore effec- on partofreplacement oflessefficient ergy conservation program isplanned ergy inspectionanadjustmentofEn- servation potential. Asaresult ofen- 2 23

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Units of JSC «MOESK» Moscow Moscow Region Name measurement Planned Actual Planned Actual Planned Actual

thousand 1 751.8 1 462.7 - - 1 751.8 1 462.7 rub. incl. VAT hot-water supply thous. m3 25.8 21.7 - - 25.8 21.7

thousand 1 196.5 1 147.4 - - 1 196.5 1 147.4 rub. incl. VAT natural gas thous. m3 335.0 320.0 - - 335.0 320.0

thousand 238 897.1 258 131.9 81 769.1 77 739.6 157 128.0 180 392.3 rub. incl. VAT car petrol thous. t. 8 309.9 9 419.2 2 829.5 2 894.6 5 480.4 6 524.6

thousand 97 239.3 108 502.9 59 511.6 60 036.4 37 727.7 48 466.5 rub. incl. VAT diesel fuel thous. t. 3 380.5 3 833.7 2 038.1 2 126.1 1 342.4 1 707.6

* – excess of actual consumption of thermal power and cold-water supply over estimated indices in Moscow are attributable to the absence of estimated consumption values for the above resources in the 24 affiliated branch Moscow Cable Networks. All points of power resources delivery JSC «MOESK» as part of priority activ- in Moscow as well as affiliated branches ity implements an action plan for en- Northern Electric Networks and Eastern ergy conservation aimed at optimization Electric Networks are furnished with me- (reduction) of the tariff of losses. Costs tering devices. As to the affiliated branch of implementation of activity program Western Electric Networks: all points of for decrease in losses in the power grid delivery of electric power and gas are fur- of JSC «MOESK» were provided for by nished with metering devices; there are the Company maintenance program and 11 points for thermal power delivery, 3 made up 450 mln rub. of them requiring installation of meters; there are 39 points of cold-water supply, As a result of activities aimed at pre- 9 of them requiring installation of me- vention of increase in losses the effect ters. As to the affiliated branch Southern due to implementation of organizational Electric Networks: all points for delivery arrangements amounted to 186.2 mln of electric power and gas are furnished kWh. Reduction of losses due to imple- with metering devices; there are 7 points mentation of technical activities made for delivery of thermal power, 5 of them up 64.3 mln kWh. Reduction of losses requiring installation of meters; there are due to implementation of activities for 33 points of cold-water supply, 9 of them metering system improvement made up requiring installation of meters. 297.8 mln kWh. Area of production facilities of JSC «MOESK» made up 802 218.9 m2 includ- The overall economic impact from im- ing in Moscow – 653 082.2 m2 and in plementation of technical activities in Moscow Region – 149 136.7 m2. 2010 made up 174.8 mln rub. year 2010 power lossesforthe reduction ofelectric The core activitiesfor tractual consumption made up 182.1 mln tractual consumption madeup182.1mln of detectionunregistered andnon-con- action planforreduction oflossesonpart tion of270.7mlnkWh;the effectofthe contractual andunregistered) consump- mln kWh,detectionofunaccounted (non- increase inlossestheamountof52.4 complexes whichenabledprevention of elimination ofviolationsinthemetering These activitiesresulted indetectionand 86 thousandpower meteringcomplexes. (instrumental) inspectionswere heldat replaced intheyear 2010. cal meteringdeviceswere installedand JSC «MOESK»more than7thousandfis- for reduction oflossesinpower grid of elimination ofelectricpower imbalance(monthly) distribution zones,relay stations,relay stationfeeders(6-10),substations, Execution andanalysisofsupply-and-demandfortheaffiliatedbranches, contractual consumption detection ofunauthorizedconnectionconsumers,unregistered andnon- Arrangement forraidsinconjunctionwithOJSC«Mosenergosbyt» for apartment houses,checkupoftheirengineeringstatus power consumption, technicalrecord devicesinthepointsofdelivery to UES», bylegalentitiesandresidential subscribers,control over thelevel of 431.4 plants, substationsadjacenttoAO-energo (overhead tie-lines)and«FGC Arrangement forreliable readings ofthemeteringdevicesatpower Activities forreduction ofnon-technicalelectricpower lossesincluding: kV, adoptionofhighervoltage forthelines) the transformersofnewstandards at thetransformersubstationsof6-10 the greater capacity, replacement oftransformersoldGOSTstandards for 0.8 kV, replacement oftransformersintransformersubstations6-20kVfor Other activities(optimizationofpointscablelinedisconnection6-20 Load compensationinthetransformersubstationsandnetworks of0.4kV optimization ofpower gridduetoconstructionofcablelines6-20kV Replacement ofwire attheoverloaded overhead linesbyheavy-gaugewire, 116.9 (0.4 –6-10kV)andvoltage transformers(6-10kV) according totheProgram forreplacement ofmeters,current transformers Checkup ofelectricpower metersandtechnicalactivitiestoreduce losses Activities forreduction oftechnicalelectricpower lossesincluding: In the course of the year 2010 technical In thecourseofyear 2010technical Within theframework ofactionplan Name ofactivity OPERATING ACTIVITY replaced orrepaired. sand meteringcomplexes were installed, ing. Thus,asof2010more than1.5thou- points oftechnicalelectric power meter- we tookeffortsforfurnishingadditional losses, theirlocalizationand elimination tailed analysisofreasons forincreased vious years. included kilowatt-hours«lost»inthepre- supply ofelectricpower fortheyear 2010 (not exceeding3years). Thusproductive cal inspectionorduetolimitationperiod eration sincethemomentoflasttechni- regulatory legalactsoftheRussianFed- is accomplishedincompliancewiththe tric power underadditionalcharge acts kWh. Calculationofunaccountedelec- To arrangeforworks foramore de- Reduction oflosses, mln kWh 210.7 220.7 110.6 1.3 4.2 2 25

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Personnel of JSC «MOESK» to assess the scope of course of the year 2010 JSC «MOESK» implemented services related to electric power transmission on activities for meter reading: for residential users – a monthly basis pays visits to residential users and more than 1.3 points of delivery; for legal entities – provides for control readings of analytical metering more than 924.6 thousand points of delivery, at the devices installed for the legal entities. In total more power plants, substations adjacent to grid companies than 4.7 mln points of delivery to residential users (overhead tie-lines) and «FGC UES» – more than 21.3 and 300 thousand points of delivery to legal entities thousand points of delivery, in the points of delivery are located in the zone of operating activity of JSC to apartment houses as well as more than 68.6 thou- «MOESK» (including in Moscow: more than 3.8 mln sand points of technical metering. The Company con- points of delivery to residential users and more than ducted more than 2.4 mln inspections of readings and 198.2 thousand points of delivery to legal entities; reliability of information on the readings of metering in Moscow Region: more than 800 thousand points devices which increased the scope of productive sup- of delivery to residential users and more than 68.2 ply and as a consequence reduced accounted electric thousand points of delivery to legal entities). In the power losses by more than 200 thousand kWh.

Information Included in the Number of Won in the Number of acts executed productive supply of on the acts on claims filed court unregistered electric power thous. thous. thous. thous. thous. consumption pcs pcs pcs pcs kW h rub. kW h rub. rub. Total 4 562 85 409.0 - 3 376 70 052.8 - - - -

For legal entities 2 016 74 234.1 - 1 735 65 315.0 - - - -

For natural 26 2 546 11 174.9 - 1 641 4 737.8 - - - - persons

Paid according to Number of Won in the Information Number of acts executed on the acts on acts claims filed court thous. thous. thous. thous. non-contractual pcs pcs thous. rub. pcs pcs consumption kW h rub. rub. rub. Total 7 032 185 327.1 602 524.7 7 239 615 412.2 - - - -

For legal entities 4 903 168 440.3 565 800.1 5 389 595 849.1 - - - -

For natural persons 2 129 16 886.8 36 724.6 1 850 19 563.1 - - - -

Information on Not executed by the grid company introduction of including for the reasons as follows partial or full Useless visits of the restriction of electric team with no restric- power supply to tions introduced including the consumers – defaulters subject to claims of Power Power Supply Supply Company in Company Executed, pcs the year 2010: pcs disconnection Total, pcs Total, consumer Grid Company Supply Company Lack of technical capability for Cancellation by Power Supply Company, pcs Supply Company, Cancellation by Power Government No. 530 dd. 31.08.2010 Government Insufficient output to the Through the fault of Power the fault of Power Through Appendix No. 6 to the Resolution of Lack of act of emergency reserved quota reserved Lack of act emergency Through the fault of Regional Through Connection to the grid of other proprietor Number of claims from Power Supply Company, pcs Supply Company, Power Number of claims from Facilities related to the List defined by related Facilities OJSC 11 671 5 999 826 355 00 302 169 0 82 87 4 846 «Mosenergosbyt» dispute: indebtedness in repayment of consumers for held bytheservice Activities of losscompensation: power forthepurpose purchase ofelectric JSC «MOESK»for and payables of power transmission related to electric for theservices to JSC«MOESK» consumer payables Information onthe 2010: obtained intheyear transmission to electricpower services related the proceeds from Information on being considered inthecourt offirstinstance. the debtor. 25.12.2011. Theschedule of payments statedintheagreement isbeingexecutedby subject ofdebtrestructuring agreement withthetermofrepayment atthelateston execution, theremaining partofindebtednessintheamount107mlnrub.became 119 mlnrub.thedebtwasrepaid inparttheamountof12mlnrub.underwrit of were filedtothecourt: amount of4mlnrub.wascollectedinaccordance withextrajudicialprocedure. 4 mlnrub.wascollectedunderthewritofexecution as well as anindebtednessinthe claims ofJSC«MOESK»bythecourtsallinstances,an indebtednessintheamountof edness related totariffapplicationintheamountof126mlnrub.duedismissal of and madeup481mlnrub. 31.12.2010 includingindebtednessaccumulatedin2010wasreduced by64mlnrub. resolution, thecasesare beingresolved inthecourts. for electricpower transmissionmadeup545mlnrub.including: services related toelectric power transmission Consumer payables for of the year, mlnrub. of theyear, 4 4 0 8 7 49134 951 34 678 481 8708 545 5 648 as ofthebeginning Total 2) Aclaimonrecovery ofindebtednessindisputetheamount of70mlnrub.is 1) SubjecttotheclaimofJSC«MOESK»concerningrecovery ofdebtintheamount As toindebtednessintheamountof188mlnrub.accumulated in2010two lawsuits In thecourseofyear 2010JSC«MOESK»wrote off from thebalanceanindebt- As aresult ofactivitiesheldin2010theaccountsreceivable indispute asof The overall amountofindebtednessindisputeisincludedtheclaimsfiledfor As of01.01.2010theaccountsreceivable in dispute subjecttoserviceagreements ocw3 4 71213 7665 0 1.30 57909 37696 1.30 57132 37143 Moscow Moscow Region Region oa 087156212 23217621.26 107662 72322 1.26 105662 70847 Total including VAT    14mlnrub.–duetoabsenceofagreementontheamountelectricpower. 126mlnrub.–disagreementastothetermsoftariffapplication; 405mlnrub.–duetoabsenceofagreementonsubscribeddemand; indebted- Including dispute ness in consrcial Accountspayable Accounts receivable Amount ofpro- ductive supply, mln kWh 3744 3 .23 2 9731.22 49753 34626 1.22 48530 33 704 for servicesrelated to mission asoftheend electric power trans- of the year, mlnrub. of theyear, Consumer payables Total prvdbsns lnActualindices Approved businessplan including VAT Proceeds incl. VAT, mlnrub. OPERATING ACTIVITY indebted- Including dispute ness in Payables ofthegridcompany ginning of the year, mlnrub. ginning oftheyear, Accounted Average tariff for bythe grid com- compensation asofthebe- for electricpower forloss rub./ kWh excl. VAT, pany including VAT Not accounted for bythegrid company (in dispute) supply, mln productive Amount of kWh Payables ofthegridcompany of the year, mlnrub.includ- of theyear, Accounted compensation asoftheend for bythe grid com- for electricpower forloss incl. VAT, Proceeds mln rub. pany ing VAT Not accounted for bythegrid company (in tariff excl. dispute) rub. /kWh VAT, mln. Average 2 27

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Services related Payables of the grid company Payables of the grid company Cost of services for transmis- to electric power for services related to trans- for services related to trans- sion of electric power through mission through the United mission through the United transmission through the United National Power Grid National Power Grid as of the National Power Grid as of the United National for the year, mln rub. includ- beginning of the year, mln rub. the end of the year, mln rub. ing VAT Power Grid rendered including VAT including VAT by «FGC UES» in YEAR 2009 – 2010: Not ac- Not ac- Billed ac- Accounted for counted for Accounted for Accounted counted for cording to by the grid by the grid by the grid for by the by the grid invoices of company company (in company grid company company (in «FGC UES» dispute) dispute)

2009 138.88 - 7 029.86 7 029.86 175.90 -

2010 425.73 - 10 120.98 10 127.65 629.64 6.67

2.3. TECHNOLOGICAL CONNECTION Actual connection of capacity in 2010 made up 991 MW. including in the Moscow Region – 529 MW, in Moscow – 461 MW. The overall number of connected consumers amounted to 17,787; 12,811 among them on the territory of Moscow region, 4,976 – in Moscow.

Data on the 2009 2010 amount of proceeds Name of category Moscow Moscow Moscow Total Moscow Total from rendering Region Region 28 services related Actual connection, to technological 11 153 2 322 13 475 12 811 4 976 17 787 connection as of pcs 2010: Actually connected 286 494 162 266 448 760 529 382 461 688 991 070 capacity, kW

Proceeds from services related to technical connec- 2 926 6 544 9 470 6 660 12 285* 18 945 tion, mln rub. excl. VAT

* wiwithth account ooff procprocedureedure foforrap applicationplication of proceproceedsedsu under the agreements of Central Electric Networks in the area of responsibility of subdivisions in Moscow Region.

In the course of 2010 more than 44 thousand In the fiscal year as compared to the year applications for technological connection 2009, the number of executed agreements to the power grid were filed for the overall increased by 55.7%. capacity of 7 153 MW including: In the course of the year 2010, 34,610  35,408 applications for the capacity of agreements were concluded for the overall 3 041 MW – from the consumers on the capacity of 1,824.1 MW with the cost of 18 territory of Moscow Region; 137.4 mln rub. excl. VAT. Including in the  9 430 applications for the capacity of Moscow Region – 28,938 agreements for the 4,112 MW – from the consumers of Moscow. overall capacity of 1,491.4 MW with the overall As compared to the year 2009, the trend cost of 7 226 mln rub. excl. VAT; in Moscow – for rise in the number of applications from 5,672 agreements for the capacity of 332.7 privileged citizens has increased. The overall MW with the cost of 10 911 mln rub. excl. VAT. growth for the Company made up 96%: Apart from that 2 agreements for connection  In Moscow region the number of of «Arkhangelskaya» substation of 220 kV applications increased from 19,633 in the with CJSC «Rublyovo-Arkhangelskoye» and year 2009 up to 33,697; «Ilyinskaya» substation of 220 kV with OJSC «Energocenter».  In Moscow – from 951 applications up to 6,749. «MOESK»: connection ofJSC the technological agreements for and concluded applications Data onsubmitted Number ofsubmittedap- plications, pcsincluding: mitted applications,MW from 15upto100kWin from 15upto100kWin from 15upto100kWin from 15upto100kWin esta 5k nttl 1084642 2 27165639307 6566 32741 25722 4624 21098 less than15kWintotal esta 5k nttl133 0 7 8434 58 376 209 36 173 less than15kWintotal esta 5k nttl122 5 0 3345 43 302 153 21 132 less than15kWintotal 32365 5016 27349 20133 2598 17535 less than15kWintotal agreements, pcsinclud- Overall capacityofsub- incl. privilegedcatego- incl. privilegedcatego- incl. privilegedcatego- incl. privilegedcatego- concluded agreements, rm10u o70k 9 0 0 8 0 1991 804 1187 1707 609 1098 from 100upto750kW rm10u o70k 5 321126 239 67 172 211 53 891 158 263 from 100upto750kW 628 776 181 593 595 214 from 100upto750kW 379 483 170 313 from 100upto750kW Number ofconcluded Connection category nl aua esn 963912 1 10111232203 1182 31021 20614 951 19663 incl. naturalpersons nl aua esn 5 018371 372 15 357 168 10 158 incl. naturalpersons nl aua esn 1 013291 281 12 269 133 20 113 25458 incl. naturalpersons 1095 24363 17 786 2383 15403 incl. naturalpersons Overall capacityfor oeta 5 W2329523737734 347 387 532 239 293 more than750kW oeta 5 W23143796281174 208 966 357 134 182 223 69 more than750kW 113 140 55 85 5983 more than750kW 3763 2220 3707 1712 1995 more than750kW MW including: Index name/ including: total total total total ing: ries ries ries ries Moscow Region 3956423 5 54894044838 9430 35408 30357 6422 23 935 9173022 1 89856234610 5672 28938 22219 3092 19 127 4 5 9 9 1 2806 1713 1093 2396 950 1 446 6 6 2 4 1 7153 4112 3041 4526 1964 2 562 2 0515919688 159 529 551 30 521 6 2 8 9 3 1824 333 602 1491 30 1172 784 572 324 221 848 522 563 1170 23 258 499 912 14 2 57 142 77 65 128 47 81 812 5136 66 1 15 35 51 29 62 1 12 28 50 40 7 33 36 7 29 OPERATING ACTIVITY Moscow 092010 2009 Total forJSC «MOESK» Moscow Region Moscow Total forJSC «MOESK» 2 29

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Data on the structure 2009 2010 pattern of demand Pattern of demand for connection categories, Moscow Total for JSC Moscow Total for JSC for technological % Moscow Moscow connection for Region «MOESK» Region «MOESK» the connection less than 15 kW in total 6.74 1.83 4.61 12.37 1.40 6.07 categories: incl. natural persons 91.29 26.54 80.16 94.81 26.32 85.71

from 15 up to 100 kW 3.16 2.39 2.83 2.15 1.88 2.00 in total incl. privileged 36.15 14.04 28.04 50.10 8.82 27.76 categories

from 100 up to 750 kW 12.21 8.64 10.66 12.45 5.21 8.29

more than 750 kW 77.88 87.14 81.90 73.02 91.51 83.65

TOTAL: 100.00 100.00 100.00 100.00 100.00 100.00

2.4. MAINTENANCE AND OPERATION The overall action plan for completion of remedial works in 2010 was executed to the fullest extent and in accordance with the work nomenclature in compliance with the terms specified in the schedules for remedial maintenance of electrical equipment of power grid. In the course of the year we completed comprehensive maintenance of 37 substations of 35-220 kV including SS of 35-110 kV No. 116 «Solnechnogorsk», No. 46 «Butyrki», No. 414 30 «Kudinovo», No. 556 «Kukarino», No. 96 «Katuar», No. 649 «Severnaya», No. 744 «Mikhali», No. 648 «Volochanovo», No. 487 «Ryumino»; maintenance of 2,513 distribution and transformer substations of 6-10 kV, maintenance of 1,583.9 km. of overhead line of 35-220 kV and 2,994.7 km. of overhead line of 0.4-6/10 kV as well as 102.1 km of cable line of 35-220 kV and 282.1 km. of cable line of 0.4-6/10 kV on the territory of Moscow and Moscow Region. 1,970.7 ha of lines of route were cleared from scrubs. We completed overhaul repairs of lines of 35-220 kV with replacement of supports, wire and insulators including overhead lines of 220 kV «Rudnevo-Vostochnaya», overhead lines of 110 kV «Gorbunovo – Gorlovo», «Vorobyovo- Vakhromeevo», «Sheremetyevo – B. Rast», overhead lines of 35 kV «Vypolzovo – Krylovo», Valuyki – Veryovkino», Golytsyno – Komarovo».

The indices of 2010 Program maintenance program Indices 2009 planned actual completion,% completion as of the year 2010 Costs of overhaul repairs, mln rub. 3 832.2 4 248.8 4 270.3 100.5%

Maintenance of electric power transmission line of 253.8 286.8 285.7 99.6% 35-220 kV, mln rub.

Maintenance of substation equipment of 35-220 kV 800.2 724.0 788.4 108.9%

Maintenance of electric networks of 0.4-20 kV, mln rub. 1 521.7 1 694.2 1 680.7 99.2%

Clearance for overhead lines of 6-220, mln rub. 94.1 89.3 88.3 98.8%

Maintenance of overhead lines of 35-220 kV, km 1 402.0 1 552.8 1 583.9 102.0%

Maintenance of substations of 35-220 kV, pcs 43 37 37 100.0%

Maintenance of networks of 0.4-10 kV 2 483.9 3 024.8 2 994.7 99.0%

Clearance for overhead lines of 35-220 kV, ha 1 173.2 916.0 1 214.2 132.6%

Clearance for overhead lines of 6-10 kV, ha 995.4 794.6 756.4 95.2% 2010 Moscow fortheyear power energy in transmission of Tariff for the year 2010 in MoscowRegionfor power transmission Tariff forelectric dd. December25,2009No.38-Rthefollowingboilertariffswere approved fortheyear 2010: territory ofMoscowamounts to968.6rub./MWh 2 AND FEEFORTECHNOLOGICAL CONNECTION 31 of thecityMoscowin2010»approved theboilertariffssinceJanuary1,2010tillDecember power transmission rendered bythepower grid(energy supply)companiestotheconsumers 2009 No.120«Concerningimpositionofunified(boiler)tariffsforservicesrelated toelectric related toelectricpower transmissionbyJSC«MOESK»inMoscow: Moscow dd.December30,2009No.129approved thefollowingindividualtariffsforservices territory ofMoscowamountsto1 Item Item No. 2.1 2.2 No. 2.2 2.1 , In compliancewiththeResolutionofCommitteeforFuelandEnergy oftheMoscowRegion f S OS h MOESK JSC f i l f l i l f h f iff TariffT forpurchase ofelectricpower lossesforlosscompensation forJSC«MOESK»onthe The ResolutionoftheRegionalEnergy CommissionofthecityMoscowdd.December25,    As oftheyear 2010theResolutionofRegionalEnergy Commissionofthecity the on «MOESK» JSC for compensation loss for losses power electric of purchase for Tariff forpurchase ofelectricpower lossesforlosscompensationJSC«MOESK»onthe lttrf u.Mh870128714181434.9 Doubletariff 1411.8 1258.7 857.0 rub./MWh 2 Flattariff 1 lttrf u.Mh631 271 295 1423.24 Doubletariff 1289.53 1267.14 683.13 rub./MWh 2 Flattariff 1 .5. TARIFFS FORTRANSMISSIONOFPOWER ENERGY 2010 asfollows:

individual tariffforservicesrelated toelectricpower transmission–1057.85rub./MWh tariff forrepayment oflosses–163.67rub/MWh; tariff formaintenanceofnetworks– 399 networks tenance ofelectric – tariffformain- electric networks sumption (losses)in of technologicalcon- – tariffforpayment networks cal consumption(losses)inelectric – tariffforpayment oftechnologi- networks – tariffformaintenanceofelectric niao Meas-tunit Indicator niao Meas-tunit Indicator Tariff classesof electric power consumers (capacity) Tariff classesofelectricpower consumers(capacity) rub./MWh. u.Mh2. 04197348.6 159.7 70.4 27.9 rub./MWh OPERATING ACTIVITY month , 278.25 rub./MWh. 6 5 5 5 1 5 513313.1 616 953 658252 469 350 rub./MWh. u.Mh3.65.4105 248.11 100.51 53.04 38.86 rub./MWh VM- VI LV MV-II MV-I HV month , 252.3 rub./MWhpermonth; 7 3 8 6 1 7 575474 617470 586163 376 938 VM- VI LV MV-II MV-I HV Voltage raqnge Voltage raqnge 2 31

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Dynamics of average Increment Increment boiler tariff for Region 2008 2009 2010 electric power 2009/2008,% 2010/2009,% transmission in 2008 – 2010 on the Moscow 704.13 951.01 35.1% 1 320.15 38.8% territory of Moscow and Moscow Region, Moscow Region 741.83 1 034.24 39.4% 1 255.77 21.4% rub./MWh:

JSC «MOESK» 721.72 987.52 36.8% 1 289.33 30.6%

Adoption by JSC The order of the Federal Tariff Service No. 299 and Instruction of the Committee «MOESK» of tariff dated 30.12.2010 No. 500-e/5 approved for Fuel and Energy of Moscow Region dated management system adoption of the tariff management system 31.12.2010 No. 58-R approved long-term according to the for services for electric power transmission management criteria and necessary gross method of return on through the networks of JSC «MOESK» with proceeds (NGP) of JSC «MOESK» for the long- invested capital (RAB- the use of the method of return on invested term management period of 2011-2015 with management) capital since January 1, 2011. the use of the method of return on invested The Resolution of the Regional Energy capital (RAB). Commission of Moscow dated 30.12.2010

Long-term 32 management criteria Indicator 2011 in Moscow: Basic level of operating expenses, thousand rub. 12 118 399

Index of efficiency of operating expenses 1%

Full value of invested capital as of 01.01.2011, thousand rub. 239 549 500

Residual value of invested capital as of 01.01.2011, thousand rub. 119 774 500

Net working capital 5%

Tariff of return on capital including

2011 6% 2012 9% 2013 11% 2014 11% 2015 11%

Tariff of return on investments including

2011 12% 2012 12% 2013 11% 2014 11% 2015 11% Region: 2011 –2015inMoscow long-term periodof transmission forthe for electricpower tariffs ofJSC«MOESK» Dynamics ofaverage 2011 –2015inMoscow: long-term periodof transmission forthe for electricpower tariffs ofJSC«MOESK» Dynamics ofaverage in MoscowRegion: management criteria Long-term e okn aia 5% 1% 60274200 8197262 126810600 Net working capital Residual value ofinvested capitalasof01.01.2011,thousandrub. Full value ofinvested capitalasof01.01.2011,thousandrub. Index ofefficiencyoperatingexpenses Basic level ofoperatingexpenses,thousandrub. 2011 123.8 2011 93.14 Indicator 2012 138.4 Tariff ofreturn oninvestments including 117.52 OPERATING ACTIVITY 2012 Tariff ofreturn oncapitalincluding tariff «flattening». long-term managementofthemechanismfortransmission compared totheyear2014iscausedbyapplicationupon *Decrease inthetariffofJSC«MOESK»2015as 2013 159.5 132.39 2013 186.0 2014 143.89 2014 0511% 11% 11% 12% 12% 2015 2014 2013 11% 2012 11% 2011 11% 9% 6% 2015 2014 2013 2012 2011 184.0 159.51 2015 2015 2011 2 33

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Fee for technological Until March 1, 2010, the amount of the fee 2009 No. 6 for the purpose of distribution connection in Moscow for technological connection of consumers of the fee for technological connection in Moscow to the electric networks of JSC established by the resolution of the «MOESK» equaled the amount approved Regional Energy Commission of the city of by the Resolution of the Regional Energy Moscow dated December 22, 2008 No. 121 Commission of Moscow dated December 22, determined the components (shares) of 2008 No. 121. the companies in the overall amount of the The Resolution of the Regional Energy fee as follows. Commission of Moscow dd. March 12,

Company shares. rub./kVA

Voltage level in the Amount JSC «MOESK» on part of power OJSC Tariff coverage point of connec- of the fee. OJSC grid facilities related to: «United tion. kV rub./kVA «Energo- Energy complex» Company» High voltage Medium volt- level age level

Medium voltage 91 050 10 643.47 21 876.31 19 961.98 38 568.32 Within Sadovoye Koltso Low voltage 102 338 11 963.01 24 588.44 22 436.79 43 349.87

Between Medium voltage 81 466 9 523.13 19 573.59 17 860.77 34 508.59 Sadovoye Koltso and the Third Ring Low voltage 91 566 10 703.79 22 000.29 20 075.11 38 786.90 34 Road

Between the Medium voltage 70 266.4 8 213.93 16 882.70 15 405.35 29 764.51 Third Ring Road and MKAD Low voltage 78 978.9 9 232.40 18 976.03 17 315.50 33 455.08

Medium voltage 54 825.1 6 408.89 13 172.67 12 019.97 23 223.65 Outside MKAD Low voltage 61 622.8 7 203.52 14 805.93 13 510.31 26 103.12

Since March 1, 2010 the Resolution of the connection fixed by the resolution of the Regional Energy Commission of Moscow dd. Regional Energy Commission of Moscow dd. February 26, 2010 No. 9 fixed and introduced February 26, 2010 No. 9 the Resolution of the the amount of the fee for technological Regional Energy Commission of Moscow dd. connection of consumers to electric networks March 16, 2010 No. 14 in 2010 determined of JSC «MOESK» on the territory of Moscow. the components (shares) of the companies in For the purpose of distribution of the the overall amount of the fee as follows: amounts of the fee for technological Region connection inMoscow Fee fortechnological consumers inMoscow: connection for for technological share inthetariff JSC «MOESK» Distribution of 2008 –2010: territory ofMoscowin networks onthe connection toelectric for technological Dynamics ofthetariff 2008 –2010: territory ofMoscowin networks onthe connection toelectric Fee fortechnological of power receivers ofconsumerswiththe tariff ofthefeefortechnologicalconnection 9, 2009No.10-Rfixedandintroduced the and Energy inMoscowRegiondatedApril Koltso Sadovoye Within Ring Road and theThird Sadovoye Koltso Between Outside MKAD and MKAD Third RingRoad Between the «MOESK» in2008% Tariff coverage The ResolutionoftheCommitteeforFuel Average tariffof From 15kWupto10000kVA 2008 rub./kVA Share ofJSC 3370 8490 39 6861 10.6% 86836.16 23.9% 78499.05 63 357.00 16 70 04 44 -39.5% 34.48 10.4% 57.03 51.68 Power range,kW aaiyu o1 Wicuie550rub. incl.VAT foroneconnection Capacity upto15kWinclusive Medium Medium Medium Medium Voltage voltage voltage voltage voltage voltage voltage voltage voltage level Low Low Low Low «MOESK» in2009% Average tariffof 2009 rub./kVA Share ofJSC Amount 1 0 0454 0533 6704 2252 3152.48 22295.21 2804.75 16740.49 19836.00 50523.38 14893.97 20495.45 113 207 44950.53 18234.75 100 720 0 9 8381 5253 4984 9984 2820.65 19948.45 14978.41 45205.36 18338.13 101 291 0181 1.24 1.41 2.01 4.22509.52 17748.02 13326.20 40218.94 16315.32 90 118 8181 4.13 2.31 8.41 2.41898.27 13425.14 1688.86 10080.34 11 944.14 30422.83 2432.91 8968.32 12341.41 17206.23 68 168 27066.72 2164.52 12919.40 10979.96 15308.10 60 648 38991.19 11494.18 15817.27 87 367 34689.83 14072.37 77 729 of the rub./ OPERATING ACTIVITY kVA fee. in thepointofconnection,kV Company» «United Energy Voltage level OJSC ,1,2 V13197 6, 10,20kV 2009/2008% 2009/2008% . V15417 0.4 kV Increment Increment amount asfollows: on theterritoryofMoscowRegionin kVA tothedistributiongridofJSC«MOESK» connected capacitynotexceeding10000 complex» «Energo- OJSC Company shares. rub./kVA «MOESK» in2010,% Average tariffof 2010, rub./kVA voltage level Share ofJSC on partofpower grid High facilities related to: Tariff of thefeefortechnological connection ofcapacityrub./kW JSC «MOESK» (excluding VAT) voltage level Medium 2010/2009% 2010/2009% Increment Increment «Mosen- ergo» OJSC 2 35

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

The Resolution of the Committee for Fuel and Energy in Moscow Region dated 24.06.2010 No. Energy in Moscow Region dd. 09.04.2009 No. 25-R fixed the tariff of the fee for technological 10-R (as amended as of 08.04.2010 with the No. development to the buses of substation 12-R) fixed and introduced a standardized tariff «Sandarovo» of 6 kV of JSC «MOESK» in the for reimbursement of expenses of JSC «MOESK» amount of 15 366 rub./kW; for construction and reconstruction of power The Resolution of the Committee for Fuel and grid facilities upon technological connection of Energy in Moscow Region dated 24.06.2010 No. receivers of electric power consumers, power grid 25-R fixed the tariff for technological connection facilities with connected load of more than 10,000 to the buses of substation «Ignatovo» of 10(6) kV kVA on part of expenses for construction and of JSC «MOESK» in the amount of 16 209 rub./kW; reconstruction of substations with the voltage of The Resolution of the Committee for Fuel and 6/10/20 kV on the territory of the Moscow Region Energy in Moscow Region dated 15.07.2010 No. in the amount of 22 040 rub./kW. 28-R fixed the tariff of the fee for technological For the main stations for consumers in the connection to the buses of substation Moscow Region a fee for technological connection «Fetishchevo» of 10 kV of JSC «MOESK» in the was fixed for the substations as follows: amount of 17 254 rub./kW. The Resolution of the Committee for Fuel and

Dynamics of the tariff for technological connection to distribution power grid at the voltage level less than 35 kV on the territory of Moscow Region, 2008-2010:

Average tariff of 2008, rub./kW Average tariff of 2009, rub./kW Average tariff of 2010, rub./kW

9 425.91 13 338.00 13 338.00 36

2.6. INDUSTRIAL AND FIRE SAFETY

JSC «MOESK» carries out activity in the field А02-53068). The stated facilities are subject to re- of industrial safety on the basis of provisions of registration on 03.12.2015. the Federal Law «Concerning Industrial Safety of All hazardous production facilities of JSC Production Facilities» dd. 21.07.1997 No. 116-FZ. «MOESK» are insured and are furnished with valid The Company possesses at its disposal 96 sites civil liability insurance policies subject to the of hazardous production facilities including 25 agreement with OJSC «Capital Insurance». sites with the pressure vessels in operation, 70 JSC «MOESK» carries out its activity in the field sites with the hoisting machines and a site of gas of industrial safety based on the licenses as follows: consumption system.  for operation of explosion-hazardous Hazardous production facilities of JSC «MOESK» production facilities (hazardous production are affiliated branches exploiting vessels under facilities furnished with equipment under excess the pressure exceeding 0.07 MPa (air collectors), pressure exceeding 0.07 MPa or at the water hoisting equipment (cranes, scaffold trucks, hoists, temperature exceeding 115 degrees Celsius) dated derricks, elevators) and gas consumption system. 20.10.2006 No. EV-02-000952 (К), license is valid Hazardous production facilities are located in all up to 29.06.2011. the affiliated branches, vessels – in the Central,  for operation of explosion-hazardous Southern and Northern Electric Networks, gas production facilities (hazardous production consumption system – in the Western Electric facilities for acceptance, use, processing, formation, Networks. Based on the agreed hazard features storage, transportation, disposal of substances as a result of identification hazardous production able to form explosive mixtures with atmospheric facilities of JSC «MOESK» are referred to the second oxygen or with each other (combustible gases, hazard class. highly inflammable and combustible liquids, dust- Hazardous production facilities are registered producing substances)) dd. 12.07.2007 No. EV-02- in the State Register (certificate of registration 001323 (S), license is valid up to 12.07.2012. in the Central Department of Rostecknadzor No. table asbelow: safety are citedinthe field ofindustrial supervision inthe production indicators for performance of themain Data onexecution ..Nme feiiae iltos07 0 77 0 Numberofeliminatedviolations 5.1. 2.1. 1.1. 3 ubro ae fsadydet aad 020 2 0 14. Number ofcasesstandbyduetohazards 13. 12. 11. 10. № 9. 8. 7. 6. 5. 4. 3. 2. 1. commission forproduction supervision) industrial safetyrequirements (uponsubmissionof Number ofworkers heldliableforviolationsof industrial safety staff oftheenterprise(organization) toensure for production supervisiontothe management Number ofproposals suggestedbythecommission supervision ments detectedbythecommissionforproduction Number ofviolationsindustrialsafetyrequire- supervision tions fulfilledbythecommissionforproduction Number ofprevention andmonitoringinspec- period Number ofincidentshavingoccurred inthefiscal fiscal period Number ofemergencies havingoccurred inthe production supervision Number ofworkers performingthefunctionsfor ardous production facilities Number ofworkers engagedinoperationofhaz- including: Ecological, Technological andNuclearSupervision quirements detectedbytheFederal Servicefor Number ofviolationsindustrialsafetyre- industrial safety training andhavingbeenattestedinthefieldof Number ofCompanyworkers havingreceived equipment Number ofcertificationsandsurveillance testsof for compliancewithindustrialsafetyrequirements Number ofunitsoperatedequipmentcertified industrial safetyrequirements including: obligatory certificationforcompliancewiththe Number ofunitsoperatedequipmentsubjectto Production Facilities» Law «ConcerningIndustrialSafetyofHazardous Insured incompliancewithart.15oftheFederal ties including: Number ofoperatedhazardous production facili- Reporting indices OPERATING ACTIVITY Boiler inspection facilities 1 0 3 3 300 300 115 115 2 2593 174 9134 133 3 49 33 13 0 2 536 350 51 31 1 1 65 65 26 26 20 02 0 00 0 00 077 1 0 1 182 182 7 7 equipment Hoisting Gas supply facilities 2 37

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

In 2010 JSC «MOESK» held 12 state expert reviews in the field of industrial safety including in the affiliated branch High-Voltage cable networks – 3 inspections and in the affiliated branch Moscow Cable Networks – 9:

High-Voltage Cable Reconstruction of cable line of 110 kV of HPP 20-Cheryomushki 1.2; Networks: Reconstruction of cable line of 110 kV of HPP 23-Metrostroyevskaya 1.2; Overhangs of cable high-voltage line of 110 kV of HPP 12-Ochakovo 1.2.

Moscow Cable Power supply of Dostoyevskaya metro station; Networks: Power supply of high-level town-planning complex «Zhilkapstroy»;  Power supply of multi-functional complex with apartments and underground parking «Moscow International Business Center – CITY»; Power supply of residential houses with non-residential premises; Power supply of Moscow television plant «RUBIN»; Power supply of administrative and office building of CJSC «Montazh-Invest»; Power supply of multifunctional center of CJSC «Extract-Fili»; Power supply of second-priority reconstruction of open-air museum «Kolomenskoye»; Power supply of administrative building ATS-11 of OJSC «Moscow City Telephone Network».

Fire statistics In the course of 12 months of 2010, 11 cases of fire were registered at the facilities of JSC «MOESK» (in the similar period of 2009 – 25 cases) for the reasons as follows: short-circuit failure in electric installations – 4 cases; influence of unauthorized persons and organizations – 2 cases; natural disasters – 5 cases.

The overall economic damage of the Company caused by fires in 2010 made up 15 087.46 thousand rub. No deaths or injuries were registered as a consequence of fires. Shortage of power supply due to fires made up 61.45 thousand kWh. 38 As of the year 2010 the Company developed and implemented 142 activities for increase in industrial safety for the overall amount of 23 248.56 thousand rub. as well as 26 activities in the field of fire safety for the overall amount of 36 665.09 thousand rub.

2.7. OCCUPATIONAL SAFETY

INJURY TARIFF In 2010 JSC «MOESK» registered 5 job-related accidents with 6 victims: 1 accident in the affiliated branch Western Electric Networks, 3 accidents in the affiliated branch Moscow Cable Networks and 1 group accident (road traffic accident) in the affiliated branch Eastern Electric Networks.

In 2009 the Company registered 7 job-related accidents with 9 victims.

Financing of occupational safety arrangements Expenses for occupational safety and health in 2010 made up about 360 mln rub.

Allocation of finances for occupational Name of activity Share, % safety activities: Activities for accident prevention 15.5

Hygienic measures for prevention of occupational diseases 26.2

Provision of personal protection equipment 47.2

Activities for improvement of working conditions 11.1

The amount of expenditures for occupational safety per each employee of JSC «MOESK» makes up 23.2 thousand rub. ROOMS OCCUPATIONAL SAFETY INJURY PREVENTION for personnel protective equipment Provision of FOR OUTSIDERS INJURY PREVENTION (including 31forroad safety). affiliated branchesoftheCompany. Amended of commentsandproposals submittedbythe and subcontractingcompanies withaccount corporate Provisions for accessofcontracting «MOESK», arrangedforfurther actualizationof contracting companiesatthefacilitiesofJSC access procedure andarrangementforworks of implemented activitiesforimprovement of victims. employees of contractingcompanieswith19 with outsidersincluding2accidents year. of contractingcompanieswere registered last cases withsevere injuries).Nocasesofinjury occurred with6victims(3fatalcasesand 3 officers from otheraffiliatedbranches. safety auditwiththeassistanceoflabour year 2010theCompanyheldanoccupational Networks and SouthernElectricNetworks inthe Moscow CableNetworks, High-Voltage Cable in three affiliatedbranchesoftheCompany– workplace. by estimationandassessmentofriskspereach «MOESK». Theabove programs were underlain causes ofhazards inherent totheactivityofJSC to prevent industrialinjuriesandminimizethe Program forincrease ofroad safetyintheCompany Program forindustrialindustryprevention and affiliated branchespurchased extra: of decisionsemergency operationscenterthe Region ofwildandpeatfires forthefulfillment by propagation withintheterritoryofMoscow was completedtothefullestextent(100%). of theCompanyforhandoutprotective clothing and footwear resistant toelectricarc. Theschedule as well as 5838people–withprotective clothing and footwear protecting from industrialpollution protective clothingwere suppliedwithclothing current Interindustryregulations forprovision of free distributionofprotective clothingand of JSC«MOESK»subjecttostandard normsfor JSC «MOESK»provided fortheoperationinitsaffiliatedbranchesof68occupationalsafetyrooms In 20105casesofinjuryoutsiders In thecourseofyear thecompany In 2009JSC«MOESK»registered 12accidents In thecontextofcomprehensive inspections Last year JSC«MOESK»implementedthe    Due toemergency climaticconditionscaused 7 806employees intheaffiliatedbranches breathing apparatus, gauze dressings, vacuum bottles,coolingboxes; OPERATING ACTIVITY recreation zonesanddiningrooms. completedreconstructioncontrol of gear, available lampsbythewithelectronic illumination withreplacement ofcurrently air conditioningsystems,increase inworkplace completed works for technicalmaintenanceof to improve hygieneandwelfare ofemployees: accidents. learned toprovide first-aidtovictimsinthe knowledge forsafepractices,4723people 3 249peopleobtainedpracticalandtheoretical obtained qualificationsinoccupationalsafety, personnel trainingcourses,thatis:2859people zones tookplace. schools, recreation campsandschoolrecreation for electricalsafety, lectures andquizzesat were given methodologicalrecommendations held: theteachersofsecondary generalschools course thereof more than160activitieswere arranged forinteractionwithchildren inthe «Kind electricityforchildren» thecompany «MOESK» «Kindelectricity–safeholidays» and power facilities.WithinthecampaignsofJSC of behaviorwithinthearea oflocation of the hazards ofelectricalcurrent andrules on aregular basisvialocalmassmedia of especially children. Population wasinformed for injuryprevention amongpopulationand December 30,2010. version oftheRegulations wasapproved on «MOESK». submitted topermanentcontestcommitteeofJSC were executedintheformofexpertopinionand operational testingofprotection equipment branches. Theresults ofexpertreview and equipment proposed fordelivery totheaffiliated Company arrangedforexpertreview ofprotection for purposesofJSC«MOESK».Therefore the selection ofsuppliersprotection equipment rub. expenses inthefiscalyear amountingto170mln collective protection equipmentresulted inthe In 2010theCompanyarrangedforactivities In 2010theCompanyarrangedforvarious In 2010theCompanyproceeded withwork In 2010laboursafetyofficerstookpartinthe Provision ofpersonnelwithpersonaland     air conditioningsystems. hypothermic bags, antipyretic gels, gel antipyretic dressings, 2 39

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

40 ratio asbelow: accomplished inthe subjects was tariff management broken downbythe monetary terms of CAPEXinthe Actual assimilation excl. VAT: «MOESK», mlnrub, assimilation forJSC Dynamic ofCAPEX table below: 2010 are citedinthe of JSC«MOESK»as investment activity parameters of Cost andphysical and MoscowRegion. 3 funding. crisis and,asaconsequence –limited problems infinancialsystemandglobal program wasreduced duetoglobal consolidation withOJSC«MGEsK». reorganization ofJSC«MOESK»through Moscow isrelated tostructuralchanges– increase incapitalinvestments in2008 the territoryofMoscowRegion.Sudden both inMoscowandtheobjectson up ofassimilatedcapitalinvestments ocwRgo 5 4127821636 3.1973 847.54 997.33 1234.11 1633.62 7812 14152 7852 Moscow Region Total forJSC In 2009–2010theCompany investment In 2008theCompanyprovided forramp- Moscow in consumers of supply power reliable for provision at aimed is 2010 of program Investment program of2010isaimedatprovision forreliable power supplyofconsumersinMoscow 15 000 10 000 20 000 25 000 .1. PARAMETERS OFINVESTMENTACTIVITY «MOESK» 5 000 ocw1 7 4521 0 4.9705 5.3643.47 552.13 770.51 642.69 11100 14542 11679 Moscow Name 0 001 3 1697852 7736 11795 11679 13960 23570 19531 21696 35365 2010 2009 2008 Year 0820 2010 2009 2008 l u.mnrb l u.MAk.NAkm. NVA km. MVA mlnrub. mlnrub. mln rub. Assimi- 9512 9 8922263 0.21594 1491.01 1549.46 2004.62 2276.31 18912 28694 19 531 lation S MEK,mnrb ocw l u.Moscowregion, mlnrub. Moscow,mlnrub. JSC «MOESK»,mlnrub. fixed assets sioning of Commis- INVESTMENT ACTIVITY (incl. VAT) Funding mln rub.(-16%). in Moscowdidn’tceaseand madeup2 by 116mlnrub.(+1.5%)at thattheslump increased ascompared totheyear 2009 completed works intheMoscowregion substantially. Thoughthescopeof (-41%). was more significant–by9610mlnrub. mln rub.(-34%).InMoscowtheslump as compared totheyear 2008by4059 scope ofcompletedworks wasreduced In 2010thesituationhasnotchanged Thus, in2009Moscowregion the aaiyetnin Capacityincrement Capacity extension Moscow region Moscow Excl. VAT , 281 3 41

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

3.2. ALLOCATION AND STRUCTURE OF CAPITAL INVESTMENT

49% of the overall amount of CAPEX assimilated in 2010 were allocated for technical re-equipment and reconstruction of power grid facilities of JSC «MOESK». According to the program for technical re-equipment and reconstruction of OJSC ‘MOESK» in 2010 assimilation made up 9 493 mln rub., and for new construction – 9 065 mln rub. Moreover, in the year 2010 the Company received under the contracts for loss compensation fixed assets for the amount of 973 mln rub. including in Moscow – 894 mln rub. and Moscow Region – 79 mln rub.

Scope of capital investments in Moscow in the year 2010 made up 11 679 mln rub. including: for technical re-equipment and reconstruction facilities assimilation amounted to 5 313 mln rub.; for new construction facilities – 5 473 mln rub.

For the facilities of JSC «MOESK» on the territory of Moscow Region in the year 2010 the company assimilated 7 852 mln rub. including: for technical re-equipment and reconstruction facilities assimilation of CAPEX amounted to 4 180 mln rub.; scope of capital investments for new construction facilities amounted to 3 592 mln rub.

According to the program for technical re-equipment and reconstruction in the year 2010 fixed assets were extended by 609.18 km of power transmission lines of all voltage levels and for new construction – 1 118.83 km of power transmission lines of all voltage levels. Commissioning for the regions made up as below: Moscow: 164.61 km – for technical re-equipment and reconstruction; 369.83 km – for new construction. 42 Moscow region: 444.57 km – for technical re-equipment and reconstruction; 749.00 km – for new construction.

Moreover, the company accepted subject to the agreements for loss compensation – 276.6 km of power transmission lines including: 236.07 km – in Moscow; 40.53 km – in Moscow Region.

In the year 2010 JSC «MOESK» extended fixed assets under the program for technical re-equipment and reconstruction by 1 575.85 MVA of transformer capacity. Extension of transformer capacity for the new construction facilities made up 569.34 MVA. Extension for the regions amounted to: Moscow: 88.53 MVA – for technical re-equipment and reconstruction; 429.58 MVA – for new construction. Moscow region: 1,487.32 MVA – for technical re-equipment and reconstruction; 139.76 MVA – for new construction.

Moreover, the company accepted subject to the agreements for loss compensation – 131.12 MVA of transformer capacity including: 124.58 MVA – in Moscow; 6.54 MVA– in Moscow Region.

As a result of completed works the company resolved the tasks for connection of new consumers. In the year 2010 the Company extended fixed assets in Moscow by 770.51 km of power transmission lines of all voltage levels. The most relevant commissioned facilities are specified as follows: Overhead cable line of 110 kV «Kozhukhovo – Chertanovo» with the tap «Ugresha – Saburovo» (2.0 km), Overhead line of 220 kV «HPP-23 – Svibilovo 1.2» (6.63 km), Overhead cable line of 110 kV «Chagino – HPP-8» with the tap «Chagino – Novospasskaya» (1.2 km), Overhead cable line of 110 kV «Kosino – Vykhino» 1.2» (3.0 km), Reconstruction of Overhead cable line of 110 kV «Timiryazevskaya A and B with the tap» (overhead section) (5.82 km), Overhangs of «overhead cable line of 110 kV «HPP-12—Ochakovo» I line, II line with the tap for table asbelow: 2010 isshowninthe «MOESK» in2008– investments ofJSC Structure ofcapital fixed assetsby1633.62MVA oftransformercapacity. Themostrelevant ofthesameinclude: transformers forincrease inpower supplyreliability andquality. Asaresult theCompanyextended Networks by 642.69MVA. transmission linesofallvoltage levels. Themostrelevant extensionsinclude: ucaeo ie ses87159973 0 1559 0 0 0 827 0 0 0 12637 180 0 17484 0 855 29 7744 127 0 264 Assimilation ofCAPEXfortechnological connectionofconsumers 541 437 For reference: 0 567 Purchase offixedassets 1241 Long-term financialinvestments Capital investments inintangibleassets 0 Facilities ofunproductive sphere Equipment notincludedintheconstructionestimate 52 650 17442 Other production andeconomicfacilities 7976 18712 Prepaid designandsurvey ofconstruction 8817 492 28 19531 Other meansofelectricpower meteringandcontrol 31286 8314 fiscal accountingofretail market 10370 21696 1007 Automatedmeasuringandinformationsystemforelectricpower 1360 20559 program 9368 35365 fiscal accountingofwholesalemarketaspartinvestment Automated measuringandinformationsystemforelectricpower Means forpower energy meteringandcontrol including Other power gridfacilities (automation,connection) New constructionandextensionofcurrent facilities Technical re-equipment andreconstruction Power gridfacilitiesincluding Areas ofinvestment activity–total: In theyear 2010theCompanyconductedinMoscowRegionworks forreplacement ofoverloaded works) (36.80km), In theyear 2010theCompanyextendedtransformercapacityoffacilitiesMoscowCable substation «Lomonosovo» forsubstation«MGU»(7.47km).                    In theyear 2010theCompanyextendedfixedassetsinMoscowRegionby1234.11kmofpower                    Substation of220kVNo.215«N.Sophino»–250MVA. Reconstruction ofsubstationNo.145«Nakhabino»–130MVA, Substation No.800«Airport»–80MVA, Reconstruction ofsubstationNo.260«Dedovo» –40MVA, Reconstruction ofsubstationNo.584110/35«Zvenigorod» (1stStart-upcomplex) – 80MVA, Reconstruction ofsubstationNo.811«Pervomayskaya» –20MVA, Substation Karinskaya of110/10kV(transformersfrom substation«Sloboda»)–50MVA, Reconstruction ofsubstationNo.316110/35kV«Daryino»(1stStart-upcomplex)–40MVA, Substation of110kVNo.836«Sloboda»(step-by-stepcommissioning)–500MVA, Reconstruction ofsubstationNo.252«Peredeltsy» –63MVA, Reconstruction ofsubstationNo.687110kV«Letovo» –63MVA, Reconstruction ofsubstationNo.735«Sosni»–80MVA; Reconstruction ofoverhead lineof35kV«Ventsy –Vaskino» (12.98km). Reconstruction ofoverhead lineof«Ochakovo –Vstrecha 1.2»(17.50km), Reconstruction ofoverhead lineof110kV«Pakhra –Aparenki» withthetap(16.52km), Overhead lineof110kV«Maryino–Letovo» (15.80km), Reconstruction ofoverhead lineof100kV«Zapovednik –Pushchino»(7.71km), Reconstruction ofoverhead lineof110kV«Krutyshi–Suvorovo» (constructionandinstallation Reconstruction ofoverhead lineof110kV«Shatura–Bruski»,«BruskiYegoryevsk» (43.20km), INVESTMENT ACTIVITY 0820 2010 2009 2008 4 6 52 469 944 32 0 24 63 mln rub.excl.VAT

3 43

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

mln rub. excl. VAT

Dynamics of capital 2008 2009 2010 investment and Name extension of fixed Assimilation Extension of Assimilation Extension of Assimilation Extension of of CAPEX fixed assets of CAPEX fixed assets of CAPEX fixed assets assets in 2008 – 2010: Moscow 23 570 9 827 13 960 19 643 11 679 14 542

Moscow Region 11 795 9 179 7 736 4 908 7 852 14 152

Total for JSC 35 365 19 006 21 696 24 551 19 531 28 694 «MOESK»

Analysis of dynamics of assimilation of At the same time steady dynamics is not CAPEX displays that in 2008 the scope of the case for separate regions. In particular in capital investments reached its maximum Moscow in the year 2009 the extension of fixed – 35 365 mln rub. In 2009 assimilation of assets doubled and in the year 2010 decreased CAPEX decreased as compared to the previous by 5 101 mln rub. (26%). In Moscow Region the year by 13 669 mln rub. (39%) and made up situation is the reverse: in 2009 the extension 21 696 mln rub. In 2010 the trend sustained. of fixed assets reduced by 1.9 times and in 2010 Further decrease in the assimilation of CAPEX increased by 2.9. Notwithstanding the fact as related to the previous year accounted to 2 that capital investments in Moscow in the last 165 mln rub. (10%). years was substantially higher, the extension Since the major part of assimilated of fixed assets as compared to Moscow Region CAPEX accounts for Moscow, this region in 2008 and 2010 increased only by 7% and was characterized by a similar trend with a 3% respectively. In the meantime, in 2009 more apparent slump in capital investments. this index in Moscow was 4 times as high as in 44 Decrease against the previous year made up Moscow Region. relatively 9 609 mln rub. (39%) and 2 281 On the whole investment program of the mln rub. (16%). In the meantime, following Company within the period of 2009 – 2010 sudden decrease of capital investments in was substantially reduced due to global 2009 in Moscow region – by 4 059 mln rub. problems in financial system and global (34%) the year 2010 was distinguished by crisis. This resulted in reduction of funding an insignificant increase – by 116 mln rub. and as a consequence – slump in the capital (1.5%). Therefore, the share of Moscow Region investments. The scope of extension of fixed in the scope of capital investments rose from assets commissioned in 2009 – 2010 was not 33% (2008) up to 40% (2010). influenced by such position due to completion of construction and acceptance of facilities, On part of commissioning of fixed assets on the construction thereof having commenced the whole JSC «MOESK» retained a stable trend in the previous periods. for rump-up : Thus, as a result of completed capital in 2009 – by 5,546 mln rub. (29%); construction works the company resolved in 2010 – by 4,143 mln rub. (17%). the tasks for connection of new consumers, replaced overloaded transformers for Such trend is related to increase in capital increase in reliability and quality of power investments and inclusion of facilities from supply, reconstructed and built new power those constructed in progress into fixed assets. transmission lines for increase in throughput.

Structure of capital 5% Other investments of JSC «MOESK» in the year 2010

New construction 46% Technological re-equipment 49% and reconstruction 2013: period of2010– investments forthe Dynamics ofcapital below: are cited inthetable investment program Funding sources for 3 Proprietory sources of .3. FUNDINGSOURCESFORINVESTMENTPROGRAM External sources of oa o S MEK 9514 3 59952166 45929 42036 19531 Total forJSC«MOESK» ocwRgo 5 4621 8 15730 11189 14662 7851 Moscow Region finance finance ocw1 7 7343 4 36437 34741 27374 11679 Moscow ae21 0121 2013 2012 2011 2010 Name

19 531 2010 Other sources ofexternalfundingincludingshared constructionat Profit ofthefiscalyear foruseininvestment program ofthefiscal INVESTMENT ACTIVITY e o ehooia oncin–avnepyet – Fee fortechnologicalconnection–advance payments 42 036 2011 asdaons(orwd neetbaig 2228 Raised amounts(borrowed, interest-bearing) usadn ercaino atyas– Outstanding depreciation ofpastyears te rpitr ore ffnne973 Other proprietory sources offinance ugtfns(eea,mncpl – Budget funds(federal,municipal) ore fivsmn,ttl19531 Sources ofinvestment,total e o ehooia oncin10 409 Fee fortechnologicalconnection nibre rfto atyas– Undisbursed profit ofpastyears ercaino h iclya 5921 Depreciation ofthefiscalyear the expenseofothersources olwo feig– Follow-on offering year including: 2012 45 929 52 166 2013 10 409 mln rub. – 3 45

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

46 PROCEEDS ANALYSIS 2010, thousandrub.: of JSC«MOESK»in economic activity financial and Major results of 4 follows: for theproceeds asrelated tothedataof 2009amountsto130%includingforthetypesofactivityas BTA2 0 4 62589146 247 36245829 15621525 24804141 212 6318508 - 52 50 21393657 7085520 10093591 0 5580774 74 13584886 59 - 11151999 - 160 2696074 0 200787 25393690 3663643 EBITDA - - Net profit 339078 15851043 ments Current incometaxand othersimilarobligatorypay- - Pre-tax profit - Other expenses Other income 160 Participation capital Interest payable 25393690 Interest receivable 15851043 Sales profit Administrative expenses Selling expenses 123 85240359 Gross profit including: 69381805 130 Cost ofproduction ofgoodsincluding 110634049 85232848 Proceeds from saleofproducts andservicesincluding: certificates. tariff –200%).Increaseoftheindicator isstipulatedbythegrowthofnumberacceptance transmission; Increase iscausedbytherisein productive gridoutputandriseinthetariffforelectricpower    Proceeds from saleofproducts (services)as of2010madeup110634mlnrub.,thegrowth tariff .1. MAJORRESULTS OFFINANCIALANDECONOMICACTIVITY Proceedsfromother activitiesmadeup450mln rub.(decrease–48%). proceedsfromservicesrelatedto technologicalconnectionmadeup18945mlnrub.(growth proceedsfromelectricpowertransmission madeup91239mlnrub.(growthtariff–122%). services relatedtoelectricpowertransmission services relatedtoelectricpowertransmission services relatedtoelectricpowertransmission services relatedtotechnologicalconnection services relatedtotechnologicalconnection services relatedtotechnologicalconnection FINANCIAL ANDECONOMICACTIVITY services relatedtootheractivities services relatedtootheractivities services relatedtootheractivities NIAO 0921 Growth tariff,% 2010 2009 INDICATOR 175791 5 3 92 10751435 11 725759 127 80487524 63 178423 122 91238959 74 904182 7 8 7 3 153 5772132 3 775083 8 2 44816373 14478196 3 882629 80 4466762 5 586778 200 18944958 9 469407 4 5 6 5 68 164059 46 242 655 286073 52 616 604 450132 859 259 4 47

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

ANALYSIS Actual cost of all goods, works and services as of 2010 made up 85 240 mln rub., the tariff growth OF PRODUCTION COSTS for production costs as related to the data of 2009 amounts to 123% including for the types of activity as follows: expenses on services related to transmission and distribution of power energy made up 80 487 mln rub. (growth tariff – 127%); expenses on technological connection made up 4 466 mln rub. (decrease – 20%); expenses on other activities made up 286 mln rub. (decrease – 54%). Increase of production costs is due to the rise in unaccountable expenses of the Company: on services of «FGC UES» – increase in the tariff for maintenance of FGC networks due to adoption of RAB-management system; on purchased power for loss compensation – increase in the amount and rise of non-adjustable price; on services of distribution grid companies – increase in the tariffs of grid organizations for electric power transmission.

PRODUCTION 2009, 2010, Structure,% COST STRUCTURE Name of cost items thousand thousand AS OF 2009 – 2010: rub. rub. 2009 2010

Total production costs including: 69 381 805 85 240 359 100.0 100.0

– expenses on loss compensation 10 604 716 13 629 129 15.3 16.0

– services of «FGC UES» 5 957 506 8 578 514 8.6 10.1

– services of distribution grid companies 12 455 125 21 811 934 18.0 25.6

48 – depreciation 11 046 906 12 156 098 15.9 14.3 – labour costs (including insurance contribu- 8 872 924 10 254 278 12.8 12.0 tions) – payment of works and services of external 4 348 390 3 128 643 6.3 3.7 organizations

– other 16 096 238 15 681 763 23.2 18.4

PROFIT Net profit of the Company made up 15 622 mln rub., growth tariff for net profit as related to the data of 2009 amounted to 247.2% including for the types of activity as follows: net profit from electric power transmission – 3 908 mln rub. (growth tariff – 129.5%); net profit from services related to technological connection – 11 583 mln rub. (growth tariff – 372.9%); net profit from other activity – 131 mln rub. (decrease by 32.4%).

Improvement of financial result is stipulated by outrunning growth of proceeds from sale of services as compared to the growth of production cost.

STRUCTURE OF PROCEEDS, PRODUCTION Name of indicator 2009 2010 COST AND NET PROFIT Proceeds structure OF JSC «MOESK» AS OF 2009-2010: Electric power transmission 88% 82%

Technological connection 11% 17%

Other services 1% 1% Production cost structure

Electric power transmission 91% 94%

Technological connection 8% 5%

Other services 1% 1% BALANCE SHEETVALUE NET ASSETS AS A of fixedassetsin2010. exceeds theindicatorofprevious year. Increase inthenetassetsvalue isrelated tocommissioning 8 te iblte 6 0 0 0 138019863 660 122127595 62623459 0 2483 Netassets 64281805 10672309 31327571 2593010 620 0 630 21786335 40759733 0 1675709 510+610 520 190 650 515 20. Costofnetassets(clauses11–19) 1108030 0 total ofclauses12–18) 19. Total liabilitiesexcludedfrom thecostofassets(sum 4844580 0 18. Otherliabilities 450 17. Reserves forfuture expensesandpayments 260 16. Settlementondividends 270 15. Accountspayable 4984 0 14. Otherlong-termliabilities 0 13.1. Deferred taxliabilities 0 6499080 13. Borrowings 790446 210+220 12. Special-purposefinancialreceipts 0 56695797 2968747 0 0 583386 62197125 27894491 149576088 ance sheetlines411and244 250 230+240 36678074 411 11. Total assets(sumtotalforclauses1–10)excludingbal- 133176971 150 4186 148 0 10. Othercurrent assets 130 3685697 120 9. Cashmeans 8.1. Treasury shares purchased from theshareholders 110 140 8. Short-termfinancialinvestments including authorized capital 7.1. Debtofthemembersrelated tocontributionsthe 7. Accountsreceivable including 6. Inventory 1% 5. Othernon-current assets 4.1. Deferred taxassets 4. Long-termfinancialinvestments 3. Work inprogress 74% 2. Fixedassets 25% 1. Intangibleassets 3% 49% 48% Other services Technological connection Electric power transmission Value ofCompanynetassetsastheend2010makesup138019.8mlnrub.whichisby13% FINANCIAL ANDECONOMICACTIVITY Name ofindicator Net profit structure II. LIABILITIES I. ASSETS Balance sheet iblte 2 0 6 107216349 128506065 Liabilities line code ses206360245236212 250633660 Assets 4 0 0 244 092010 2009 4 49

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

4.2. ANALYSIS OF FINANCIAL STATUS AND PERFORMANCE

The values of financial ratios of JSC «MOESK» calculated in follow-up of 2010 attest stable financial status of the Company.

Formula for calculation (in compliance with the Procedure approved by Name of indicator the Order of the Federal 31.12.2006 31.12.2007 31.12.2008 31.12.2009 31.12.2010 Financial Markets Service of Russia dd. 10.10.2006 No. 06-117/pz-n)

In compliance with the Order Cost of net assets No. 10n of the Ministry of 30 863 843 48 930 597 86 976 157 122 127 595 138 019 863 Finance of Russia

Ratio between the amount (f1 line590+f1line 690)/(f1 of raised funds and capital 57.20 93.96 148.30 109.43 81.86 line 490)*100 and reserves (%)

(Net profit + depreciation allowances)/(liabilities subject to redemption in the fiscal Debt service coverage (%) period (f.1, line 610 + f.1, line 69.78 30.05 13.84 18.33 39.73 620) + interest payable in the fiscal period (f.2, gr.3, line 50 070))*100

Receivables turnover f.2 gr.3 line 010 / (f.1line 230 3.25 2.11 1.04 1.37 1.95 (times) + f.1line240 – f1 line 244)

(overdue indebtedness)/(Ac- Level of overdue accounts counts payable as of the end ––––– payable (%) of the period)*100

Net profit/book value of as- Return on assets (%) 7.72 5.02 1.08 2.52 6.37 sets*100

Net profit/Proprietory funds Return on capital (%)* (capital) as of the beginning 12.14 9.7 4.72 5.57 13.05 of the period *100

(f1line 290-f1line230)/ Current liquidity ratio 1.57 0.90 0.75 0.52 0.44 (f1line690-f1line 640)

(f1line 290-f1line 210-f1line Quick ratio 220-f1 line 230)/(f1line 690- 1.27 0.77 0.63 0.45 0.37 f1 line 640)

(Capital and reserves excluding treasury shares purchased Equity-assets ratio (stan- from shareholders) special- 0.64 0.52 0.41 0.49 0.56 dard no less than 0.5-0.6) purpose funding and receipts + deferred income)/(non-current assets + current assets)

(f1line 490+f1line 640)/ Debt-equity ratio (f1line700-f1line 490-f1line 1.76 1.07 0.69 0.95 1.29 640)

* – Value of indicator «Return on capital» as of 20062006-2007-2007 is calculated based on the amouamountntt of proprietory funds (capital) as of the end of the appropriate period. up to12months accounts receivable adjustment of Reasons for rub.: payable, thousand receivable and Dynamics ofaccounts «Advances paidout»by2989 609thousandrub.is power. of extensionproductive supplyofelectric rub. iscausedbyincrease inproceeds onaccount «Buyers andcustomers»by2672 149thousand as follows: 56 695797thousandrub.(decrease by9%). receivable andpayable. 4 Accounts receivable (exceeding12months) Accounts receivable (lessthan12months) Indebtedness payable tostateandextra- advances paidouttotheparticipants3726864thousandrub. Decrease in accountsreceivable inthesection Increase in accountsreceivable inthesection   The structure ofaccountsreceivable asoftheendfiscalperiodisrecognized bytheadjustments Accounts receivable ofJSC«MOESK»forthefiscalperioddecreased from 62197125thousandrub.to To reach thenecessaryliquiditypositionCompanyprovides forconstantmonitoringofaccounts .3. ACCOUNTS RECEIVABLE ANDPAYABLE decrease inshort-termaccountsreceivableby9376680thousand rub. increase inlong-termaccountsreceivableby3875352thousand rub.includingintermsof eevbe n aalsblne-90448-38105-659917271044 -16599971 -23871015 -19004498 Receivables andpayables balance hr-emacut aal 342856 8 0 26349-1658346 62623459 64281805 53462855 Short-term accountspayable ogtr conspybe2 8 3 176351 7 0 -11114026 10672309 21786335 26180131 Long-term accountspayable upir n otatr 622931 9 1 229641272520 12269634 10997114 16282953 Suppliers andcontractors uesadcsoes3960065301925202672149 106913 9245200 106913 6573051 986070 3 0 Buyers andcustomers 20900 Buyers andcustomers urn a iblte 7 3 6 5 0 8 339929 601880 261951 270831 Current taxliabilities consrcial 068486 9 2 66577-5501328 56695797 62197125 60638488 Accounts receivable FINANCIAL ANDECONOMICACTIVITY dacspi u 1 2 2 1 9 2 8 -2989609 2021585 5011 194 15521526 3768439 32927820 29159 381 Advances paidout 29981122 Advances paidout dacsrcie 670153 2 6 799249055269 47979234 38923965 36730105 Advances received conspybe7 4 8 608107 9 6 -12772372 73295768 86068140 79642986 Accounts payable arl iblte 2 0 7581 9202 1621 0 Payroll liabilities budgetary funds te rdtr 7 9 4070917992-12337057 1759982 14097039 178195 Other creditors te etr 1 2 7 143491 9 7 -9059220 12394279 21453499 11128870 Other debtors including: including: ae20 092010 2009 Name 2008 066463 3 4 36104-9376680 23661064 33037744 30 636466 3875352 33034733 29159381 30 002022 7 1 2 3412 3527 115 771 bank PLC were repaid inApril2010. (hedging ofborrowings). Borrowings ofBarclays account ofrepayment of liabilities onswapdeals able are decreased by9059220thousandrub.on tion companies. related tothesettlement ofdebtswithconstruc- In thesection«Otherdebtors»accounts receiv- compared to Adjustment (2010 as 2009) 4 51

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Accounts payable of JSC «MOESK» as of 31.12.2009 made up 86 068 140 thousand rub., as of 31.12.2010 this indicator decreased up to 73 295 768 thousand rub. The structure of accounts payable as of the end of the fiscal period is recognized by the adjustments as follows:

 decrease in long-term accounts payable by 11 114 026 thousand rub.;  decrease in short-term accounts payable by 1 658 346 thousand rub.

Reasons for decrease Long-term accounts payable are partly rep- caused by requalification of liabilities for tech- in accounts payable resented by the amount of advance payments nological connection – change of the status of exceeding 12 months for services related to technological connection long-term liabilities into short-term payables to electric networks, Decrease in the amount in compliance with the provisions of applicable of payables as of the end of the fiscal period is agreements.

Reasons for Indebtedness according to article «Suppliers and contractors» increased by 1 272 520 thousand rub. adjustment of and made up 12 269 634 thousand rub. including: accounts payable up  for maintenance companies – 716 736 thousand rub. (increase by 247 511 thousand rub.); to 12 months  for construction companies – 6 664 769 thousand rub. (decrease by 979 222 thousand rub.);  for other suppliers and contractors – 4 888 129 thousand rub. (increase by 2 004 231 thousand rub.).

Increase in accounts payable for this section is due to other suppliers of electric power (services of territorial grid companies). Payables according to article «Advances received» as compared to the beginning of the year increased by 9 055 269 thousand rub. and made up 47 979 234 thousand rub. including:  advances received for rendering services related to technological connection in the amount of 47 836 856 thousand rub. (increase by 9 630 770 thousand rub.); 52  other advances in the amount of 142 378 thousand rub. (decrease by 575 501 thousand rub.).

Increase in the payables is caused by requalification of liabilities related to technological connection – change of the status of long-term liabilities into short-term payables in compliance with the provisions of applicable agreements.

Payables according to article «Other creditors» decreased by 12 337 057 thousand rub. and made up 1 759 982 thousand rub. The major adjustment is caused by repayment of liabilities on swap deals, in connection therewith deals for hedging of borrowings were excluded from accounting records. Borrowings of Barclays bank PLC were repaid in April 2010.

In follow-up of the year 2010 receivables and payables balance decreased by 7 271 044 thousand rub. as compared to the previous period.

4.4. LENDING POLICY

In 2010 the lending policy of JSC «MOESK» the short-term into the long-term one as well as was focused on decrease in the cost parameters optimization of use of borrowings in compliance of the borrowings, change of the status of the with current Company needs by way of opening major part of credit and loan indebtedness from revolving credit facilities.

In the fiscal period the Company involved 33 944 mln rub. due to opening of credit lines including:  for revolving credit facilities – 10 821 mln rub. (7 684 mln rub. were repaid in the fiscal period);  for non-revolving credit facilities – 23 123 mln rub.

Total amount of payables reimbursed amounts to 42 756 mln rub. including:  for credit liabilities – 36 688 mln rub;  for Company promissory notes submitted – 6 068 mln rub. «MOESK»: portfolio ofJSC Structure ofcredit Promissory of theyear 2007 (dateofthemeeting–28.05.2008): Annual generalshareholders’ meetinginfollow-up eamn fps er oss0 0 237379 4510209 Repayment ofpastyears losses Dividends (thousandrub.) Accumulation fund(thousandrub.) 4747588 Reserve fund(thousandrub.) Unappropriated profit (thousandrub.) 22% notes so 10.00Asof01.01.2011 As of01.01.2010 6% years theCompanyprofit wasallocatedasfollows: 7 monthsupto50.5months. of JSC«MOESK»wasreduced from 11.45%upto7.73%,theaverage lendingperiodwasincreased from 4 In compliancewiththedecisionsofGeneralshareholders’ meetingsofJSC«MOESK»inthelast3 In follow-upoftheresults ofwork in2010theweighted average interest tariffforcredit agreements debenture issue Promissory notesand Credits .5. ALLOCATION OFNETPROFIT OA: 07031328 40760 TOTAL: Debenture issue FINANCIAL ANDECONOMICACTIVITY oftheyear 2009(dateofthemeeting–30.06.2010): facilities Non-revolving credit 73% Annual generalshareholders’ meetingin follow-up eamn fps er oss0 450000 315925 Repayment ofpastyears losses 5552583 Dividends (thousandrub.) Profit fordevelopment (thousandrub.) 6318508 Reserve fund(thousandrub.) Unappropriated profit (thousandrub.)

hr-em l u.6353848 756 6375 20423 Short-term, mlnrub. Short-term, mlnrub. ogtr,mnrb 1 1210 25514 4812 9150 Long-term, mlnrub. Long-term, mlnrub. Revolving credit Promissory facilities of theyear 2008(dateofthemeeting–11.06.2009) Annual generalshareholders’ meetinginfollow-up 10% eamn fps er oss0 0 115157 Repayment ofpastyears losses 2187 989 Dividends (thousandrub.) Profit fordevelopment (thousand rub.) 2303146 Reserve fund(thousandrub.) Unappropriated profit (thousandrub.) notes 8% 8% 10.0001.01.2011 01.01.2010 Debenture issue facilities Non-revolving credit 74% 4 53

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

The decision of the Board of Directors dd. May 6, 2011 recommended to the annual general shareholders’ meeting to adopt a decision on allocation of Company profit received in follow-up of the work in 2010 as follows:

Unappropriated profit (thousand rub.) 15 621 525

Reserve fund (thousand rub.) 91 239

Profit for development (thousand rub.) 14 330 286

Dividends (thousand rub.) 1 200 000

Repayment of past years losses 0

4.6. DIVIDEND POLICY

The dividend policy of the Company is based Board of directors of decisions on the issue on the balance of convenience of the Company concerning recommendations to the General and its shareholders upon assessment of the shareholders’ meeting as regards the amount of amount of dividend payouts, respect towards dividends for shares to ensure transparency of and strict compliance with the rights of the the procedure for assessment of the amount of shareholders stipulated by the current legislation dividends and payout thereof as well as keeping of the Russian Federation, Articles of Association the shareholders and other interested persons and internal Company documents and is aimed aware of the dividend policy of the Company. The at increase in the Company investment prospects statute determined the procedure for adoption of and growth in its market capitalization. decisions on payout (declaration) of dividends, 54 In 2010 the Company Board of directors terms of payout thereof, procedure for calculation approved the Statute on Dividend Policy of JSC of amount thereof including terms, place, form «MOESK» determining the major principles and of payment thereof, Company liability for non- approaches for acceptance by the Company payment of dividends.

Dividend policy calculation of dividends is based on the use of profit with no account of revaluation of financial of the Company investments;  necessity to support the required level of financial and technical status of the Company is focused on the (implementation of investment program), to ensure development prospects of the Company; following principles: compliance of practice for accrual and payout of dividends with the legislation of the Russian Federation and best standards of corporate conduct; optimum conjunction of interests of the Company and shareholders; necessity to increase Company investment prospects and capitalization; provision for transparency (understanding) of the procedure for assessment of the amount of dividends and payout thereof; dividends for ordinary shares are paid out only in case of full payout in compliance with the Articles of Association of the Company of dividends for preferred shares (in case of placement of Company preferred shares).

Information on Amount of dividends Amount of payment for Profitability of dividend Period dividends accrued accrued, thousand rub. one share, rub. payouts,% and paid out by the Company: in 2006 50 001 0.00177 0.28 in 2007 60 000 0.00212394 0.06

in 2008* – – –

in 2009** – – –

in 2010 450 000 0.0092389 0.86 Company in2010: values ofKPIthe Approved andactual planning offinancialandeconomicactivity. of Directors theCompanyprovides forannual planning ofJSC«MOESK»approved bytheBoard ordinary shares ofJSC«Moscow UnitedElec- to adoptadecisiononpayout ofdividendsfor nual generalshareholders’ meetingwasoffered Board ofDirectors datedMay 6,2011theAn- unreasonable. dividends waspossibleonlywithaccountofcreditfundswhichamidstglobalfinancialcrisishighly in thenumberandcostoffixedassetsisnotexpressedascash-equivalentitems.Therefore,payout provisions forgenerationoffinancialresultallthenetprofithavingbeenreceivedisrelatedtoincrease investment expenditures,dividendpayoutisnotincludedinthetariff.Thus,withaccountofparticular related totechnologicalconnectiontheoverallincomefromthistypeofactivityshallbedirectedfor from technologicalconnectionofconsumerstoelectricnetworks.Upontariffmanagementservices ** TheoverallnetCompanyprofitinfollow-upoftheworkas2008wasformedwithaccountincome through consolidationwithOJSC«MGEsK». shareholders’ meeting(April18,2008)whichadoptedadecisiononreorganizationofJSC«MOESK» upon requestoftheshareholdershavingvotedagainstorhaven’tparticipatedinextraordinary to adoptdecisionsonthepayoutofdividendsforsharespriorredemptionallberedeemed «Concerning Joint-StockCompanies»datedDecember26,1995No.208-FZJSC«MOESK»isnotentitled to payoutdividendsinfollow-upof2007ascompliancewithclause1article43theFederalLaw * Theannualgeneralshareholders’meetinghavingtakenplaceonMay28,2008adoptedadecisionnot 4 Q1 rent quarter(intermsandcost) Efficiency ofinvestment program asofcur- 12.99 9.39 terms andcost) Efficiency ofinvestment program of2010(in grid, % Loss ofelectricpower asrelated tothepower Return oncapital,ROE,%* To assesstheefficiencyoffinancial, economic In compliancewiththeStandard forbusiness Subject tothedecisionofCompany Reliability criteria, concurrently: and higher) power supplyinterruption(forfeedersof6kV – Systemindicatorforaverage durationof of 6kVandhigher) – Systemindicatorofgridfailure (forfeeders cidents – Non-exceedanceofcutoffnumberac- Reliability criteria,concurrently: .7. EXECUTIONOFKEYPERFORMANCEINDICATORS FINANCIAL ANDECONOMICACTIVITY KPI QUARTERLY: ANNUAL: prvdidctrvleActualindicatorvalue Approved indicatorvalue thereof. days sinceadoptionofthedecisiononpayout share oftheCompanyincashmeanswithin60 amount of0.0246371rublesforoneordinary tric GridCompany»infollow-upof2010the and theirtarget values. with alistofkeyperformanceindicators(KPI) decision oftheBoard ofdirectors isprovided and administrative activitytheCompany bythe 1211.15 11.2   1<1 <1 <1 <1 95 95 00   95 95 4 55

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

– Non-exceedance of cutoff number of ac- 00 cidents

– Absence of fatal job-related accidents or 01 group accidents with heavily injured victims

– System indicator of grid failure (for feeders <1 <1 of 6kV and higher)

– System indicator for average duration of power supply interruption (for feeders of 6 kV <1 <1 and higher)

– Receipt of passport of availability within 100 100 the stated deadline, %.

Efficiency of investment program as of cur-  95  95 rent quarter (in terms and cost)

Reliability criteria, concurrently:

– Non-exceedance of cutoff number of ac- 00 cidents

– Absence of fatal job-related accidents or 01 group accidents with heavily injured victims 56

– System indicator of grid failure (for feeders <1 <1 of 6kV and higher)

– System indicator for average duration of power supply interruption (for feeders of 6 kV <1 <1 and higher)

Efficiency of investment program as of cur-  95  95 rent quarter (in terms and cost)

Reliability criteria, concurrently:

– Non-exceedance of cutoff number of ac- 00 cidents

– Absence of fatal job-related accidents or 00 group accidents with heavily injured victims

– System indicator of grid failure (for feeders <1 <1 of 6kV and higher)

– System indicator for average duration of power supply interruption (for feeders of 6 kV <1 <1 and higher)

Efficiency of investment program as of cur-  95  95 rent quarter (in terms and cost) ON THEAUDITOR: INFORMATION «Institute ofProfessional Auditors»aswell asparticipates intheorganizations asfollows: of JSC«MOESK»heldonJune30,2010. 2010. Holding». approved byJSC«IDGCHolding»andrecommendedforusesubsidiaryaffiliatesof assessment ofachievementkeyperformanceindicatorssubsidiariesandassociatesthecompany» 4 makes up2950000rublesincluding VAT 18%.Asof31.12.2010theauditorwas paid2212500rubles. -al www.npg.ru (495)954-3180 7737017200 (495)954-3180 activity 14,Dukhovskoy by-street, Moscow,115191 Data onthelicenseforcarryingoutauditing E-mail: ClosedJoint-StockCompany«NPConsult» CJSC«NPConsult» Fax Telephone INN Place oflocation Abbreviated companyname Full companyname the stateddeadline,%. – Receiptofpassportavailability within and higher) power supplyinterruption(forfeedersof6kV – Systemindicatorforaverage durationof of 6kVandhigher) – Systemindicatorofgridfailure (forfeeders group accidentswithheavilyinjured victims – Absenceoffataljob-related accidentsor cidents – Non-exceedanceofcutoffnumberac- Reliability criteria,concurrently:      CJSC «NPConsult»isamemberofself-regulatory organization ofauditorsNon-Profit Partnership CJSC «NPConsult»waselectedauditoroftheCompanyatannualgeneralshareholders’ meeting The annualkeyperformanceindicators establishedfortheCompanywere achievedintheyear and calculation for Instructions «Methodological with compliance in calculated is indicator *the indicatoriscalculatedincompliancewith«MethodologicalInstructionsforcalculationand CJSC «NPConsult» didn’trender non-auditingservices totheCompany. Amount ofremuneration ofCJSC«NPConsult»forrendering auditing servicesundertheagreement .8. INFORMATION ONTHEAUDITOR      Institute forSocialandEthicAccountability (AccountAbility). International allianceoftariffexperts; International RealEstateFederation (FIABCI); Partnership ofRussianSociety Appraisers; Alliance ofprofessionalauditingorganizations; FINANCIAL ANDECONOMICACTIVITY Date ofexpiry:15.05.2013 Date ofissue:15.05.2003 Number: E004289 The MinistryofFinancetheRussianFederation Name ofauthorityhavingissuedthelicense: 0 100 100 1<1 <1 <1 <1 00 00 4 57

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

58 2. JUSTICE 1. ACCOUNTABILITY 5 receive effective protection incaseofviolationtheirrights. towards allshareholders. TheBoard ofdirectors provides allshareholders withanopportunityto of theCompany. of theCompanyapproved bytheGeneralmeetingofshareholders andbytheBoard ofdirectors framework, whichincludesthelegislationofRussianFederation andinternaldocuments present report. implementation oftheCorporateCodeConductiscontainedinappendixto Securities CommissionofRussiadatedApril4,2002No.421/r. The informationaboutthe with therequirements oftheCorporateCodeConductpreferred bytheOrder oftheFederal as well astheaccountabilityofBoard ofdirectors totheshareholders oftheCompany. the work oftheGeneralDirector andtheCompanymanagementbyBoard ofdirectors, Board). the Collegialexecutive body(Management        The rightsofshareholders oftheCompanyare protected by: The Companyundertakestoprotect therightsofshareholders andtoensure equalattitude In order toimprove thecorporategovernment qualitytheCompanyaimsatcomplying The systemofcorporatemanagementtheCompanyprovides theefficientcontrol over The corporategovernance intheCompanyisbasedonfollowingprinciples: The principlesofcorporatemanagementJSC«MOESK»are basedonregulatory andlegal ask questionsinteresting forthem; equal opportunitytoallpersonsparticipatinginthemeeting toexpress theiropinionandto about theCompany. order stipulatedbythelegislationofRussianFederation andtheCharterofCompany; Company; bodies oftheCompany; place oflocation; its competence; participating inthegeneralmeetingofshareholders withtherightto vote onallissueswithin .1. CORPORATE GOVERNANCE PRINCIPLES establishment ofanorder toholdthegeneralmeetingofshareholders, providing areasonable granting rightstotheshareholders for regular and well-timed fullandreliable information the shareholders’ proposals ontheagendaof Generalmeetingofshareholders inthe granting therighttoshareholders toparticipateinthedistribution ofprofits of the the participationofshareholders' representatives inthework ofgovernance andcontrol equal treatment ofallshareholders, regardless ofthepercentage oftheirownershipand granting therighttoshareholders toparticipateintheCompany’smanagementby body (GeneralDirector) and directors, theSoleexecutive mittees undertheBoard of the Board ofdirectors, com- the Check-upCommittee, eral meetingofshareholders, ernance, includingtheGen- C tem ofcorporategov- has amulti-level sys- urrently theCompany

CORPORATE MANAGEMENT the internalregulatory system. constantly w its shareholders. Inaddition,theCompanyis of theBoard ofdirectors oftheCompanyto tors, aswell astoensure theanswerability control ofmanagersbytheBoard ofdirec- management ofthecompany, andeffective ship andlocation,toensure thestrategic regardlessshareholder, ofhis/herowner- holders andtokeepequalattitudeeach nance allowstorespect therightsofshare- The current systemofcorporategover- orking ontheimprovement of 5 59

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

3. TRANSPARENCY The company ensures timely disclosure In order to implement the principle of trans- of reliable information about the most sig- parency, as well as to protect insider informa- nificant events of its businesses, including tion, JSC «MOESK» is guided in its activity by the data on its financial position, its busi- the Provisions on information policy approved ness management, social and environmental by the decision of the Board of directors of the performance indicators, ownership and the Company dated April 30, 2010 (Minutes No.107 Company’s management structure, as well as dated April 30, 2010) and by the Provisions on a free access to such information for all in- insider information of JSC «MOESK», approved terested persons in order to enable the Com- by the decision of the Board of directors of pany's shareholders and investors to take the Company dated October 13, 2008 (Minutes informed decisions. No.71 of October 14, 2008).

The main principles of information disclosure about the Company and its activities are: the guarantee of completeness and reliability of disclosed information; the regularity and efficiency of disclosure; the availability of information to shareholders and interested persons; the limited disclosure relating to trade secrets.

The disclosure of information about the corporate website of the Company in the Company and its business is carried out Internet at the address www.moesk.ru: it is through the distribution of information the information about the Company's struc- via electronic mass media, print media, on ture and management bodies, information the Internet in the form of press-releases, for shareholders, investors and other inter- 60 reports, articles, advertising materials and ested persons, including the data subject to other information. obligatory disclosure on the main production In accordance with the Charter of JSC and financial-economic performance, on the «MOESK» and the Provisions on information mission of the Company and the most sig- policy the main print media for the publica- nificant events happening around and inside tion of information for shareholders and in- the Company. vestors of the Company is a social and politi- In accordance with the requirements of cal newspaper «Izvestia». the legislation of the Russian Federation the The greatest amount of information about Company regularly presents quarterly re- the Company's activities is placed on the ports of the issuer to the FCSM of Russia.

4. RESPONSIBILITY The company recognizes the rights of all interested persons stipulated by the legislation of the Russian Federation and aims at cooperation with such persons for the purpose of its development and maintenance of financial stability.

5.2. REPORT OF THE BOARD OF DIRECTORS ON THE BUSINESS PRIORITIES’ DEVELOPMENT

According to the decision of the Board of on antiterrorist and anti-sabotage security directors of JSC «MOESK» (Minutes No.113 increase of the power industry facilities of of 02.09.2010) the Company is working to JSC «MOESK». increase the level of anti-terrorist and an- In accordance with the order of JSC ti-sabotage security of the power industry «MOESK» and inspection schedules, they facilities of JSC «MOESK», and in its frame- organized inspections of the status of work one has developed the «Comprehen- the anti-terrorist security and the facili- sive safety and antiterrorist security pro- ties’ protection implementation. Routine gram of the power industry facilities of JSC checks are carried out by the regime provi- «MOESK», valid until December 31, 2010» sion department of the executive body for and the first-priority arrangements Plan all facilities of affiliated branches. Accord- in 2010thefollowingmaindirections: registration/re-legalization ofrightstousethelandplots,Companyworked In thefieldofregistration oftheproperty rightsforreal estateobjects, with territorialbodiesoftheMinistry departments ofJSC«MOESK»branches of cooperationbetween regime provision owned byJSC«MOESK». of antiterrorist securityofthefacilities trolled andonehasprepared theConcept pany’s facilitiessafetyhave beencon- tion ofthedetecteddeficiencies. pare conclusions andproposals onelimina- ing totheresults ofinspectionstheypre- supply network facilities. information ontheprotected zonesofpower the implementationofworks toprepare for theyears of2011–2014withregard to legalization oftherightstouselandplots rights ofreal estateobjects,registration/re- of JSC«MOESK»onregistration ofproperty developed andapproved theWork Program the Board ofdirectors oftheCompanyhas key objectsforJSC«MOESK»as: OJSC «Mosenergo», locatedintheterritoryofMoscowcityandregion, includingsuch network facilities. JSC «MOESK»carriesoutworks aimedattheacquisitionbyJSC«MOESK»ofpower supply decision topreliminary approve thesales after whichtheBoard ofdirectors tookthe implementation ofcorporate procedures, legal andfinancialaspects, required forthe out theanalysisoftransaction, including Theу corrected andapproved theplans The anti-terrorist securityandtheCom- In connectionwiththelegislationchanges ◆ ◆ ◆ ◆ ◆ In 2010thepriorityforacquisitionwassetupon89power supplynetwork facilitiesof In accordance withthedecisionofBoard ofdirectors (MinutesNo.121of26.11.2010) In thereporting year theCompanycarried to consumersoftheSouthandSouth-West districtsofMoscow. ◆ power substation406«Shakhovskaya» andSS249«Shevardino» ownedbyJSC«MOESK»; «Sereda –Glyadkovo» providing thetechnologicalpower flowsbetween theelectric ◆ Scientific Research InstituteofAutomatics; railway stations«Sevastopolskaya» and«Southern»,FSUENSPC«Pribor»,All-Union socially significantobjectsasStatememorialestate«Tsaritsyno», theunderground

re-registration oftherightpermanentperpetualusealandplotfortenantright; determination ofprotected zonesofpower supplynetwork facilities. registration/re-legalization ofproperty rightsforreal estateobjects; cadastral registration oflandplotsandreal estateobjects; Power transmissionlineof110kV«Krasnogorka–Gavrikovo», providing power supply Overhead power transmission linewith35kVvoltage, indimensionsofHV–110kV Electric power substationNo.561«Sumskaya» 110kV, supplyingaswell forsuch CORPORATE MANAGEMENT means ofprotection. of allMoscowsubstationswithhigh-tech stations», whichincludestheequipment and equipmentofhighvoltage power sub- modular protection systemofperimeter gram ofAutomatedterritorialdistribution emergency situations. attacks andliquidationofconsequences tions ofRussiaunderthethreat ofterrorist vice, oftheMinistryforEmergency Situa- internal affairs,oftheFederal securityser- land-property complexoftheCompany. to control, tomanageandownobjectsof risks atrealization oftheCompany’srights well astominimizethelegalandeconomic land-property complexofJSC«MOESK», as conditions forthemosteffective useof plots isaimedatproviding legalandother registration/renewal oftherightsonland ownership rightstoreal estateobjects,on «MOESK» wasrecognized asthewinner. in tenderheldbyOJSC«Mosenergo». network facilitiesasaresult ofparticipation transaction oftheindicated89power supply The Companyisimplementingthe«Pro- Carrying outworks onregistration of According tothetenderresults JSC 5 61

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

5.3. GOVERNANCE AND CONTROL AUTHORITIES

General meeting of shareholders

Board of directors Check-up committee

Audit Committee

Management Reliability Committee Board

Strategy and Development Committee

Personnel 62 and Remuneration Committee

Director Committee on Technological Connections General to electric networks

Advisory bodies under the Board of Directors

GENERAL MEETING The General Meeting of Shareholders is the supreme governance body of the OF SHAREHOLDERS Company. In accordance with the Company’s Charter, the Federal Law On Joint-Stock Companies and internal documents of the Company, the competence of the General Meeting of Shareholders includes the following issues: 1) amending of the Charter and supplementing thereof or approval of the revised Charter; 2) restructuring of the Company; 3) liquidation of the Company, appointment of the liquidation commission and approval of interim and final liquidation balances; 4) determination of the quantity, par value, category (type) of declared shares and the rights provided by these shares; 5) increase in the authorized capital of the Company by increase in the par value of shares or by placement of additional shares; 6) reduction of the Company’s authorized capital by reduction of the par value of shares through acquisition by the Company of a part of shares in order to reduce their total amount, as well as by repayment of the shares redeemed or acquired by the Company; 7) fractioning and consolidation of the Company’s shares; 8) decision-making on placement by the Company of bonds convertible into shares and other equity securities convertible into shares; OF DIRECTORS BOARD nine monthsofthefinancialyear. loss followingtheresults ofthefinancialyear; ninemonthsofthefinancialyear) andtheCompany’s halfyear, results of thefirstquarter, ment (declaring)ofdividends,exceptfortheprofit distributedasadividendfollowingthe income statements(profit andlossaccounts),distributionofitsprofit (includingpay- of theirpowers; legislation oftheRussianFederation. General meetingofshareholders oftheCompanyinaccordance withthe requirements of the general managementoftheCompany’sactivities,controls theexecutionofdecisions in thereporting year. freely accessibleontheweb-site ofJSC«MOESK»:http://www.moesk.ru. and holdingoftheGeneralmeetingshareholders ofJSC«MOESK». the legislation,CharterofCompany, andalsotheProvisions ontheorder ofpreparation transferred totheBoard ofDirectors, Management Board orGeneralDirector oftheCompany. of 13members beingelectedbytheGeneral meetingofshareholders. work. the Companyforshareholders andotherinterested persons; the Company’sshareholders, aswell as toassistindeterminationofcorporateconflicts; increase inassetsoftheCompany; capitalization andinvestment attractiveness, andtheachievement ofmaximumprofits and The maingoalsandtasksoftheCompany’sBoard ofdirectors are: 13) payment (declaring) of dividends following the results of the first quarter, half year, halfyear, 13) payment (declaring)ofdividendsfollowingtheresults ofthefirstquarter, 12) approval oftheannualreport, annualaccountingstatements,includingtheCompany’s 11) approval oftheCompany’sAuditor; 10) electionofthemembersCompany’sCheckupCommitteeandearlytermination 9) electionofthemembersBoard ofDirectors andearlyterminationoftheirpowers; The Board ofDirectors isthesupervisoryauthorityofCompany, whichcarriesoutthe There are noneextraordinary Generalmeetingofshareholders oftheCompanybeinghold The fulldataonthedecisionsofGeneralmeetingsCompany’sShareholders is 4. Itapproved aneweditionoftheCharterJSC«MoscowUnitedElectricGridCompany». 3. Itapproved theauditorofJSC«MoscowUnitedElectricGridCompany». United ElectricGridCompany». 2. ItelectednewmembersoftheBoard ofdirectors, theAuditcommitteeofJSC«Moscow Electrical GridCompany»inaccordance withtheresults ofthe2009financialyear. distribution ofprofit (includingpayment ofdividends)andlossesJSC«MoscowUnited loss reports ofJSC«MoscowUnitedElectricalGridCompany»,andmadeadecisionon 1. Itapproved theAnnualreport, annualaccountingstatements,includingprofit and 2010 tookthefollowingdecisions: The annualGeneralMeetingofShareholders ofJSC«MOESK»June30, The procedure ofcallingand holdingofGeneralMeetingsshareholders isdeterminedby The issuescovering thescopeoffunctionsGeneralShareholders Meetingcannotbe According tothe Article16.1oftheCharterCompany, theBoard ofDirectors consists      the regular assessmentofactivitythe Company’sexecutive bodiesandmanagement's to establisheffective internalcontrol mechanisms; to ensure completeness,reliability andobjectivityoftheinformationdisclosure about to ensure theimplementationandprotection oftherightsandlegitimateinterests of the Company’sdevelopment strategydetermination,aimedatincreasing itsmarket CORPORATE MANAGEMENT 5 63

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

INFORMATION ON THE BOARD OF DIRECTORS ACTING BEFORE THE 30TH OF JUNE 2010 (DATE OF ELECTION – THE 11TH OF JUNE 2009, THE POSITIONS ARE SHOWN FOR THE DATE OF ELECTION).

The ownership of ordinary shares Full name Position of the person in the Company

NIKOLAY NIKOLAEVICH General Director of JSC «IDGC Holding» 0% SHVETS

MARIA GENNADIEVNA Head of the Department of the Russian 0% TIKHONOVA Federation Ministry of Energy

SERGEY NIKOLAEVICH First Deputy Chairman of the Management 0% IVANOV Board of «FGC UES» , JSC

YURY IVANOVICH General Director of JSC «MOESK» 0% TROPHIMOV

ALEKSEY FELIKSOVICH Property Relations Minister of the Moscow 0% BODUNKOV Region Administration

64 ALEXANDER ALBERTOVICH Deputy General Director of JSC «IDGC Hold- 0% POPOV ing»

ALEKSEY VLADIMIROVICH Deputy General Director of JSC «IDGC Hold- 0% DEMIDOV ing»

NIKOLAY GRIGORIEVICH First Deputy Chairman of the Management 0% SHULGINOV Board of «SO UPS»

WOLFGANG Managing Director of the Department for 0% SKRIBOT Direct Investments of JSC «Gazprombank»

SERGEY VALENTINOVICH Deputy Head of the Department for Direct 0% GRISHCHENKO Investments of JSC «Gazprombank»

ANATOLIY ANATOLIEVICH General Director of Leader JSC «SO UPS» 0% GAVRILENKO

Director of the Direction for Investment SERGEY MIKHAYLOVICH Projects and Programs – Managing Director 0% KERBER of Leader JSC Pension Fund Assets Manage- ment Company

VLADIMIR NIKHOLAEVICH Deputy Mayor of Moscow in the Moscow City Administration, Head of the Moscow 0% SILKIN Property Department Board ofDirectors Chairman ofthe SHVETS Nikolaevich Nikolay THE BOARD OFDIRECTORS N.G.Shulginov, S.E.Yurchuk. A.V. Nuzhdov,K.Y.Petukhov,S.M. Kerber, A.A.Popov, E.V. Sklyarov, W. Skribot, N.N. Shvets, A.F. Bodunkov,A.A.Gavrilenko,S.V. Grishchenko,D.L.Guryanov, The newBoard ofDirectors was electedandincluded: terminated: A.V. Demidov,S.N.Ivanov, V.N. Silkin,M.G.Tikhonova, Y.I.Trophimov Board ofDirectors ofJSC«MOESK». Date offirstelectiontotheBoard ofDirectors: Ownership ofCompany’sordinary shares: Chairman oftheBoard of Directors ofJSC«UralIDGC». Chairman oftheBoard ofDirectors ofJSC«IDGCtheNorth-West»; Chairman oftheBoard ofDirectors ofJSC«IDGCtheCenterandVolga region»; Member oftheBoard ofDirectors ofJSC«R&Denterprise «Start»; Member oftheBoard ofDirectors ofJSC«Sarapulsky ElectricGeneratorPlant»; University (part-time); Professor ofManagement,MarketingandLawFaculty oftheFar EasternStateAgrarian Chairman oftheLegislative AssemblyoftheAmurregion; First DeputyPrimeMinisteroftheAmurRegion; Assistant GeneralDirector of FSUE«Rosoboronexport»; Positions heldduringthelast5years: Chairman oftheBoard ofDirectors ofJSC«Kubanenergo». Member oftheSupervisoryBoard oftheJSC«RRDB»; Member oftheBoard ofDirectors ofJSC«Energy forecasting agency»; Chairman oftheBoard ofDirectors ofJSC«SouthIDGC»; Chairman oftheBoardC ofDirectors ofOJSC«CenterIDGC»; Chairman oftheBoardC ofDirectors JSC«Yantarenergo»; Chairman oftheBoardC ofDirectors JSC«Tyumenenergo»; Chairman oftheBoardC ofDirectors ofJSC«Lenenergo»; Member oftheBoardM ofDirectors ofJSC«IDGCHolding»; TechnicalT CounciloftheUnifiedEnergy System(NPSTC UES); Member oftheSupervisoryBoardM oftheNon-Commercial Partnership theScientificand WorkersW Union»; Vice-PresidentV oftheAll-Russian branchassociationofemployers «Russia’sEngineering public organizationp «Russia’sEngineeringWorkers Union», Member ofcentralcouncil,amembertheBureauM oftheCentralCouncilAll-Russian pervisory Board): Positions heldinotherorganizations,includingasamemberoftheBoardDirectors(Su- Education: Nationality: Year ofBirth: ChairmanoftheBoardGeneral Director, ofJSC«IDGCHolding» As avote result intheBoard ofDirectors oftheCompanyfollowingpowers were The annualGeneralmeetingofshareholders ofJune30,2010electedthecurrent higher Russia 1956

CORPORATE MANAGEMENT 0% June 11,2009. 5 65

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Aleksey Advisor to the Governor of Moscow region Feliksovich BODUNKOV Year of Birth: 1966 Nationality: Russia Education:E higher

PositionsP held during the last 5 years: PropertyP Relations Minister of the Moscow Region Administration.

OwnershipO of Company’s ordinary shares : 0% DateD of first election to the Board of Directors: June 11, 2009.

Anatoliy General Director of JSC «Leader» (Pension Fund Assets Management Company). Anatolievich GAVRILENKO Year of Birth: 1972 Nationality: Russia Education:E higher

PositionsP held in other organizations, including as a member of the Board of Directors (Su- pervisoryp Board): MemberM of the Board of Directors of JSC «Leader»; MemberM of the Board of Directors of JSC «Mosenergo»; MemberM of the Board of Directors of «Gasprombank» (open joint stock company); MemberM of the Board of Directors of JSC «Sibur Holding»; 66 MemberM of the Board of Directors of JSC «Salavatnefteorgsintez»; MemberM of the Board of Directors of JSC «WGC-2»; Member of the Board of Directors of JSC «WGC-6»; Member of the Board of Directors of JSC «GASKON»; Member of the Board of Directors of JSC «GAS-service»; Member of the Board of Directors of JSC «Stolichny trakt»; Member of the Board of Directors of JSC «Main Road»; Member of the Board of Directors of JSC «Sochi-Breeze».

Positions held during the last 5 years: General Director of JSC «Leader» (Pension Fund Assets Management Company).

Ownership of Company’s ordinary shares : 0% Date of first election to the Board of Directors : February 28, 2005

Sergey Deputy Head of the Direct Investments Department of JSC «Gazprombank». Valentinovich GRISHCHENKO Year of Birth: 1972 Nationality: Russia Education:E higher

PositionsP held in other organizations, including as a member of the Board of Directors (Su- pervisoryp Board): MemberM of the Board of Directors of JSC «Sibur Holding»; MemberM of the Board of Directors JSC «MK «URALMASH»; MemberM of the Board of Directors JSC «United Machine Engineering Plants» (Uralmash- IzhoraI Group); MemberM of the Board of Directors of «Status» Ltd.; MemberM of the Board of Directors of JSC «Group Khimmash»; KERBER Mikhailovich Sergei GURYANOV Lvovich Denis Date offirstelection totheBoardofDirectors : Ownership ofCompany’sordinary shares: ment); Director ofEconomicAffairsFSUE«Goskorporatsia» bytheATM (airtrafficmanage- Positions heldduringthelast 5years: Member oftheBoardM ofDirectors ofJSC«Mosteplosetenergoremont». Member oftheBoardM ofDirectors ofJSC«SIBUR–MineralFertilizers»; Member oftheBoardM ofDirectors ofJSC«Uralsvyazinform»; Member oftheBoardM ofDirectors ofJSC«SIBUR–RussianTyres»; Member oftheBoardM ofDirectors ofJSC«Arktel»; pervisory Board): p PositionsP heldinotherorganizations,includingasamember oftheBoardDirectors(Su- Education: E Nationality: N Year ofBirth: JSC «Leader»(Pension FundAssetsManagementCompany). Director oftheInvestmentProjects andPrograms Direction –ManagingDirector of Date offirstelectiontotheBoardDirectors: Ownership ofCompany’sordinaryshares: Deputy HeadoftheDirect Investments DepartmentofJSC«Gazprombank». Positions heldduringthelast5years: Member oftheBoard ofDirectors of«Uralmash-Engeneering»Ltd. Member oftheBoard ofDirectors ofJSC«Forpost-Management»; Member oftheBoard ofDirectors ofJSC«MachineEngineeringPlant«ZiO-Podolsk»; PositionsP heldduringthelast5years: Member oftheBoardM ofDirectors ofJSC«IDGCtheNorthCaucasus». Member oftheBoardM ofDirectors ofJSC«Sevkavkazenergo»; Member oftheBoardM ofDirectors ofJSC«EstateVNIPIenergoprom»; pervisory Board): p PositionsP heldinotherorganizations,includingasamemberoftheBoardDirectors(Su- Education: E Nationality: N Year ofBirth: ment ofJSC«IDGCHolding». First DeputyHeadoftheCorporateGovernanceandShareholder RelationsDepart- Date offirstelectiontotheBoardDirectors: Ownership ofCompany’sordinaryshares: «UES ofRussia». Head ofCorporateRelationsDepartmentBusinessUnitJSC«IDGCHolding»RAO Head ofCorporateRelationsDepartmentManagementCenterIDGC«FGCUES»; Deputy HeadofCorporateEvents Department,BusinessUnit 1ofJSCRAO «UESofRussia»; higher higher Russia Russia 1973 1977

CORPORATE MANAGEMENT

0% 0% 0% May 28,2008 May 28,2008 May 28,2008 5 67

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Aleksey Deputy General Director for Security of JSC «Leader» (Pension Fund Assets Manage- Viktorovich ment Company). NUZHDOV Year of Birth: 1967 NNationality: Russia EEducation: higher

PPositions held in other organizations, including as a member of the Board of Directors (Su- ppervisory Board): HHead of Corporate Protection SPF «Gazfond»; MMember of the Board of Directors of JSC «Mosenergosbyt».

PPositions held during the last 5 years: HHead of Federal Security Service Branch of the Russian Federation.

Ownership of Company’s ordinary shares : 0% Date of first election to the Board of Directors : June 30, 2010

Alexander Deputy General Director– Chief of Staff of JSC «IDGC Holding» Albertovich POPOV Year of Birth: 1955 Nationality: Russia Education:E higher

PositionsP held in other organizations, including as a member of the Board of Directors (Su- 68 pervisoryp Board): MemberM of the Board of Directors of JSC «IDGC of the North-West»; MemberM of the Board of Directors of JSC «Lenenergo»; MemberM of the Board of Directors of JSC «IDGC of the Center»; MemberM of the Board of Directors of JSC «IDGC of Siberia»; MemberM of the Board of Directors of JSC «IDGC of the Center and Volga region».

Positions held during the last 5 years: Armed Forces and the Federal Security Service of the Russian Federation – in various positions, Chief Specialist of Vice President Service OAU – Security Director of «Group AvtoVAZ» Ltd., Head of organizational personnel department of the Administration of the Amur region under the President of the Russian Federation, and the Government of the Russian Federation; Head of the Staff of the Governor of the Amur Region and the Government of the Amur Region; Head of the Representative Office of the Amur Region under the President of the Russian Federation and the Government of the Russian Federation.

Ownership of Company’s ordinary shares : 0% Date of first election to the Board of Directors : June 11, 2009

SKRIBOT Wolfgang PETUKHOV Yurievich Konstantin SKLYAROV Viktorovich Evgeniy Ownership ofCompany’sordinary shares: President ofJSC«Mospromstroymaterialy». Positions heldduringthelast5years: Education: Nationality: Year ofBirth: Head oftheDepartmentFuelandEnergy SectorofMoscowCity D Date offirstelectiontotheBoard ofDirectors: O P P Date offirstelectiontotheBoardDirectors: Ownership ofCompany’sordinaryshares: joint stockcompany). Managing Director oftheDepartmentforDirect Investments ofJSC«Gazprombank» (open Positions heldduringthelast5years: ing suppliers); Member oftheBoard ofDirectors ofJSC«NPGS»(Noncommercial partnershipofguarantee- Member oftheBoard ofDirectors ofJSC«IDGCtheCenterandVolga region»; Member oftheBoard ofDirectors JSC«Mosenergosbyt»; pervisory Board): Positions heldinotherorganizations,includingasamemberoftheBoardDirectors(Su- Education: Nationality: Year ofBirth: (open jointstockcompany) Managing Director oftheDepartmentforDirect InvestmentsofJSC«Gazprombank» Date offirstelectiontotheBoardDirectors: Ownership ofCompany’sordinaryshares: Director of Development andimplementationofservicesJSC«IDGCHolding». Siberia»; Deputy GeneralDirector forDevelopment andimplementationofservicesJSC«IDGC Head oftheDepartmentElectricityTransport «IDGCofSiberia»; operations servicesofJSC«IDGCtheCenterandNorthCaucasus»; Head ofenergy lossesoptimizationDepartmentandoftheinterconnected torate ofJSC«Altayenergo»; Deputy Executive Director forthepower transportofthePower Transport Executive Direc- Positions heldduringthelast5years: Education: Nationality: Year ofBirth: Director of StrategyandDevelopmentJSC«IDGCHolding». P i M M M p P E N D S D H o H t D P higher higher higher Austria Russia Russia 1955 1971 1966

CORPORATE MANAGEMENT

0% 0% 0% June21,2007 June30,2010 February 28,2005 5 69

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Nikolay First Deputy Chairman of the Management Board of «SO UPS» Grigorievich SHULGINOV Year of Birth: 1951 Nationality: Russia Education: higher

PositionsP held in other organizations, including as a member of the Board of Directors (Su- pervisoryp Board): MemberM of the Board of Directors of JSC «Mosenergo»; MemberM of the Board of Directors of JSC «WGC-1»; MemberM of the Board of Directors of JSC «Lenenergo».

PositionsP held during the last 5 years: DeputyD Chairman of the Management Board of «SO UPS»;

Ownership of Company’s ordinary shares : 0% Date of first election to the Board of Directors : May 28, 2008

Sergey Finance Director of JSC «IDGC Holding». Evgenievich YURCHUK Year of Birth: 1966 Nationality: Russia Education: higher

Positions held in other organizations, including as a member of the Board of Directors (Su- 70 pervisory Board): Member of the Board of Directors of JSC «IDGC of the North-West»; Member of the Board of Directors of JSC «IDGC of the South»; Member of the Board of Directors of JSC «Lenenergo».

Positions held during the last 5 years: Director for Economy and Finance of JSC «Shipyard «Severnaya Verf»; Deputy General Director for Economy and Finance of JSC «Almaz Press».

Ownership of Company’s ordinary shares: 0% Date of first election to the Board of Directors: June 30, 2010

At the first meeting of the newly elected Board of directors of the Company on 30 July 2010 (Minutes No.112 dated August 2, 2010) N.N Shvets was unanimously elected as the Chairman of the Board of Directors, and A.A Popov was unanimously elected as the Deputy Chairman of the Board of directors.

In the reporting year no transactions have been made between members of the Board of directors and JSC «MOESK», no claims have been advanced to the members of the Board of directors of the Company. ACTIVITY OFTHEBOARD OFDIRECTORS IN2010COMPARED TO 2009: THE ACTIVITY OFTHEBOARD OFDIRECTORS 10.003.221 72 1 89.1% 92.84% 219 209 24 21 17 18 7 3 0 0 01.01.2010-31.12.2010 01.01.2009-31.12.2009 including –89.6%ofindependentdirectors. 90.4% ofthemembersBoard ofdirectors, acting uptoJune30,2010: directors intheprevious Board ofDirectors of directors atthemeetingsofBoard of The attendanceofthemembers oftheBoard ..Sugnv12 10 10 9 8 12 N.G. Shulginov 12 Y.I. Trophimov M.G. Tikhonova 12 W. Skribot V.N. Silkin 12 11 A.A. Popov 9 12 S.M. Kerber 12 A.V. Demidov S.V. Grishchenko A.A. Gavrilenko A.F. Bodunkov S.N. Ivanov N.N. Shvets Board ofdirectors The meetingswere ontheaverage attended by ihddb h hi Member ofthe Period July 30,2009(MinutesNo.112of02.08.2010). the Board ofdirectors for2010-2011,approved bythedecisionofBoard ofdirectors dated meeting ofshareholders datedMarch 28,2006. meetings oftheBoard ofdirectors oftheCompany, approved bythedecisionofGeneral bytheProvisions ontheprocedureby theCompany’sCharter, forcallingandholdingof In 2010theyheld24meetingsoftheBoard ofdirectors, where: The activitiesoftheBoard ofdirectors are organized inaccordance withtheWork Planof In itsactivitytheBoard ofdirectors isguidedbythelegislationofRussianFederation, in absentia. ◆ and inabsentia; ◆ presentia

having beenattended 12 –ofthenewBoard ofDirectors electedin2010,3ofthem–meetingspersonand by thememberof 12 –oftheBoard ofDirectors electedin2009,amongthem4meetingswere inperson Number ofmeetings Board ofdirectors in Number ofthemeetings in personand in absentia CORPORATE MANAGEMENT absentia including –86.8%ofindependentdirectors. 87.8% ofthemembersBoard ofdirectors, elected onJune30,2010: directors inthecurrent Board ofDirectors of directors atthemeetingsofBoard of The attendanceofthemembers oftheBoard .E ucu 12 12 4 10 12 12 S. E.Yurchuk N.G. Shulginov 8 11 V.E. Sklyarov W. Skribot 12 K.Y. Petukhov A.A. Popov 12 8 A.V. Nuzhdov 12 12 S.M. Kerber D.L. Guryanov S.V. Grishchenko A.A. Gavrilenko A.F. Bodunkov N.N. Shvets Board ofdirectors The meetingswere ontheaverage attended by in ihddb h hi Member ofthe Total Total issues examined Number of having beenattended by thememberof Number ofmeetings Board ofdirectors meetings Average quorum at the 5 71

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

The result of the The result of the Board of directors’ activities in 2010 was the adoption of decisions on Board of directors’ the most significant issues of the Company's business in the framework of its competence, activities among them:

◆ approval of the Business-plan (including the investment program) of the Company for 2010 (Minutes No.106 dated 02.04.2010), as well as making adjustments in the above document (Minutes No.121 of 24.12.2010); approval of the Business-plan (including the investment program) of the Company for 2011 (Minutes No.121 of 24.12.2010), approval of the Annual Comprehensive Program of Competitive and Regulated Non-Competitive Purchases of the Company for 2010 (Minutes No.109 of 10.06.2010); ◆ approval of internal documents of the Company (the edited Provisions on the procedure for providing material assistance to the employees of JSC «MOESK», the amended Provisions on the procedure for providing charitable donations and sponsor support of JSC «MOESK» (Minutes No.100 dated February 15, 2010); approval of JSC «Moscow United Electric Grid Company» Insurance Program for 2010, the amended Provisions for the information policy of JSC «MOESK» (Minutes No.107 dated April 30, 2010); the amended Provisions on the Audit Committee of the Board of directors of JSC «Moscow United Electric Grid Company», the amended Provisions on the Personnel and Remuneration Committee of the Board of Directors of JSC «Moscow United Electric Grid Company», the Policy of risks management in JSC «MOESK», Internal control policy of JSC «MOESK» (Minutes No. 110 dated 11.07.2010), the Provisions on the dividend policy of JSC «MOESK», the Program of the non-state pension provision of the employees of JSC «MOESK» (Minutes No. 114 dated 03.09.2010); the first-priority arrangements Plan on antiterrorist and anti-sabotage security increase of the power industry facilities of JSC «MOESK» (Minutes No.115 dated 20.09.2010); the Provisions on transport policy of JSC «MOESK» (Minutes dated 30.10.2010); the Program of non-state pension provision of employees of JSC «MOESK» for 2011 (Minutes No.123 of 72 31.12.2010). ◆ JSC «MOESK» membership in Noncommercial Partnership «The union of power auditors and power-service companies» (Minutes No. 119 dated 26.11.2010) and membership in Non-commercial Partnership «The market Union on organization of efficient system of wholesale and retail trade of electric power and capacity» (Minutes No.123 dated 31.12.2010). ◆ The definition of the priority business areas of JSC «Moscow United Electric Grid Company»:  antiterrorist and anti-sabotage security increase of the power industry facilities of the Company (Minutes No. 113 dated 02.09.2010); registration of property rights for the real estate objects, registration/ re-legalization of the rights to use the land plots for the period from 2011 to 2014 taking into account the works implementation directed to the preparation of the data on the protection zones boundaries of the power sector facilities» (Minutes No.119 dated 26.11.2010); consolidation of power supply network objects belonging to JSC «Mosenergo» and located within the territory of Moscow and Moscow region (Minutes No.121 dated 24.12.2010). ◆ preliminary approval of transactions which were of interest for the Company; ◆ other issues. DATA ONMAJOR DEALS DATA ONTRANSACTIONS BEINGOFINTERESTTO THECOMPANY the Federal LawOnJointStockCompaniesdatedDecember 26,1995No.208-FZ. by theBoard ofdirectors ortheGeneralmeetingofshareholders inaccordance with made bytheCompanyisgiven intheAppendix. Total Item 3.6. 3.5. 3.4. 3.3. 3.2. 3.1. 5. 4. .Croaegvrac:8 36.53% 80 Corporategovernance: 3. 2. 1. In 2010theCompanydidnot makemajordealsrequired tobepreliminary approved The dataonthetransactionsbeingofinterest totheCompanyandonbargains controlled bytheBoard ofdirectors transactions withsecuritiesandothersitsexecutiontobe transactions, beingofinterest totheCompany, majordeals, Approval oftransactions,includingpreliminary approval of economic activities,ontheinsuranceprotection provision key performanceindicators,onthecredit policyofindustrial- tion ofbusinessplans,investment programs, ontarget values of Management control, includingexaminationofreports on execu- «MOESK» activity ofcompanieswiththeshares (stakes)ownedbyJSC Consideration ofissuesrelated tothecontrol over thebusiness assistance Material assistancetoemployees andcharitable(sponsored) trol bodies,ofexternalauditor bodies oftheCompany, issuesofmanagementandinternalcon- Consideration ofissuesrelated totheactivityofexecutive man oftheBoard ofdirectors, etc. tors, committeesoftheBoard ofdirectors, electionoftheChair- Organization andholdingofthemeetingsBoard ofdirec- meetings ofshareholders, etc. consideration ofshareholders' proposals ontheagendaof Preparation andholdingofgeneralmeetingsshareholders, tence oftheBoard ofdirectors introduction ofamendmentsintotheCharterwithincompe- Approval/amendment oftheinternaldocumentsCompany, of cashflows,insuranceprotection programs, etc. procurement, ofkeyperformanceindicators’values, benchmarks complex programs ofcompetitive andregulated non-competitive Approval/amendment ofbusiness-plans,investment programs, placement ofbonds,onattractionexternalborrowings taking decisionsonparticipationinotherorganizations, on Development oflong-termdevelopment strategyoftheCompany, Issues withinthecompetenceofBoard ofdirectors CORPORATE MANAGEMENT Number ofissues examined 712.33% 27 26.94% 59 56.85% 15 8.68% 9.59% 19 5.48% 21 12 25.48% 12 15.53% 34 98.68% 19 0.46% 1 219 total amountof the examined Share inthe issues 5 73

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

THE COMMITTEES UNDER THE BOARD OF DIRECTORS In order to effectively address the requirements of Russian stock exchang- issues within the competence of the es, which compliance allows to support Board of directors and to develop pre- the shares of JSC «Moscow United Elec- liminary recommendations to the Board tric Grid Company» in the «A» category of directors and the Executive body, the stock exchange quotation lists. Company has the committees under the In the course of 2010 the following Board of directors, including represen- Committees worked under the Board of tatives of the majority shareholders of directors of the Company: the Person- JSC «Moscow United Electric Grid Com- nel and Remuneration Committee, the pany». Audit Committee, the Strategy and De- The membership of the committees velopment Committee, the Committee of the Board of directors of the Com- on technological connection to electric pany is formed in accordance with the networks, the Reliability Committee.

THE AUDIT The Audit Committee was established by the decision of the Board of directors of COMMITTEE the Company and is a consultative advisory body providing control of the Board of directors of the Company over the financial and economic activities of the Company. The Committee’s objective is the development and presentation of recommendations (conclusions) to the Board of directors of the Company on the issues of financial and economic activity. The data in the Position and place of work (for the date of election) membership of the Full name Audit Committee Aleksey Vladimirovich Economy and Finance Deputy General Director of JSC 74 acting till the 30 of 1. Demidov (Chairman of the «IDGC Holding» July 2010: Committee) Alexander Albertovich Deputy General Director – Staff Head of JSC «IDGC 2. Popov Holding» Sergey Nikolaevich First Deputy Chairman of the Management Board of 3. Ivanov JSC «FGC UES»

Sergey Mikhailovich Investment Projects and Programs Head – Managing 4. Kerber Director of JSC «Leader»

The resolution Full name Position and place of work of the Board of directors dated Sergey Evgenievich July 30, 2010 1. Yurchuk (Chairman of the Director for Finances of JSC «IDGC Holding» (Minutes No.112 of Committee) 02.08.2010) stated First Deputy Chief of the Corporate Governance and the quantitative 2. Denis Lvovich Guryanov Shareholder Relations Department of JSC «IDGC membership of the Holding» Committee of 5 Sergey Mikhailovich Head of the Investment Projects and Programs Direc- persons and elected 3. the personal Kerber torate – Managing Director of the JSC «Leader» membership of the Alexander Albertovich Deputy General Director – Head of the Administra- 4. Committee: Popov tion of JSC «IDGC Holding» Managing Director, Chief of the Electric Power Industry and Infrastructural Projects Administration 5. Wolfgang Skribot of the Direct Investments Department of Gazprom- bank (open joint-stock company). Committee undertheBoard ofdirectors. in theresults ofthe audit)fortheyear 2009; of theAuditorforCompany's management(includingletterstothe JSC «MOESK»for2009prepared in accordance withIFRSand therecommendations value oftheproperty andother assetsoftheCompany; of theCompany’sAuditor; the Companyfollowingissueswere Committee oftheBoard of directors of 30, 2010: mittee undertheBoard ofdirectors inthecurrent membership electedonJuly The attendanceoftheCommitteemembers atthemeetingsofAuditCom- July 30,2010: Committee undertheBoard ofdirectors intheprevious membership upto The attendanceoftheCommitteemembers atthemeetingsofAudit including 2collective meetingswithattendancebythemembers. Committee undertheBoard ofdirectors. ..Kre 1 1 3 3 S.M. Kerber S.N. Ivanov A.A. Popov A.V. Demidov ..Yrhk3 2 3 3 2 S.E. Yurchuk W. Skribot A.A. Popov S.M. Kerber D.L. Guryanov The meetingswere ontheaverage attended by67%ofthemembersAudit In 2010atthemeetingsofAudit In 2010theyheld6meetingsoftheAuditCommitteeunderBoard ofdirectors,    The meetingswere ontheaverage attendedby87%ofthemembersAudit h etnswr nteaeaeatne y8%o h ebr fteAudit the of members the of 87% by attended average the on were meetings The OncheckingtheAuditor's report fortheConsolidated financialstatementsof OncheckingtheListofindependent auditorsengagedtoevaluate themarket Therecommendations fortheBoard ofDirectors ontheamountofremuneration of theAuditCommittee of theAuditCommittee Member Member CORPORATE MANAGEMENT Number ofmeetingshavingbeenattendedbythemember Number ofmeetingshavingbeenattendedbythemember Company businessactivity, inparticular: on themostimportantissuesof discussed andrecommendations given of theAuditCommittee of theAuditCommittee 5 75

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

 The assessment of the audit report on financial statements of the Company for the year 2009, issued by JSC «HLB Vneshaudit»;  The recommendations for the Board of directors of JSC «Moscow United Electric Grid Company» for the candidature of the Company’s Auditor;  On the preliminary approval of the annual report and annual accounting records of the Company for 2009;  The recommendations to the General meeting of shareholders on distribution of profits and losses, and also on the size of the dividend on shares of the Company following the results of 2009;  On drawing up recommendations on the choice of the Auditor executing the Company’s financial audit prepared in accordance with International Accounting Standards.

PERSONNEL AND The committee was created to increase personnel policy and motivation, as well REMUNERATION the management efficiency of the Com- as of the execution of such decisions, COMMITTEE pany’s development by means of sound- taken by the Board of directors of the ly-based recommendations to the Board Company. of directors of the Company in respect of

The data on the membership of Full name Position and place of work (for the date of election) the Personnel and Alexander Albertovich Remuneration Deputy General Director of JSC «IDGC Holding» – 1. Popov (Chairman of the Head of the JSC «IDGC Holding» Administration 76 Committee acting Committee) till the 30 of July 2010: Aleksey Vladimirovich Deputy General Director on Economy and Finance 2. Demidov of JSC «IDGC Holding»

Head of the Administration of the Electric Power and Infrastructure Projects – Managing 3. Wolfgang Skribot Director of the Direct Investments Department of Gazprombank (Open Joint Stock Company)

Anatoliy Anatolievich 4. General Director of JSC «Leader» Gavrilenko

The resolution of the Board of Full name Position and place of work directors dated Alexander Albertovich Deputy General Director of JSC «IDGC Holding» – July 30, 2010 1. Popov (Chairman of the Head of the JSC «IDGC Holding» Administration (Minutes No.112 of Committee) 02.08.2010) stated Anatoliy Anatolievich 2. General Director of JSC «Leader» the quantitative Gavrilenko membership of the Committee of 5 First Deputy Chief of the Corporate Governance and persons and elected 3. Denis Lvovich Guryanov Shareholder Relations Department of JSC «IDGC the personal Holding» membership of the Managing Director, Head of the Administration of Committee: the Electric Power and Infrastructure Projects of the 4. Wolfgang Skribot Direct Investments Department of Gazprombank (Open Joint Stock Company)

Sergey Evgenievich 5. Director for Finances of JSC «IDGC Holding» Yurchuk Directors oftheCompany; resources; of theCompany; ny thefollowingissueswere discussed of theBoard ofdirectors oftheCompa- sonnel andRemunerationCommittee business activity, inparticular: and recommendations givenonthemostimportantissuesofCompany the Board ofdirectors oftheCompanyfollowingissueswere discussed In 2010atthemeetingsofPersonnel andRemunerationCommitteeof Personnel andRemunerationCommitteeundertheBoard ofdirectors. members. under theBoard ofDirectors, including1collective meetingwithattendancebythe membership actinguptoJuly30,2010: and RemunerationCommitteeundertheBoard ofDirectors intheprevious The attendanceoftheCommitteemembers atthemeetingsofPersonnel Remuneration CommitteeundertheBoard ofdirectors. ..Yrhk4 4 4 4 4 S.E. Yurchuk W. Skribot A.A. Popov D.L. Guryanov A.A. Gavrilenko .Srbt4 5 5 4 W. Skribot A.A. Popov A.V. Demidov A.A. Gavrilenko Member ofthePersonnel and Member ofthePersonnel and In 2010atthemeetingsofPer- the of members the of 90% by attended average the on were meetings The meetingswere ontheaverage attendedby90%ofthemembers In 2010theyheld9meetingsofthePersonnel andRemunerationCommittee       The meetingswere attendedby100%ofthemembersPersonnel and Th Remuneration Committee Remuneration Committee Onperformance estimationoftheGeneral Director oftheCompany. Onpreliminary estimationofthecandidatures ofthemembersBoard of OntheProgram review inthefieldof managementofCompany’shuman Onstipulationoftheconditionslaborcontract withtheGeneralDirector OnelectionoftheGeneralDirector oftheCompany; OnelectionoftheCompany’sManagementBoard members; e me et in gs w er e CORPORATE MANAGEMENT at te nd ed b Number ofmeetingshavingbeenattendedbythemember Number ofmeetingshavingbeenattendedbythemember y 10 of thePersonnel andRemunerationCommittee of thePersonnel andRemunerationCommittee 0% business activity, inparticular: most importantissuesoftheCompany and recommendations given onthe o f th e me mb er s of t he P er so nn el a nd 5 77

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

RELIABILITY The main tasks of the Committee are working out and presentation of COMMITTEE recommendations (conclusions) to the Board of Directors of the Company in the following business areas of the Board of Directors:

 expertise of investment programs and plans for repair of energy facilities, analysis of its implementation from the point of view of the requirements of comprehensive reliability;  assessment of the completeness and adequacy of measures taken on the results of accidents and major technological violations, as well as the control of its execution;  monitoring and performance appraisal of Company’s technical services regarding:  ensuring overall reliability of the network and generating equipment and constructions;  ensuring normal status of fixed assets and presentation of the information on the anticipated reliability risks of its functioning;  analysis of the contractual and economic tools of reliability management.

The data on membership in the Reliability Full name Position and place of work (for the date of election) Committee acting till the 30 of July Pavel Ivanovich Okley 2010: Deputy General Director– Technical Director of JSC 1. (Chairman of the «IDGC Holding» 78 Committee)

Pavel Vladimirovich Deputy Head of the Department for Organization of 2. Ilyushin Operation and MRO of JSC «IDGC Holding»

Andrey Vladimirovich Deputy Director General – Chief Engineer of JSC 3. Mayorov «Moscow United Electric Grid Company»

Deputy General Director in charge of Finance of JSC 4. Olga Leonidovna Bulanova «Moscow United Electric Grid Company»

Director for Development of Dispatch Management Igor Dmitrievich 5. Technology of the Interregional Dispatching Office Alyushenko of Centre, a branch of «SO UPS»

Mikhail Ivanovich First Deputy Head of the Fuel and Energy Economy 6. Balabanov Department of the city of Moscow

Deputy Director of the Department of Economic Valeriy Mukhamedovich Regulation and Property Relations in Fuel and 7. Shogenov Energy Complex under the Russian Federation Ministry of Energy

Chief of the Investment Projects Analysis and Timur Khyzyrovich Efficiency Evaluation Division of the Investments 8. Tambiev Department of JSC «IDGC Holding» July 30,2010: membership upto the previous of directors in under theBoard Committee the Reliability meetings of members atthe of theCommittee The attendance Company»: Electric Grid «Moscow United the Board ofJSC Committee under the Reliability membership of The personal 02.08.2010) statedthequantitative membershipoftheCommittee of8persons. directors. Reliability Committeeunder theBoard ofdirectors. ..Soeo 0 1 2 2 2 2 0 1 V.M. Shogenov T.Kh. Tambiev A.V. Mayorov P.V. Ilyushin P.I. Okley O.L. Bulanova M.I. Balabanov I.D. Alyushenko The resolution oftheBoard ofdirectors datedJuly30,2010(MinutesNo.112of In 2010theyheld5meetingsoftheReliabilityCommitteeunderBoard of ht ht 3 hbfth f b th f 63% b d d tt th ti Th The meetingswere ontheaverage attendedby63%ofthemembers ofthe 8. 7. 6. 5. 4. 3. 2. 1. Member oftheReliability Alyushenko Igor Dmitrievich Balabanov Mikhail Ivanovich Olga LeonidovnaBulanova Chegodaev Anatoly Vasilievich Voynov Roman Vladimirovich Tambiev KhyzyrovichTimur Ilyushin Pavel Vladimirovich Committee) Zuykova (Chairmanofthe Olga Valentinovna Committee Full name CORPORATE MANAGEMENT Number ofmeetingshavingbeenattendedbythemember UPS» Dispatching OfficeofCenter)–abranch«SO Development ofIDOCenter(Interregional Director forDispatchingManagementTechnologies Department ofthecityMoscow First DeputyHeadoftheFuelandEnergy Economy Finance ofJSC«MOESK» Deputy GeneralDirector incharge ofEconomyand «MOESK» Deputy GeneralDirector– Technical Director ofJSC «MOESK» – ChiefoftheGridsManagementCenterJSC Deputy Technical Director forDispatchManagement Department ofJSC«IDGCHolding» Efficiency Evaluation DivisionoftheInvestments Chief oftheInvestment Projects Analysisand Holding» Repairs ArrangementDepartmentofJSC«IDGC Deputy ChiefoftheExploitation,Maintenanceand Directorate ofJSC«IDGCHolding» Head oftheIndustrialControl andLaborSafety of theReliabilityCommittee Position andplaceofwork 5 79

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

The attendance Member of the Reliability Number of meetings having been attended by the member of the Committee Committee of the Reliability Committee members at the meetings of I.D. Alyushenko 2 the Reliability Committee M.I. Balabanov 0 under the Board O.L. Bulanova 3 of directors in the current R.V. Voynov 2 membership elected on July 30, O.V. Zuykova 3 2010: P.V. Ilyushin 2

T.Kh. Tambiev 0

A.V. Chegodaev 3

ThThee meetingsmeetings werewere on thethe averageaverage attendedattended by 63%63% ofof thethe membersmembers of tthehe Reliability Committee under the Board of directors.

IInn 20102010 thethe ReliabilityReliability CommitteeCommittee ofof thethe BoardBoard ofof thethe DirectorsDirectors ooff tthehe CCompanyompany eexaminedxamined tthehe ffollowingollowing mmajorajor iissuesssues aatt iitsts mmeetings:eetings:  making the Company ready for work in the autumn and winter period of 2010 -2011; 80  review of the Company's Investment program for 2010 from the point of view of the comprehensive reliability requirements;  approval of the first-priority arrangements Plan on antiterrorist and anti- sabotage security increase of the power industry facilities of JSC «MOESK»;  approval of action Plan for reduction of the outsider injury risks within the Company’s responsibility for the years 2010 – 2012;  approval of the Program for the development and increase of reliability of the system of operative-technological management of the Company’s electric power grid complex for 2011 – 2015;  review of the report on the execution of the Company’s Investment program.

STRATEGY AND The main tasks of the Committee are Board of Directors of the Company in the DEVELOPMENT the working out and presentation of following business areas of the Board of COMMITTEE recommendations (conclusions) to the Directors:

 definition of priority directions, strategic targets and basic principles of strategic development of the Company;  increase of investment appeal of the Company, improving investment activity and making justified investment decisions;  adjustment of the current development strategy of the Company;  management of the implemented programs, projects and restructuring process of the Company;  determination and improvement of policies in the field of business-planning and budgeting of the Company;  development of recommendations on the dividend policy of the Company;  the Company's performance evaluation. 2010: till the30ofJuly Committee acting Development the Strategyand membership of The dataonthe Committee: Development the Strategyand membership of the personal persons andelected Committee of15 membership ofthe the quantitative 02.08.2010) stated (Minutes No.112of July 30,2010 directors dated of theBoard of The resolution ter ofJSC«IDGSHolding»,asthememberCommittee. Committee. the StrategyandDevelopment Committee: utes No.100dated14.02.2010)tomakethefollowingchangesinmembershipof – To electVladimirVasilievich Kuznetsov,HeadofStrategyandDevelopment Cen- – To terminateearlypowers ofArmanMushegovichAirapetyan,themember On the12thofFebruary 2010theBoard ofDirectors passedtheresolution (Min- 6 5 4 3 2 1 11. 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. Committee) Demidov (Chairmanofthe Aleksey Vladimirovich PPetukhov KKonstantin Yurievich Sannikov Aleksey Valerievich Perepelkin Aleksey Yurievich Demidov Aleksey Vladimirovich Gennady Feliksovich Binko Mikhail Yurievich Kurbatov Leonid Vladimirovich Mazo Olga LeonidovnaBulanova Tikhonova Maria Gennadievna Oleynik Alexander Pavlovich Kravchenko Aleksey Sergeevich DDmitriy Yurievich Tushunov Demina Valentina Alexandrovna KhyzyrovichTimur Tambiev Ayrapetyan Arman Mushegovich Perepelkin Aleksey Yurievich e o m t n u i t s k r t i h a y n o

Y Full name Full name t v i u

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i Y e u v CORPORATE MANAGEMENT r i i c e h v

i T c u h s

h u n o v

the MinistryofEnergy oftheRussianFederation and theProperty RelationsintheFuelandEnergy Complexof Deputy Director oftheDepartmentEconomicRegulation Moscow Government Deputy HeadoftheDepartmentforFuelandEnergy Economyof (Open jointstockcompany) Direct Investments DeputyGeneralDirector ofGazprombank «Leader» Head oftheAnalyticalDepartment–ChiefEconomistJSC Head AnalystofCJSC«Leader» Assessment DepartmentofJSC«IDGCHolding» Head oftheInvestment Projects Productivity Analysisand «IDGC Holding» Deputy HeadoftheStrategyandDevelopment Centre ofJSC Ownership ofJSC«IDGCHolding» Deputy GeneralDirector incharge ofCorporateGovernance and JSC «IDGCHolding» Deputy GeneralDirector incharge ofEconomyandFinances Director forStrategyandDevelopment ofJSC«IDGC Holding» Deputy GeneralDirector ofJSC«IDGCHolding» of JSC«IDGCHolding» Deputy GeneralDirector forCorporateGovernance andProperty JSC «IDGCHolding» Deputy GeneralDirector incharge ofEconomyandFinance Deputy GeneralDirector ofJSC«IDGCHolding» Deputy GeneralDirector ofJSC«IDGCHolding» JSC «MoscowUnitedElectricGridCompany» Strategy andBusinessDevelopment DeputyGeneralDirector of JSC «MoscowUnitedElectricGridCompany» Deputy GeneralDirector incharge ofEconomyandFinances Position andplaceofwork Position andplaceofwork (for thedateofelection) 5 81

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Full name Position and place of work

7 Viktor Vasilievich Kudryavy Adviser to the President of JSC «Eurocement group»

Valentina Alexandrovna Leading analyst of JSC «Leader» 8 Dyomina Aleksey Viktorovich Deputy General Director for Security of JSC «Leader» 9 Nuzhdov

Chief of the Analytical Administration – Main Economist of JSC 10 Dmitry Yurievich Tushunov «Leader»

Aleksey Sergeevich Deputy Director of the Direct Investments Department of 11 Kravchenko «Gazprombank» (open joint-stock company)

Deputy General Director for Engineering Connection in Moscow 12 Mikhail Lvovich Krupin of JSC «MOESK»

Deputy General Director for Economy and Finance of JSC 13 Olga Leonidovna Bulanova «MOESK"

Alexander Pavlovich Deputy Head of the Fuel and Energy Economy Department of 14 Oleynik the city of Moscow Nikolay Grigorievich First Deputy Chairman of the Management Board of «SO UPS» 15 Shulginov 82 In 2010 they held 19 meetings of the Strategy and Development Committee under the Board of directors, including 10 collective meetings with attendance by the members. The attendance of the Committee members at The attendance of the Committee members at the meetings of the Strategy and Development the meetings of the Strategy and Development Committee under the Board of directors in the Committee under the Board of directors in the previous membership acting till February 12, 2010: previous membership acting till July 30, 2010:

Member of the Number of meetings having Member of the Number of meetings having Strategy and been attended by the member Strategy and been attended by the Development of the Strategy and Develop- Development member of the Strategy and Committee ment Committee Committee Development Committee А.М. Аyrapetyan 0 O.L. Bulanova 8 A.V. Demidov 2 A.V. Demidov 7 O.L. Bulanova 2 V.A. Dyomina 8 V.A. Dyomina 2 A.S. Kravchenko 8 A.S. Kravchenko 2 V.V. Kuznetsov 8 L.V. Mazo 2 L.V. Mazo 8 A.P. Oleynik 0 A.P. Oleynik 5 A.Y. Perepelkin 2 A.Y. Perepelkin 8 T.Kh. Tambiev 2 T.Kh. Tambiev 6 M.G. Tikhonova 0 M.G. Tikhonova 3 D.Y. Tushunov 2 D.Y. Tushunov 7 The meetings were on the average attended by The meetings were on the average attended by 73% of the members of the Strategy and Develop- 86% of the members of the Strategy and Develop- ment Committee under the Board of directors. ment Committee under the Board of directors. for 2010; investment program); power andcapacity». Union onorganization of efficientsystemofwholesaleandretail tradeofelectric power auditorsandpower-service companies»; sabotage securityincrease ofthepower industryfacilitiesofJSC«MOESK»; «Innovations inElectricPower Industry»(INVEL); «Council oftheenergy sectorveterans»; given onthemostimportantissuesofCompanybusinessactivity, inparticular: of directors oftheCompanyfollowingissueswere discussedandrecommendations         In 2010atthemeetingsofStrategyandDevelopment CommitteeoftheBoard OnJSC«MOESK»Business-planapproval (includingtheinvestment program) Onthereport analysisoftheCompany’sBusiness-planresults (includingthe OnparticipationofJSC«MOESK» inNon-commercial partnership«Themarket OnparticipationofJSC«MOESK»inNon-commercial partnership«Theunion of Onanalysisofthefirst-priorityarrangementsPlan onantiterrorist andanti- OnterminationofJSC«MOESK»participationinNon-commercial partnership OnterminationofJSC«MOESK»participationinNon-commercial partnership Ondeterminationofprioritybusinessareas ofJSC«MOESK»; current membership electedonJuly30,2010: Committee undertheBoard ofdirectors inthe the meetingsofStrategyandDevelopment The attendanceoftheCommitteemembers at ment CommitteeundertheBoard ofdirectors. 78% ofthemembersStrategyandDevelop- ..Oenk 2 N.G. Shulginov 4 D.Y. Tushunov 9 7 A.V. Sannikov K.Y. Petukhov 7 A.Y. Perepelkin 8 A.P. Oleynik 6 A.V. Nuzhdov 9 M.Y. Kurbatov 8 8 M.L. Krupin V.V. Kudryavy A.S. Kravchenko V.A. Dyomina A.V. Demidov O.L. Bulanova G.F. Binko The meetingswere ontheaverage attended by ihdd h hi Member ofthe Development Strategy and Committee CORPORATE MANAGEMENT member oftheStrategyand Number ofmeetingshaving Development Committee been attendedbythe 9 8 6 6 8 b 5 83

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

COMMITTEE ON The main tasks of the Committee are Board of Directors of the Company in the TECHNOLOGICAL the working out and presentation of following business areas of the Board of CONNECTIONS recommendations (conclusions) to the Directors: TO ELECTRIC  development of proposals on antimonopoly regulation legal framework improvement NETWORKS and ensuring nondiscrimination access to services of the consumers’ technological connection to electric networks;  development of proposals on improvement of internal rules and standards of the Com- pany to ensure nondiscrimination access to services of the consumers’ technological connection to electric networks;  development of principles and criteria for evaluating the effectiveness of the Com- pany's performance on technological connection of consumers to electric networks;  evaluation of the effectiveness of the Company's performance on technological connection of consumers to electric networks;  analysis of the current situation in the Company, and the formation of proposals to the Board of directors of the Company in the part of the technological connection of consumers to electric networks. The data on the membership of № Full name Position and place of work (for the date of election) the Committee Andrey Vladimirovich on Technological Deputy General Director in charge of Economy and 1. Demidov (Chairman of the Finances of JSC «IDGC Holding» Connections to Committee) Electric Networks acting till the 30 of 84 2. Gennady Feliksovich Binko Deputy General Director of JSC «IDGC Holding» July 2010:

Dmitriy Igorevich Clients Relations and Technological Connection 3. Romeyko Deputy General Director of JSC «MOESK»

Evgeniy Anatolievich Director of the Department for the Legal Support of 4. Kopanov JSC «MOESK»

Head of the Economy Management Department of the 5. Olga Stanislavovna Zotova Technological Connections of JSC «MOESK»

DDmitriymitriy VeniaminovichVeniaminovich Capital Construction Department Directors of JSC 6. MMorylevorylev «Moscow United Electric Grid Company»

Aleksey Sergeevich Direct Investments Department Deputy General Di- 7. Kravchenko rector of Gazprombank (open joint stock company)

Valentina Alexandrovna Head Analyst of JSC «Leader» 8. Dyomina Regimes Deputy Chief Dispatcher of «SO UPS» Mos- Denis Nikolayevich Yarosh 9. cow Regional Dispatch Administration

Vsevolod Georgievich First Deputy Head of the Department for Fuel and 10. Pleshivtsev Energy Economy of Moscow Government

Councilor of the Corporate Governance Department Khasan Mushtafaevich of Economic Regulation and Property Relations in 11. Likhov the Fuel and Energy Complex of the Ministry of Energy of the Russian Federation issues oftheCompanybusinessactivity, inparticular: ing issueswere discussedandrecommendations givenonthemostimportant the ElectricNetworks undertheBoard ofdirectors oftheCompanyfollow- In 2010atthemeetingsofCommitteeonTechnological Connectionsto elected thepersonalmembershipofCommittee: 02.08.2010) statedthequantitative membershipoftheCommittee9personsand collective meetingwithcombinedattendance. to theElectricNetworks undertheBoard ofdirectors ofJSC«MOESK»,including1   electric grids ofJSC«Moscowunitedelectric gridcompany». issued priortothepayment introduction fortechnological connectiontothe of 2009; technological connection on theterritoryofMoscowcityfollowingresults The resolution oftheBoard ofdirectors datedJuly30,2010(MinutesNo.112of n21 hyhl etnso h omte nTcnlgclConnections Technological on Committee the of meetings 3 held they 2010 In In 2010theyheld3meetingsoftheCommitteeon Technological Connections Fullname № 9. 8. 7. 6. 5. 4. 3. 2. 1. Ontheextensionoftechnical conditionsforthetechnologicalconnection, Onimplementationofmeasures toaddress theproblem issuesinthesphere of Pleshivtsev Vsevolod Georgievich Kravchenko Aleksey Sergeevich Dyomina Valentina Alexandrovna DDenis Nikolayevich Yarosh Petukhov Konstantin Yurievich Kruchinin Mikhail Alexandrovich Makarovsky Aleksey Yurievich Olga Stanislavovna Zotova Mikhail Lvovich Krupin e n i s

N i k o l a y e CORPORATE MANAGEMENT v i c h

Y a r o s h

Energy EconomyofMoscowGovernment First DeputyHeadoftheDepartmentforFueland company) Director ofGazprombank (Openjointstock Direct Investments DepartmentDeputyGeneral Head AnalystofJSC«Leader» Moscow RegionalDispatchAdministration Regimes DeputyChiefDispatcherof«SOUPS» Holding» Director forStrategyandDevelopment ofJSC«IDGC Directorate ofJSC«MOESK» Head oftheElectricPower Transportation Administration ofJSC«MOESK» Chief oftheEngineeringConnectionsEconomy Connections ofJSC«MOESK» Management DepartmentoftheTechnological Head oftheInvestment PlanningandEconomy Connection inMoscowofJSC«MOESK» Deputy GeneralDirector forEngineering Position andplaceofwork 5 85

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

The attendance of the Committee Member of the Committee on Number of meetings having been attended by the member members at the Technological Connections to of the Committee on Technological Connections to the Electric Networks meetings of the the Electric Networks Committee on Technological G.F. Binko 2 Connections to Electric Networks A.V. Demidov 2 under the Board V.A. Dyomina 2 of directors in the previous O.S. Zotova 2 membership acting till July 30, 2010: E.A. Kopanov 0

A.S. Kravchenko 2

K.M. Likhov 1

D.V. Morylev 2

V.G. Pleshivtsev 1

D.I. Romeyko 2

86 D.N. Yarosh 2

TheTh meetings ti were on the th average attended tt d d by b 82% of f the th members b of f ththe CCom- mittee on Technological Connections to the Electric Networks under the Board of directors. The attendance of the Committee Member of the Committee on Number of meetings having been attended by the member members at the Technological Connections to of the Committee on Technological Connections to the Electric Networks meetings of the the Electric Networks Committee on Technological V.A. Dyomina 0 Connections to O.S. Zotova 0 Electric Networks under the Board A.S. Kravchenko 1 of directors in the current M.L. Krupin 1 membership elected on July 30, M.A. Kruchinin 1 2010: A.Y. Makarovsky 1

K.Y. Petukhov 1

V.G. Pleshivtsev 0

D.N. Yarosh 1

The meetings were on the average attended by 67% of thethhe members of the ComCom-- mittee on Technological Connections to the Electric Networks under the Board of directors. JOINT MEETINGSOFCOMMITTEESUNDERTHEBOARD OFDIRECTORS OFTHECOMPANY 2010: acting tillJuly30, memberships in theprevious the jointmeetings Electric Networks at Connections to on Technological of theCommittee Committee and and Development of theStrategy of themembers The attendance results oftechnologicalconnectiontoelectricnetworks ofJSC«MOESK». Electric Networks under theBoard ofDirectors, where theydiscussedtheactivity Development CommitteeandoftheonTechnological Connectionstothe members. ..Yrs 1 1 0 0 0 0 1 1 0 1 D.N. Yarosh D.Y. Tushunov 1 M.G. Tikhonova 1 T.Kh. Tambiev D.I. Romeyko 1 0 V.G. Pleshivtsev 1 A.Y. Perepelkin 1 A.P. Oleynik 1 D.V. Morylev 1 L.V. Mazo 1 K.M. Likhov V.V. Kuznetsov A.S. Kravchenko E.A. Kopanov O.S. Zotova V.A. Dyomina O.L. Bulanova G.F. Binko А.V. Demidov Member oftheStrategyandDevelop- In thecourseof2010there tookplace3jointmeetings oftheStrategyand The jointmeetingswere ontheaverage attendedby68%oftheCommittees’ on Technological Connections tothe ment Committee,oftheCommittee Electric Networks CORPORATE MANAGEMENT Committee, oftheCommitteeonTechnological Number ofmeetingshavingbeenattendedby the memberofStrategyandDevelopment Connections totheElectricNetworks 5 87

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

The attendance Member of the Strategy and Develop- of the members Number of meetings having been attended by ment Committee, of the Committee of the Strategy the member of the Strategy and Development on Technological Connections to the Committee, of the Committee on Technological and Development Electric Networks Connections to the Electric Networks Committee and of the Committee G.F. Binko 2 on Technological O.L. Bulanova 2 Connections to Electric Networks at A.V. Demidov 2 the joint meetings V.A. Dyomina 2 in the memberships O.S. Zotova 1 elected on July 30, A.P. Konovalov 1 2010: A.S. Kravchenko 2 M.A. Kruchinin 1 M.L. Krupin 0 V.V. Kudryavy 2 M.Y. Kurbatov 2 A.Y. Makarovsky 2 A.V. Nuzhdov 1 A.P. Oleynik 0 88 A.Y. Perepelkin 2 K.Y. Petukhov 1 V.G. Pleshivtsev 1 A.V. Sannikov 1 M.G. Tikhonova 2 D.Y. Tushunov 1 N.G. Shulginov 1 D.N. Yarosh 2

The joint meetings were on the average attended attennded by 68% of the Committees’ Committees’ members.

MANAGEMENT The management board is a collegial executive body of the Company. The management BOARD board is responsible for the practical implementation of the objectives, development strategy and policy of the Company and manages the current activities within its competence, determined by the decisions of the General meeting of shareholders and the Board of directors, and shall act in accordance with the legislation of the Russian Federation, with the Charter of the Company and other internal documents of the Company, as well as with the Provisions on the Management Board of JSC «Moscow united electric grid company», approved by the resolution of the annual general meeting of shareholders on June 15, 2007.

The main tasks of the Company’s Management Board are as follows:  enforcement of rights and legitimate interests of the Company’s shareholders;  development of proposals on the development strategy of the Company;  implementation of financial and economic policy of the Company, development of proposals on important issues of its current business activities and coordination of its subdivisions performance;  increasing the effectiveness of the internal control and risk monitoring systems;  ensuring profitability high level achievement of the Company's assets and maximum profit from the Company's activities of theBoard Deputy Chairman BULANOVA Leonidovna Olga Management Board Chairman ofthe KONOVALOV Pavlovich Andrey VOLKENSTEIN Yakovlevich Grigory MANAGEMENT BOARD MEMBERSHIP(AS OF31.12.2010) issuer’s subsidiariesandaffiliates: i Ownership interestofthepersoninauthorized(joint-stock)capital(sharefund) O Ownership interestintheissuer’sauthorizedcapital: O Financial Director ofGroup ofcompanies«INOPROM». Positions heldforthelast5years: Education: Nationality: Year ofbirth: Deputy GeneralDirector oneconomicsandfinancesofJSC«MOESK» issuer’s subsidiariesandaffiliates: i Ownership interestoftheperson intheauthorized(joint-stock)capital(sharefund)of the O Ownership interestintheissuer’sauthorizedcapital: O General DirectorG of«Prominvestcomplex», LLC. General DirectorG ofJSC«CorporationROEL»; PositionsP heldforthelast5years: Education: Nationality: Year ofbirth: Deputy GeneralDirector onthecapitalconstructionofJSC«MOESK» issuer’s subsidiariesandaffiliates: Ownership interestofthepersoninauthorized(joint-stock)capital(sharefund) Ownership oftheCompany’sordinaryshares: hydro power plant». DirectorFirst DeputyGeneralDirector, oneconomicsandfinancesofJSC«Krasnoyarsk General Director ofJSC«Irkutskenergo»; Member oftheBoard ofJSC«RusHydro»; Positions heldforthelast5years: Education: Nationality: Year ofbirth: General Director ofJSC«MoscowUnitedElectricGridCompany» i O O h F G higher higher higher Russia Russia Russia 1959 1956 1958

CORPORATE MANAGEMENT 0% 0% 0% 0% 0% 0%

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MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

David Deputy General Director on special projects of JSC «MOESK» Feliksovich Year of birth: 1963 KUZNETSOV Nationality: Russia Education: higher

PPositions held for the last 5 years: Member of the Board of JSC «RusHydro»; Director of the representative branch in Moscow, Deputy General Director of «LEVIT», LLC.

Ownership interest in the issuer’s authorized capital: 0% Ownership interest of the person in the authorized (joint-stock) capital (share fund) of the issuer’s subsidiaries and affiliates: 0%

Mikhail Deputy General Director on technological connections in Moscow Lvovich Year of birth: 1972 KRUPIN Nationality: Russia Education: higher

PositionsP held for the last 5 years: General Director of «Region-Securities», LLC.; Assistant of the deputy of the regional 5th Duma of Yaroslavsk city Duma; First Deputy General Director – Financial Director of JSC «Fifth generating company of the wholesale electric power market»;

90 Ownership interest in the issuer’s authorized capital: 0% Ownership interest of the person in the authorized (joint-stock) capital (share fund) of the issuer’s subsidiaries and affiliates: 0%

Yuri Deputy General Director in charge of control and security of JSC «MOESK» Vadimovich Year of birth: 1960 MARAKIN Nationality: Russia Education: higher

Positions held for the last 5 years: Business development department head, Chief of the department of economic security of JSC «SOLLERS»; General Director of JSC «SOLLERS-ST»;

Ownership interest in the issuer’s authorized capital: 0% Ownership interest of the person in the authorized (joint-stock) capital (share fund) of the issuer’s subsidiaries and affiliates: 0%

Anatoly Deputy General Director – Technical Director of JSC «MOESK» Vasilievich Year of birth: 1954 CHEGODAEV Nationality: Russia Education: higher

PositionsP held for the last 5 years: Deputy Chief engineer on organization of operation of JSC «UES FGC»; Director on production – Chief engineer of JSC «Engineering company Electronic Intelligence»; Deputy General Director on production – chief engineer of JSC «WGC-2»; Chief engineer, Director of Energosbyt of JSC «Krasnoyarskenergo»; Member of the Board of directors of JSC «Kuban backbone grids»; Member of the Board of directors of JSC «Dalenergosetproekt».

Ownership interest in the issuer’s authorized capital: 0% Ownership interest of the person in the authorized (joint-stock) capital (share fund) of the issuer’s subsidiaries and affiliates: 0% MAYOROV Vladimirovich Andrey GENERAL DIRECTOR KONOVALOV Pavlovich Andrey business companieswithJSC«MOESK»beingthesoleshareholder; and affiliatesoftheCompanyfor9monthsyear 2010. competitive, regulated andnon-competitive purchases oftheCompanyforyear 2009. 2009, oftheCompany'sInvestment program fortheyear 2009,oftheAnnualcomplexprogram of mentioned documents; non-competitive purchases oftheCompanyforyear 2010,aswell amendmentstotheabove- Investment program for2010,oftheAnnualcomplexprogram ofcompetitive, regulated and Director wasAndrey Vladimirovich Mayorov: shareholders andJSC«MOESK»ManagementBoard. activity, exceptfortheissuespertainedtoscopeoffunctionsGeneralMeeting the GeneralDirector andtheCompany. Russian Federation, bytheCompany’sCharterandwork contractconcludedbetween General meetingofshareholders andtheBoard ofdirectors oftheCompany. body –GeneralDirector (theChairmanoftheManagementBoard), whoisaccountabletothe significant issuesoftheCompany'sactivitieswithinitscompetence,amongthem: 12.03.2010): Andrey Pavlovich Konovalov astheGeneralDirector oftheCompany(MinutesNo.104dated issuer’s subsidiaries andaffiliates: i Ownership interest ofthepersoninauthorized (joint-stock)capital(share fund)ofthe O Ownership oftheCompany’sordinary shares: O hydroh power plant». DirectorFirst DeputyGeneralDirector, F oneconomicsandfinancesofJSC«Krasnoyarsk General DirectorG of JSC«Irkutskenergo»; Member oftheBoardM ofJSC«RusHydro»; PositionsP heldforthelast5years: Education: E Nationality: Year ofbirth: General Director ofJSC«MoscowUnitedElectricGridCompany» issuer’s subsidiariesandaffiliates: Ownership interestofthepersoninauthorized(joint-stock)capital(sharefund) Ownership oftheCompany’sordinaryshares: Director oftheWestern electricgridsofJSC«Orenburgenergo». Deputy GeneralDirector incharge ofelectricgridsJSC«Orenburgenergo»; First DeputyGeneralDirector onProduction –ChiefEngineerofJSC«MOESK»; Deputy GeneralDirector –ChiefEngineerofJSC«MOESK»; Acting GeneralDirector ofJSC«MOESK»; Positions heldforthelast5years: Education: Nationality: Year ofbirth: Within theperiodfrom the1stofJanuarytill10thMarch 2010theactingGeneral The scopeoffunctionsGeneralDirector covers alltheissuesofJSC«MOESK»present The rightsanddutiesoftheGeneralDirector shallbedeterminedbythelegislationof The managementofthecurrent activityoftheCompanyisexecutedbysoleexecutive       As theresult oftheManagementBoard activityin2010ittookdecisionsonthemost In 2010theManagementBoard oftheCompanyheld48meetings. On the11thofMarch 2010theBoard ofDirectors ofJSC«MOESK»resolved toappoint issuesrelated totheperformanceoffunctionsGeneralmeetingshareholders of definitionofprioritybusinessdirections; theProgram review ofnon-statepensionprovision ofemployees ofJSC«MOESK»for2010. examinationofReportsontheresults offinancialandeconomicactivitiessubsidiaries analysesofReportsabouttheresults offulfillmenttheCompany’sBusinessplanfor coordination oftheBusinessplan oftheCompanyforyear 2010,oftheCompany's higher higher Russia Russia 1958 1967

CORPORATE MANAGEMENT 0% 0% 0% 0%

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MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

CHECKUP The Checkup Committee is the authority controlling financial and economic activities of COMMITTEE the Company, and on a regular basis carries out the checking of the financial and economic activities of the Company and its separate subdivisions, and of officials of the Company's management bodies and structural divisions of the executive apparatus of the Company in compliance with the legislation of the Russian Federation, with the Company’s Charter and internal documents of the Company. The main tasks of the Checkup Committee of the Company are:  control over financial and economic activities of the Company;  ensuring supervision over the compliance with the legislation of the Russian Federation and the Company’s Charter of the financial and economic operations of the Company;  independent estimation of the information on the financial condition of the Company.

According to the Article 23.1 of the Charter of the Company the internal Checkup Committee consists of 5 members elected annually by the General meeting of shareholders. The data on the membership of the Lyudmila Romanovna First Deputy Head of the Department for Internal Audit of Checkup Committee Matyunina JSC «IDGC Holding» acting prior to June Deputy Head of the Department – Chief of Branch of Internal 30, 2010 (positions Irina Vasilievna Mikhno per election date): Audit Department of JSC «IDGC Holding» Chief of the Branch of internal audit, revisory checks and Lyudmila Dmitrievna expertise of the Internal Audit and Risk Management Kormushkina Department of JSC «IDGC Holding» First Deputy Head of the Department for Corporate Maxim Mikhailovich 92 Governance and Relations with Shareholders of JSC «IDGC Saukh Holding»

Yuriy Mikhailovich Head of the Internal Audit and Financial Control Department Pukov of JSC «MOESK»

The data on the Izumrud Aligadzhievna Chief of the Internal Audit Department of JSC «IDGC membership of the Holding» Checkup Committee Alimuradova elected on June, 30 Year of birth: 1971 2010 (the positions Education: higher per election date): Positions held for the last 5 years: Director on development of «Energoconsult», LLC.

Ownership of the Company’s ordinary shares: 0%

Vladimir Nikolaevich First Deputy of the Security Department Head of JSC

Arkhipov «FGC UES» Year of birth: 1956 Education: higher

Positions held for the last 5 years: Consultant of Federal State Unitary Enterprise «Rosoboronexport» General Director of JSC «Rustel»

Ownership of the Company’s ordinary shares: 0% and control bodiesofJSC«MOESK». pany obtainedaconsentforprocessing ofpersonaldata ofallmembersthegovernance Committee oftheCompany. Committee andJSC«MOESK»,noclaimshave beenadvanced tothemembersofCheckup Filippova Irina Alexandrovna Maxim MikhailovichSaukh Kormushkina Lyudmila Dmitrievna In accordance withtheFederal lawonpersonal datadated27.07.2006No.152-FZ,theCom- In thereporting year notransactionshave beenmadebetween membersoftheCheckup CORPORATE MANAGEMENT Ownership oftheCompany’sordinaryshares: JSC «IDGCHolding» reorganization completionofJSCRAO «UESofRussia» of shareholders’ rightsofthe Project centre on Senior project manageroftheGroup on enforcement Department ofJSCRAO «UESofRussia» Corporate Governance andShareholders Relations Key expert,СhiefChiefoftheBranch Positions heldforthelast5years: Education: Year ofbirth: Holding» Shareholder RelationsDepartmentofJSC«IDGC Deputy ChiefoftheCorporateGovernanceand Ownership oftheCompany’sordinaryshares: Department ofJSCRAO «UESofRussia» Key expertoftheheadofficeinternalaudit Positions heldforthelast5years: Education: Year ofbirth: checks andexpertiseofJSC«IDGCHolding» Chief oftheDepartmentinternalaudit,revisory Ownership oftheCompany’sordinaryshares: Key expertof«Energoconsult», LLC. Positions heldforthelast5years: Education: Year ofbirth: Department ofJSC«IDGCHolding» Performance BranchintheInternalAudit Leading ExpertoftheAuditArrangementand higher higher higher 1956 1979 1958

0% 0% 0% 5 93

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

5.4. THE CRITERIA AND AMOUNT OF REMUNERATIONS PAID TO THE MEMBERS OF THE GOVERNANCE BODIES AND TO THE CHEKING COMMITTEE

THE IInn 2010,2010, thethe totaltotal amountamount ofof remunerationremuneration paidpaid toto thethe membersmembers ofof thethe BoardBoard ofof directorsdirectors REMUNERATION ooff thethe CompanyCompany amountedamounted tto:o: TO THE MEMBERS  for participation in the meetings of the Board of directors – 6 469 039 rubles (including OF THE BOARD OF personal income tax). for the primary earning index of the Company according to the annual financial DIRECTORS  statements for 2009, approved by the General meeting of shareholders of the Company – 13,658 856.7 rubles (including personal income tax).  for the market capitalization index for the performance period of the Board of directors of the Company – 1 526 428.1 rubles (including personal income tax). Since September 1, 2008, the size of and procedure for payment of remunerations and compensations to the members of the Board of directors is determined by the Provisions on payment of remunerations and compensations to the members of the Board of directors approved by the annual General meeting of shareholders on May 28, 2008. REMUNERATION TO In accordance with Clause 2.4. of the Provisions on the Management Board of the Company THE MEMBERS OF approved by the General meeting of shareholders of the Company of June 15, 2007 (Minutes THE MANAGEMENT No.4 dated June 21, 2007), the determination of remunerations and compensations to be paid BOARD OF THE to members of the Management Board of the Company is carried out by the Board of directors of the Company. COMPANY In 2010 the Board of directors of the Company made no decisions on payment of remunerations and compensations to members of the Management Board of the Company. 94 Material incentives for the employees of the Company, being the members of the Manage- ment Board, are given in accordance with the Provisions on stimulating remuneration for top managers of JSC «MOESK», approved by the decision of the Board of directors of JSC «MOESK» (Minutes No.46 dated July 17, 2007). REMUNERATION The size of remuneration for the General Director of the Company is determined in TO THE GENERAL accordance with the Provisions on stimulating remuneration of the General director of the DIRECTOR Company approved by the decision of the Board of directors dated July 13, 2007 (Minutes of July 17, 2007 No.46) and depends on the degree of execution by the Company of quarterly and annual key performance indicators.

REMUNERATION Procedure for payment of remunerations and compensations to the members of the TO THE MEMBERS Checkup Committee for participation in the audit of the Company’s financial and economic OF THE CHECKUP activity is established by the Provisions on payment of remunerations and compensations to COMMITTEE members of the Checkup Committee of the Company. The amount of remuneration paid in 2010 to members of the Checkup Committee of the Company for audit of the Company’s financial and economic activities following the results of 2009 amounted to 390 619 rubles (including personal income tax).

5.5. SECURITIES

Total number of issued shares – 48 707 091 574 shares.

Share denomination – 0.5 rubles.

Size of the authorized capital – 24 353 545 787 rubles.

Total number of shareholders – 17 044*

* data per 17.05.2010 – the listing date of shareholders, having the right to participate in the General meeting of shareholders in 2010. OF CAPITAL STOCK THE HISTORY HAVING THERIGHTTO PARTCIPATE INTHEGENERALMEETINGOFSHAREHOLDERS2010 SHAREHOLDING PER17.05.2010–THELISTINGDATE OFSHAREHOLDERS, given issue. ing ordidnottakepartinthe voting onthe holders whovoted againsttherestructur- was madeundertherequest ofthe share- were leftaftertheshares repurchase that the shares ownedbyJSC«Mosenergo») that ber ofJSC«Mosenergo» shares (exceptfor to distributionequalledthetotalnum- tal numberofJSC«MOESK»shares subject JSC «Mosenergo» ownedbythem.Theto- of 0.5roubles foreachordinary share of nary share ofJSC«MOESK»withaparvalue «Mosenergo». ergo», inproportion totheirshares ofJSC cerning therestructuring ofJSC«Mosen- not takepartinthevoting ontheissuecon- the shareholders, whovoted againstordid «Mosenergo», includingdistributionamong distribution amongtheshareholders ofJSC 29.06.2004). go» byway ofspin-off(MinutesNo.1dated about thereorganization ofJSC«Mosener- ing oftheshareholders ofJSC«Mosenergo» the resolution oftheannualGeneralmeet- of JSC«MOESK». April 1,2005–thedateofstateregistration The shareholders received 1(one)ordi- The shares ofJSC«MOESK»were placedby The stockplacingorder hasbeensetby The JSC«MOESK»stockplacingdateis VENTURES LIMITED MC «AGANA» LLC SIRITIA 5.23% 14.23% CJSC «LEADER» 6.84% CORPORATE MANAGEMENT 4.50% Others OJSC «OEK-Finance» subsidary –Moscow) (100% RFsubjekt 5.05% the amountof 3718126pieces. as well thepresence ofauthorizedshares in to 48707091574shares. Thechanges fixed authorized capitaloftheCompany amounted JSC «MOESK»,inaccordance withwhichthe changes andadditionsNo.7to theCharterof JSC «MOESK». ment results ofadditionalissuesecurities (FFMS) registered thereport ontheplace- Federal FinancialMarketsServiceofRussia «MOESK» reorganization (31.07.2008),the the process ofrestructuring. conversion inthemofJSC«MGESK»shares in the numberof20461450000pieces)for JSC «MOESK»additionallyissuedshares (in «MGESK», andthedecisiononplacementof «MOESK» intheformofmerger withJSC made thedecisiononrestructuring ofJSC eral MeetingofShareholders ofJSC«MOESK» with aparvalue of0.5roubles. JSC «MOESK»madeup28249359700shares holders' register. Theauthorizedcapital of basis ofthedataJSC«Mosenergo» share- him/her onthedateofplacement «Mosenergo» ordinary shares belongingto received equalledtothenumberofJSC shares thateachshareholder ofJSC«MOESK» On September19,2008theyregistered the A monthafterthecompletionofJSC On April18,2008theExtraordinary Gen- The numberofJSC«MOESK»ordinary JSC «IDGCHolding» Other shareholders 50.90% 13.25% 5 95

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Distribution of Share in charter the shareholders Name Number of shares, pcs. of JSC «MOESK» capital, % by the categories of owners as of JSC «IDGC Holding» 24 794 187 558 50.90 December 31, 2010: Other legal entities 21 915 859 301 45.0

Natural persons 1 997 044 715 4.10

Distribution of the shareholders of JSC Category 31.12.2008 31.12.2009 31.12.2010 «MOESK» by the state registration place: Residents 99.293% 99.294% 99.294%

Nonresidents 0.707% 0.706% 0.706%

96 A list of registered persons with Share in the authorized capital, % accounts of 5% Name and more of shares 31.12.2008 31.12.2009 31.12.2010 of the authorized capital of JSC «MOESK»: Limited Liability Corporation «Depositary and corporate tech- 50.90 50.90 50.90 nologies» (nominal holder)*

Noncommercial partnership «Na- tional Depositary center» (nomi- 32.62 32.72 33.25 nal holder)

Closed joint-stock company «Depository Clearing Company» 11.57 11.63 11.46 (nominal holder)

* As of December 31, 2010 JSC «IDGC Holding» is the shareholder owing 50.90% of JSC «MOESK» charter capital. shares registered issuesof Data onthe Share tenderresults ofJSC«MOESK»fortheyear 2010 MICEX stockexchangeunderasingleMSRSticker. the additionalissueofshares JSC«MOESK»wascancelled. the individualnumber001Dofstateregistration number1-01-65116-D-001D,assignedto nNvme 8 08i codnewt h re fFM fRsi No.08 On December10,2008theshares oftheprimaryandadditionalissueswere Russia combinedon of FFMS of Order the with accordance in 2008 18, November On November 18,2008inaccordance withtheOrder ofFFMSRussiaNo.08-2788/pz-n, ikro T tc xhneMR MSRS 0.5 MSRS MSRS-001D 0.5 onRTSStockExchange Ticker MSRS change Tender startdateonRTSStockEx- onMICEXStockExchange Ticker Exchange Tender startdateonMICEXStock Per value, RUR. Number ofissuedshares, pcs. State registration dateofissue State registration numberofissue CORPORATE MANAGEMENT rnia su Additionalissue Principal issue 829397020457731874 28 249359700 -1616D1-01-65116-D-001D 1-01-65116-D 90.0607.08.2008 09.02.2006 22.08.2008 09.02.2006 10.0530.06.2008 31.05.2005 MOESK - 2788/pz - 5 n, 97

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Shares Inclusion date of in- of JSC «MOESK» Index short title* Index weight dexes calculation basis in weighted indexes MICEX POWER 15.10.2007 2.36% RTS2 15.06.2007 1.42% RTSEU 15.09.2006 2.72%

* The detailed information about the rules and the indexes calculation basis is presented on the web-sites of JSC «Russian Trading System» (www.rts.ru) and of JSC «MICEX» (www.micex.ru).

REGISTRAR The registrar of JSC «MOESK» is a Closed Joint Stock Company «Registrar Company INFORMATION «STATUS» – a professional participant of the securities market, rendering services on keeping the register of security holders on the basis of the license issued by the Federal service on financial markets dated 12.03.2004 No.10-000-1-00304 with unlimited validity period.

BONDED LOAN DATA On September 12, 2006 the bonds of the Company were placed on JSC «MICEX Stock exchange». The first and subsequent coupon tariff fixed by JSC «MOESK» by the tender results amounted to 8.05% per annum, which corresponds to the redemption effective yield of 8.21% per annum.

Parameters of the Par value 1 000 RUB bonded loan: Form of a security documentary 98 Number and date of the issue state 4-01-65116-D, 22.06.2006 registration of the securities issue Unique registration code of the issue Series 01 (series, tranche) Issue sequence number 1 (the first) Number of securities of the issue 6 000 000 pcs. Amount of the securities of the issue 6 000 000 000 RUB Placement beginning date 12.09.2006 Completion date of the placement 12.09.2006

Placing price of each security of the issue is Placing price fixed equal to 100% of the security nominal value – 1 000 RUB

Maturity date 06.09.2011

1 820 calendar days since the beginning Security life date of the placement without the possibility of the advanced repayment.

On September 15, 15 2008 JSC «MOESK» purchased 3 643 6443 493 pieces piecces of bonds, bonds presented for redemption in connection with the reorganization of JSC «MOESK» through merger with JSC «MGESK». The bonds specify the payment of semi-annual coupons. The general size of coupons payments in 2010 amounted to 189.2 million rubles. The Company has timely and in full fulfilled all obligations before holders of the bonds. In 2010 the bonds of JSC «MOESK» were traded on the MICEX stock exchange in the first level quotation list, into which they were included on December 2, 2008. PARTICIPATION OFJSC«MOESK»INCOMMERCIALORGANIZATIONS: «MZB»; «MZB»; contracts was made as well in 2011. contracts wasmadeaswellin2011. agreements weremadein2011; № 4 3 2 1 – due to the sales of equipment and fixed assets of JSC «Energocenter». – duetothesales ofequipmentandfixedassets ofJSC«Energocenter». – duetothereserverevaluation fordoubtfulaccountsestablishedtocoverlossesassociatedwith non-returnoffundsfromAKB ** TheJSC«Energocenter»earnings bytheresultsof2010wereobtainedfollowing: – duetothelackofrawmaterial someworksunderseparatecontractsbeganinAugust2010, andpaymentunderthese – duetothefactthatsomecontractsforcablelinesrepairwere concludedinMay-Juneof2010,andthepaymentsunderthese * Company «ElectricGrid Open JointStockCom- h S ME»ngtv iaca eut yteedo 00wr nlecdb h olwn factors: following the by influenced were 2010 of end the by results financial negative «MKER» JSC The The JSC«MKER»negativefinancialresultsbytheendof2010were influencedbythefollowingfactors: (JSC «Energocenter» ) pany «Energocenter» Equipment Repairing belsetmontazh» (JSC and associatesofthe lenergoremont» (JSC Name ofsubsidiaries Company «Moskabe- Plant» (JSC«Zavod Company «Moska- Open Joint-Stock Open Joint-Stock Open Joint-Stock «MKSM») company «MKER») RETO») 5 AND NONCOMMERCIALCOMPANIES Yuzhnoportovaya Location: 115569 Location: 115088 Location: 152201 Starokashirskoye associates ofthe Street 13,Build- Street 17,Build- subsidiaries and 65, Podolsk city, Russia, Moscow, Russia, Moscow, Russia, Moscow, Russia, 142117 Shipilovskaya Moscow Area, Kirova Street Location of .6. PARTICIPATION INBUSINESS shosse 4a company ing 2 ing 3 equipment, installationandadjustment. researches, construction,reconstruction, re- grid facilities,includingdesigning,engineering development ofelectricgridsandother of servicesonconnectiontoelectricgrids, Realization ofinvestment activities,rendering according tooperatingnormative requirements. equipment, engineeringsystemsandstructures networks; maintenanceofoperationpower of power supplyoftheconsumersconnectedto reconstruction ofpower facilities;maintenance lines andequipment,re-equipment and reconstructionrepair, andre-equipment ofcable equipment andenergy installationsofconsumers; facilities, electricpower andheatpower Installation, adjustmentandrepair ofenergy protective works, commissioningworks). engineering networks; structures andequipment of bearingandenclosingstructures, internal preparation andexcavation works, erection 20, 35,110,220and500kVelectricsupply;site and equipment,fieldcableinstallationof1-10, installation works onexternalutilitynetworks Construction andinstallationworks (including of Moscowandregion andotherregions. GRES power plantsandotherfacilitiesinthecity electrical power networks, ThermalPower Plants, plants, andotherfacilities;recovery operationsat networks, ThermalPower Plants,GRESpower powered electricalfacilitiesinpower of power consumers;repair andoverhaul ofthe facilities, electricity, heatandpower equipment Installation, maintenanceandrepair ofpower Primary activityofsubsidiariesandassociates CORPORATE MANAGEMENT the company issuer inthe Share ofthe of thecom- the subsid- authorized associates iaries and capital of pany,% 0 9 7 (15077)* 190271 100 0 1 4 13156 610147 100 686 348405 100 0093634** 0 50 company, Earnings sidiaries sociates and asof sub- thous. of the RUR the company, result ofsub- associates of sidiaries and thous.RUR Financial 5

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

JSC «MOESK» PARTICIPATION IN NONCOMMERCIAL ORGANIZATIONS:

№. Name Location Area of business of noncommercial organization

Noncommercial partnership Moscow, Pr.Mira 119, Partnership members’ assistance in carrying out research and 1 «INVEL» Building 506 development activities, innovative and experimental development

Noncommercial partnership Partnership members’ assistance in the formation of science-based 2 «Scientific and Technical Moscow, Vorontsovsky per. 2 technical and economic policies in the Unified Energy System of Council of UES» Russia

Noncommercial partnership Moscow, Ulansky per. 26, Issuance of competency certificate for the kinds of works affecting 3 «ENERGOSTROY» Building 1 capital construction security

Noncommercial partnership Moscow, Ulansky per. 26, Issuance of competency certificate for the front and engineering 4 «ENERGOPROEKT» Building 1 design works

Assistance in: – works quality improvement in the field of energy audits and providing energy services; Noncommercial partnership Russia, 105066, Moscow, – collaboration and cooperation on the development and 5 «The union of power auditors Nizhnyaya Krasnoselskaya implementation of energy efficiency and renewable energy and power-service companies» str. 40/12, Building 6 technologies, of soft energy production, of reducing the energy intensity of production; – development of proposals for changes in active legislation on energy efficiency and conservation. 100 5.7. ADMINISTRATION OF OWNERSHIP INFORMATION ON NON-CURRENT ASSETS AS OF 31.12.2010: Physical quantities As of the Profit Disposals As of the end of for: HV lines. cable beginning of for the for the the accounting networks – the length the accounting account- account- period – book No. Name of chains (km), and period – book ing period ing period (depreciated) substations. other (depreciated) (thousand (thousand value (thou- assets – the amount value (thousand rubles). rubles). sand rubles). (units) rubles). Assets related to power supply network 1. 130 773 667.8 28 289 791.2 138 807.6 146 742 406.6 facilities. including: 1.1. HV lines 220 kV and more 2 080.8 2 187 064.3 653 235.0 4 925.0 2 728 641.5

1.2. HV lines 110 kV 9 842.0 4 848 539.8 1 423 122.8 1 103.0 5 913 374.3

1.3. HV lines 35 kV 4 232.6 545 205.2 24 575.0 0.0 522 912.1

1.4. HV lines 10 kV and less 51 146.5 4 473 738.8 307 878.8 52.0 4 321 622.6

1.5. Substations 220 kV and more 44 15 585 506.9 2 340 174.2 0.0 15 858 734.3

1.6. Substations 110 kV 352 20 629 512.7 7 419 080.2 13 790.0 25 481 231.4

1.7. Substations 35 kV 206 1 192 785.5 145 352.0 0.0 1 269 808.3

1.8. Substations 10 kV and less 28 684 36 060 631.9 4 140 626.5 73 664.6 36 776 448.9

1.9. Cable networks (all voltage classes) 73 258.9 33 003 812.8 7 847 411.9 38 655.6 39 495 714.1

Other assets intended for providing 1.10 14 902.6 12 246 869.9 3 988 334.8 6 617.4 14 373 919.2 electrical connections Non-core assets, included into the 2. 3 6 864.0 0.0 0.0 6 864.0 «Registry of non-core assets» Other assets (item 3 = item 4 – item 2 – 3. 1 828.0 2 396 438.9 346 197.6 3 038.4 2 826 817.7 item 1) interest tariff reduction. interest tariffreduction. agreements valueinconnection withtheexceptionofpropertytaxfromleasepayments, andcreditresourcesattraction ..Sbttos3 v15. . . 58.3 0.0 0.0 371295.8 145917.2 14122.0 1831.0 0.0 0.0 58.3 8274 570.5 0.0 0.0 130692.0 12196.0 18159201.0 0.0 502018.0 30488.3 0.0 54299.0 359099.8 7903244.5 0.0 1 408567.0 5345.0 0.0 17804933.0 14122.0 16 2445 12628.9 1831.0 9373.5 23204.4 1.0 0 7. 13.3 Otherrented assets 171.7 6. 5.10 Cablenetworks (allvoltage classes) 5.9. Substations10kvandless 5.8. Substations35kv 5.7. Substations110kv 5.6. Substations220kvandmore 5.5. HVlines10kvandless 5.4. HVlines35kv 5.3. HVlines110kv 5.2. HVlines220kvandmore 5.1. 5. .Ohrast sdudrlaecnrcs1769000176900 52067.0 187669.0 0 0.0 0.0 25734620.0 6221629.0 187669.0 0 94560.0 0.0 52067.0 6652555.0 0.0 192092.0 6316189.0 1 0.0 Total (item 11=item4+ 25734620.0 11. 16 88.17 6844647.0 10. Otherassetsusedunderleasecontracts 8 9. 8. Cablenetworks (allvoltage classes) 7.10 Substations10kv and less 7.9. Substations35kv 7.8. Substations110kv 7.6. Substations220kvandmore 7.5. HVlines10kvandless 7.4. HVlines35kv 7.3. HVlines110kv 7.2. HVlines220kvandmore 7.1. 4. o Name No. * – in the column «Disposal of assets the accounting period (thousand rubles)» the Article 7 shows the decrease in the leasing – inthecolumn«Disposalofassets theaccountingperiod(thousandrubles)»Article7shows thedecreaseinleasing in including *: to thepower supplynetwork facilities, Assets usedunderleasecontractsrelating electrical connections Other rented assetsintendedforproviding network facilities,including: Rented assetsrelated topower supply + item6789) 910 ofthebalancesheet)(item10=item5 Total leasedassets,includingleases(line intended forproviding electricconnections Other assetsusedunderleasecontracts sheet) «Fixed Assets»(line120ofthebalance t he c ol um n «D is po sa l tm1)199251 item 10) of a ss et s th e ac co un networks –thelength assets –theamount of chains(km).and Physical quantities for: HVlines.cable substations. other ti ng CORPORATE MANAGEMENT p (units) er io d (t 2. 3 9. 3 8. 96679158716.1 99686.7 8431880.4 832691.5 625.0 ho us an value (thousand d the accounting period –book (depreciated) beginning of ru 133 176970.7 As ofthe rubles). 6991459372032002736156200.3 290022.7 9367290.3 26 939184.5 897530002662038660871.0 286 652.0 0.0 38 947523.0 6043659372037433774817071.3 764343.7 9367290.3 66 074376.5 bl es )» 4. 38 347.3 t he A rt 28 704830.0 ic (thousand ing period account- le rubles). for the 072 120.3 Profit 7 s ho ws t (thousand ing period he Disposals 4 4. 149576088.2 141 846.0 account- rubles). for the 906 189.7 d ec re as e period –book (depreciated) 224 393159.5 sand rubles). in value (thou- accounting end ofthe As ofthe t he l ea si ng 5 101

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

CHANGES IN VALUE AND QUANTITATIVE CHARACTERISTICS OF POWER SUPPLY NETWORKS AND SUBSTATIONS

Assets proceeds in JSC «MOESK» balance as a result of the following activities:  start-up upon building completion of newly created and renovated facilities within the investment program of JSC «MOESK»;  transfer of property by third parties to compensate the losses of JSC «MOESK» incurred as a result of liquidating the assets of the Company (the agreement on the compensation of losses).

Disposal of assets during the year occurred for the following reasons:  impairment write-off from the JSC «MOESK» balance sheet as a result of reconstruction, total or partial liquidation of the JSC «MOESK» assets under the agreements on the compensation of losses;  derecognition of obsolete and worn-out fixed assets ;  accrual of depreciation.

Changes in value and quantitative characteristics of fixed assets facilities on accounts not booked in balance sheet:  additional transfer by JSC «UEC» of electric grid facilities to lease and sublease of JSC «MOESK»;  cadastral value of the rented by JSC «MOESK» land plots in off-balance sheet accounts.

102 DATA ONLANDPLOTS AS OF31.12.2010: .Landplots 1. . Landplotsunder 3. Landplotsunder 2. .Landplotsunder 5. Landplotsunder 4. TTL 6165 TOTAL: Landplotsunder 7. Landplotsunder 6. No. including: station facilities. the electricsub- boiler facilities facilities power plant under theelectric other facilities facilities heating network 0.4/6/10 kv under HVlines 35 kv under HVlines 110 kv under HVlines ing: and less,includ- HV lines110kv and more HV lines220kv 35 kvandless Under substation 110 kv Under substation 220 kvandmore Under substation Types ofland plots

num- 3798 1910 3364 Total number 222 781 159 970 235 383 ber 51 and area of land plots

1325.0 170.5 156.9 161.3 351.7 255.3 392.6 127.5 775.4 33.5 27.3 ha

num- porting date repurchased ber per there- . 5275359 72 4 0.9 46 27.2 99 4.6 757 3.5 102.9 5 166 6.3 48.3 2.7 6.1 1204 227.8 29 55 192 587 10.2 17.3 0.0 105.0 775 34 0 64 0.0 62.0 0.3 18.9 2458 284.1 85.3 0 1259 139.0 4 275 32 1427 0.0 20.5 9.7 63.7 0.0 0 36 197 356 0 112.5 0.0 52.7 28.9 93 1581 0 258.3 0.0 8 253 431.4 0 97.4 2765 1.3 42 159.5 1 1463 1.3 205.0 1 457 408.3 1876 2.6 2 9335 0. 6 5. 19401 48 563.2 4289 420.1 119.4 2149 128 352.6 15.5 560 65 503.0 3450 42.2 0.7 49.3 35 401 6 66.2 97.7 118 322 46.6 53.2 4 30 6.0 429 0.0 0

ha CORPORATE MANAGEMENT taken onlease (sublease) per the reporting number date ha (indefinite) use num- of permanent per reposting ber by theright hro:whereof: whereof: date ha reporting date num- not fixedper the rightis ber ha reporting date num- an easement ber issued per ha reporting date num- cadastre per ber put tothe ha 5 103

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

104 6 6 ment inaccordance withitsstrategic of Company’sservices’qualitymanage- body fortheoperationanddevelopment Committee beingacollegialcoordinating agement systemandcreated theQuality implement abusinessprocesses man- system. rapidly develop itsqualitymanagement ternational standards ISO9000. agement systeminaccordance within- development andimprovement ofman- main toolforachievingthisgoalisthe nological connectiontopower grids.The quality ofpower transmissionandtech- infrastructure andtoimprove theservice to improve theavailability level ofGrid – totheAuditCommittee of theBoard ofDirectors. is administratively andfunctionally accountable totheCompany’sGeneralDirector, the CompanydatedJuly10,2010(MinutesNo.110 from 06.11.2010): is guededbythefollowinginternaldocumentsapproved bytheBoard ofDirectors of internal control. International standards ofmanagementsystems: The Companylaunchedaproject to In 2010JSC«MOESK»continuedto One oftheCompany’skeyobjectives is In order toensure independence andobjectivitytheInternalControl Department by theInternalControl Departmentdated16.09.2010(Order No.671of16.09.2010.).  implementation ofsystematiccontrol procedures); risk managementsystem(withthemethodsofidentification, evaluation, analysisand    The Department’sordered activitytoimplementmeasures ofrisk-orientedaudit The structuralunitresponsible forinternalcontrol systemistheDepartment of   environment;  Audit CommitteeoftheCompany’sBoard ofDirectors;     In creation andoperationofitsinternalcontrol systemsJSC«MOESK» isguidedby .1. QUALITY MANAGEMENT SYSTEM .2. INTERNALCONTROLSYSTEM MANAGEMENT OFIN-COMPANY PROCESSES the Provisions ontheimplementationandorganization ofinternalcontrol andaudit the Standard provisions onbusinessprocesses, control environment andintegrated the InternalControl Policy; the RiskManagementPolicy; the Provisions ontheAuditCommittee oftheBoard ofdirectors. the operatingdocumentationofCompany’smanagementsystems; OHSAS 18001(occupationalhealthandsafetymanagementsystem); ISO 14000(environmental management); ISO 9000(qualitymanagementsystem); the organizational/management andfunctionalprocedural documentsofthe the Company'spoliciesofquality, safety, occupationalhealthandsafety, certification. the fieldofqualitymanagementsystem certificate. credited BUREAUVERITAS Certification in accordance withthetermsofac- of JSC«Bureau Veritas CertificationRus» pliance auditconductedbytheauditors confirmed bythesuccessfulsecondcom- national standard ISO9001:2008was necting topower grids»withtheinter- distributing electricalenergy andcon- when providing transmissionservices, agement oftheCompany'saffiliates agement systeminrespect tothe«Man- standards ISO9001. well asinaccordance withinternational and operationalgoalsobjectives, as In 2011,theCompanyplanstoexpand The complianceofthequalityman- 6 105

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

The internal control system objectives are: ◆ support of effective management and efficient achievement of strategic objectives; ◆ ensuring compliance with the Russian legislation and the requirements of existing regulations and internal procedures of the Company; ◆ early detection and risk analysis activities; ◆ providing accuracy, correctness, integrity and relevance of financial and management information and reporting of the Company; ◆ enforcement of the Company’s financial and business plans; ◆ providing a high level of investors’ trust in the Company and its governance bodies; ◆ shareholders’ and investors’ investment security; ◆ providing soundness of assets of the Company and effective employment of the Com- pany’s resources; ◆ promoting the forming-up of the optimal organized structure of the Company.

The basic document in the Department's organization work is the Policy on internal control, which regulates the following activities of the Internal Control Department: ◆ monitoring the compliance of the authorization matrix and the assignment of responsibility between departments and managers of the Company and its structural units; ◆ performance management of the Company’s financing and operating activities and its analysis; ◆ management of performance and efficiency, and of intended use of investment activity financing sources; 106 ◆ monitoring the alignment of effective data flow on the activities of the Company’s structural units, providing vertical and horizontal information flows within the Company; ◆ management of the decisions of the General Director, of the Board of Directors, of the Internal Audit Committee and of the Company's officers to remedy the violations; ◆ providing reasonable assurance regarding the reliability of the Company’s financial statements, as well as compliance with the requirements of the Company’s accounting records maintenance; ◆ budget management of the Company and its structural divisions; ◆ monitoring the compliance of the Company's contracts with third party with the Com- pany’s interests; ◆ monitoring the compliance of internal documents and draft decisions of the Company’s governance bodies with its financial and economic interests.

The result of the internal control standardized system at the first stage of the internal control systems development is the standard-based guidelines and other regulatory documents to describe business processes.

The roles and responsibilities of the internal control system participants are distributed according to with the following principles: ◆ The Board of Directors approves the policy on internal controls and evaluates its effectiveness, and is responsible for approving and periodical review of the overall strategy of internal control. ◆ The Audit Committee of the Board of Directors provides an overall assessment of the Company’s internal control procedures’ effectiveness (including those based on reports and records of the Internal Control Department). ◆ The General Director of the Company is responsible for implementing this policy, approved by the Board of Directors, as well as for the functioning and effectiveness of internal control procedures in the Company. The responsibility for the functioning and effectiveness of internal control procedures at lower levels of the Company management is to be carried out by the directors of branches. ion ontheCompany’sfinancialandeconomicactivities: During inspectionstheyusedthefollowingaudit procedures toexpress anopin- Particular attentionwas giventothefollowingareas beingaudited: been taken: During theauditoffinancialandbusinessofficesfollowingactionshave with theinternalcontrol systemCoordinators inthebranchesperformingsimilarfunctions. and methodologicalsupportoftheprocess ofestablishingcontrol procedures andcooperates It isresponsible fororganizing andcoordinating thestandardization ofbusinessprocesses control system,itsdegree ofstandardization andoptimizationatalllevels ofgovernment. control levels businessprocesses. Inaddition,itgives anoverall assessmentofinternal the complianceassessmentofcontrol procedures bytheparticipantsofcorresponding the adequacy, sufficiencyandeffectiveness ofcontrol procedures, aswell ascarriesout registration order ofmaterial liabilityofemployees, thesoundnessof write-offs ofshortages; checking theemergency reserve configuration,accountingtreatment andfuel flow,the control; necessary actionsrelated tothesettlement ofbaddebts; possible toberecovered, thedefinition oftherisksassociatedwithdefaults,identifying explicability oftheamountsrankinginaccounting,identifying overdue indebtednessnot not registered intheaccount,butare actuallyused; availability ofstocknumbers at thesitesoffixedassets,identificationobjectsthatare transactions. with theorders oftheGeneralDirector thefollowingcheckshave beencarriedoutin2010: within theapproved work planfortheInternalControl Department,aswell asinaccordance effectiveness andimprovement ofcontrol procedures. implementation ofcontrol procedures, aswell ascarryouttheirownassessmentofthe execution ofcontrol procedures inaccordance withthestandards. regulatory documents.TheCompany’ssubdivisionsmonitorandare responsible forthe functional responsibilities shallexecuteinternalcontrol through theformalstandards and ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ Based ontheresults ofthecontrol measures tocheckfinancialandeconomicactivities ◆ ◆ TheInternalAuditDepartmentoftheCompanymakesanimmediateassessment identificationofmaterialasset withnoflowwithinayear according totheaccounting, conductingsamplecomparison ofstockswiththedataaccountingandinventory checkingaccountsreceivable andpayable, includingtheanalysisofitsstructure, checkforandexecutionofinventory; checkingthecorrectness oftheformationinitialcost offixedassets,the accountingofpayments forlabour andsocialtransfers. stockrecording; settlementswithdebtorsandcreditors; therepair andmaintenance costs; accountingoffundsforcapitalconstructionandrenovation; assetmanagement; Thecheckofcompliancewithapplicablelawsandregulations whenmakingbusiness Theassessmentoftheaccountingsystemandpreparation offinancialstatements; Theassessmentoftheinternalcontrol system; 11casestudiesonbehalfoftheGeneralDirector. 4checksofsubsidiariesandassociatesthecompanybyCheckupCommittee; 7checksofthefinancialandeconomicactivitiesbranches; Headsofsubdivisionsandotherstaffofficesare responsible fortheestablishmentand Headsofdepartmentsandotheremployees oftheCompanyinaccordance withtheir MANAGEMENT OFIN-COMPANY PROCESSES

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MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

◆ an analysis of contracts, design estimate documentation and acts of KS-2 per investment activities; ◆ analysis of contracts, of defective statements and acts of KS-2 per repair costs; ◆ selective control measurements of the works executed and accepted by the acts of the KS– 2 form; ◆ analysis of payments to employees for compliance with local regulations and the provisions of the Company, soundness of calculation and payments and deductions; ◆ sample checks of records in the accounting records for the compliance with primary documents per certain account item for a particular accounting period, per used accounts correlation, organization of analytical accounting.

6.3. RISK MANAGEMENT

The main purpose of the risk management system is to increase the stability of JSC «MOESK» financial results through the implementation of the risk effective management tools inherent in the Company. In 2010 the Company fulfilled the following measures: it developed the regulations governing the operation of the Company’s risk management system; it formed the organizational structure of risk management; it identified key risks of the Company and formed risk passports and register, and compiled the risks map of the Company.

The main documents of the Company governing the risk management system are the 108 Internal control policy and Risk management policy.

For efficient organization of work on implementation and management of risk management system they implemented an appropriate institutional infrastructure in JSC «MOESK».

Board of directors

Audit Committee

Director General

Subdivision – Risk Management System Risk manager coordinator

Owners of risks

Risk-coordinators of functional blocks/ subdivisions REGIONAL RISKS 1. COUNTRYAND KEY RISKSANDACTIONS TO MINIMIZETHEM spond totherisks,assesseffectiveness ofimplementedactivities. for identifyingandassessingrisksintheirbusinessareas, anddevelop actionplanstore- field ofriskmanagement.Theownerstherisksandrisk-coordinators arrangeaprocedure system iscarriedbytheriskmanagerofCompanyandaspecializedsubdivisionin on thematrixprinciple.Thecoordination ofdevelopment andgeneraladministration ofthe inaccessibility. inwinterthewooded However, area there isariskoflosstimewhenyou ceived torisksassociatedwiththecessationof transportationduetoremoteness and/or ing icesystems,aswell asinsurance. kV withself-supportinginsulated wires (CIP);selective introduction ofanti-icingandmelt- development andimplementationofaprogram toreplace thewires ofoverhead lines0.4-10 introduction ofmodernmeansdiagnosingandlocatingthefaultsinoverhead power lines; ing theprotected areas andcuttingofprocess tranchesnearelectricitysupplyfacilities; head power linesinaccordance withtheregulations governing theprocedure fordetermin- of transmissionlinestakingintoaccountthezoning icing; interlayer expansionofover- equipment failure duetothehurricane,heavysnow,ice,freezing rain. is registered asataxpayer and/orcarriesoutitscore activities. 1.2.2. order tominimizethenegative impactofthesituationonitsactivities. affect thecompany'sactivities,Companyplanstotakeactiononcrisismanagementin the nearfuture. whole, whichmay adversely affecttheactivitiesand economicsituationoftheCompanyin verse changesinthesituationregion oftheissuerandinRussianFederation asa business andpositively impactitsfinancialposition.There are nopredicted significantad- improving theeconomicstatusofregion willhave apositive impact ontheCompany's The Companyevaluates thepoliticalandeconomicsituationinregion asstable.Further provides asteadydemandforthecompanyservices,nonethelessaffectedbyeconomiccycles. Moscow cityandregion, whichisthemostdeveloped region ofthecountry. This fact the destabilizationofpoliticalsituation. 1.2.1. 1.2. Regionalrisks policy ofdebtborrowing. reduce internalcosts,tooptimizetheinvestment program, aswell ascarriesoutabalanced can beassessedas«average». Aspartofminimizingtheserisks,thecompany isworking to fect theCompany'sactivities.Currently, theimpactoftheserisksonCompany'sactivities lems have reduced theamountofinvestment intheRussianeconomy, whichcannotbutaf- Russian Federation from the«negative» to«stable».Ontheotherhand,financialprob- «Standard &Poor's», and«Fitch»changedtheforecast level ofthesovereign rating ofthe cently there have beenpositive tendencies,andinlate2009–early2010theratingagencies downgraded attheendof2008byseveral internationalratingagencies.Nevertheless, re- asaresulteration. However, oftheglobalfinancialcrisis,Russia'ssovereign ratinghasbeen 1.1. Countryrisks The organizational structure oftheriskmanagementsystemJSC«MOESK»isformed The Companytradesintheregion with well-developed infrastructure andis slightlyper- The Company’sactivities,aimedatreducing theimpactoftheserisks may include:design The Companybearstherisksassociatedwithincreased riskofnaturaldisasters:damageor In thecaseofdestabilizationincountryoraparticularregion, whichmay adversely Production activitiesoftheCompanyare carriedinthemetropolitan region ofRussia:in The appearanceofpoliticalsituationdestabilizationrisksisassessedaslow. Until mid-2008there wasapositive trend ofimproving credit ratingsoftheRussianFed- MANAGEMENT OFIN-COMPANY PROCESSES Therisksassociatedwiththegeographicalfeatures oftheregion where theCompany Therisksassociatedwiththedeterioratingeconomicsituationinregion, aswell as 6 109

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

move the operating and maintenance personnel to the site of reclamation work in connection with the inaccessibility of individual sections of power lines. For the early detection of fault location of overhead lines, it is assumed to equip filed service and recovery teams with the mobile intelligence means (ATVs and snowmobiles), as well as with specialized four-wheel drive and track-type equipment.

1.2.3. The risks connected with possible military conflicts, with announcement of the state of emergency and strikes in the country and in the region where the issuer is registered as a taxpayer and/or carries out its core activity. These risks relating to the Russian Federation and the Moscow region are estimated by the Company as minimal.

2. INDUSTRY RISKS The price risks, connected with possible change of prices for the purchase of electric power losses during its transfer, for raw materials, services, equipment and other material and technical resources used by the Company in its activities and their impact on the company's activities and performance of obligations under securities. The reduction of this risk occurs due to the electric power fiscal metering program on the retail electricity market, due to the creation of competitive environment in the sphere of procurement of works and services, due to the centralization of procurement with a view to the savings due to «economies of scale»; removal of cross-procurement.

3. REGULATORY The risks associated with the state regulation of tariffs for services provided by the RISKS Company. Such risks may include the establishment of tariffs lower than economically sound 110 levels; operating revenue runoff due to the changes in actual structure of electric power transmission relative to the structure adopted with the approval of tariffs; the risks related to the legislation changes in price setting area at the retail markets. To reduce the impact of the risks the following measures are taken: the work with tariff regulation bodies of Moscow and the Moscow region on the economic feasibility of expenses, the introduction of a new RAB-based tariff regulation system (return on invested capital method). The application of this method should encourage long-term investments in the sector, as well as the reduction of the subjective factors’ influence on the tariff decisions.

4. OPERATIONAL 4.1. The operational risks associated with aging of equipment and consumption of fixed AND assets of the energy industry enterprises. TECHNOLOGICAL RISKS Among these risks can be classified the occurrence of emergency situations, reduction of power supply reliability, and as a result – incomplete execution of obligations under contracts on rendering of electric power transmission services. To reduce these risks the Company takes the following measures: the reconstruction of existing and construction of new transmission lines, transformer substations and distribution equipment, it improves the policy on equipment repairs and maintenance, and introduces modern methods of the equipment condition diagnostics.

4.2. Industrial risks: the risk of transfer to work with the involuntary (emergency acceptable) cross-flows; the environment contamination risk.

The main forms of damage reduction and compensation are: insurance (commercial property insurance, insurance of dangerous production facilities, of means of transport, public indemnity insurance); the creation of an emergency stock of materials and spare parts; the implementation of actions to increase the energy system reliability; measures for localization and accident management based on the analysis of scenarios of possible development ways of emergency situations; the control of the timely replacement, of reconstruction of worn- out or overloaded equipment, of repair works performance, of labour protection management system functioning, of environment and pollution sources. 6. LEGALRISKS 5. FINANCIALRISKS and diseases,aswell asmedicalinsurance. training andimprovement ofpersonnelqualification,insuranceagainstaccidents introduction ofmaterialandnon-materialmotivation methods,carryingoutofactionson personnel deficit. 4.3. Thepersonnel risksassociatedwitherrors, insufficientqualificationsandqualified insignificant. to theneedmeetrequirements. thisriskshouldberegarded Ingeneral, however, as increased documentpreparation timerequired forthelicenserenewal, as well asmay lead rights touseobjectswithlimited recourse (includingnaturalresources). 6.2. Changesofrequirements onlicensingofthecompany’score activitiesorlicensing of intends toplanitsfinancialandeconomicactivitysubject tothesechanges. legislation oftheRussianFederation. optimization ofthetaxbasecalculationschemesin strictaccordance withthecurrent interpretation ofthenormslegislation,Companyisconstantlyworking on 6.1. Changesinthetaxlegislation on thesecurities. inflation shouldnothave asignificantimpactontheCompany'sabilitytomake payments Russian Federation tocontrol inflationanditspredictive values forthenearest period,the financial positionofthecompany. Inaccordance withintentionsoftheCentralbank investment program. Theinflationcurrent level doesnothave asignificanteffectonthe increase, withincreased costvalue, withreduction ofthereal value offundsunderthe may beassociatedwithlossesinthereal value ofaccountsreceivable, withthedueinterest 5.3. Inflationrisk is estimatedasinsignificant. influence ofthenationalcurrency tariffchangesonthefinancialconditionofCompany addition, JSC«MOESK»isnotplanningtoundertakeactivitiesontheexternalmarket.So planned insuchaway thatitsassetsandliabilitiesare expressed inthenationalcurrency. In activities are largely independentofchangestheexchange tariff,astheissueractivityis Federation. TheCompany'sfinancialcondition,itsliquidity, financingsources, results of prices forelectricenergy transportationare alsoexpressed inthe currency oftheRussian 5.2. Currency risk itplanstoincrease theshareparticular, oflong-termloans. financial markets. interest tariffunilaterally. Thisrisk occurrence may becausedbytheinstabilityat in loaninterest tariffsduetothebankrightstipulatedundercontractsincrease the funds andtotimelyliquidateitsobligations.Atthesametimethere isapossibilityofincrease 5.1. Tariff risk The companyisimplementinganumberofprograms aimedatreduction ofstaffturnover, The changesinrequirements onlicensingofthe Company’score activitiesmay leadto the In caseofamendmentstotheexistingprocedure andtermsoftaxation,theCompany In order tominimizetheriskofincorrect taxcalculationand/orpayment duetodifferent The inflationrisksare assessedbytheCompanyasmedium. The inflationnegative influenceonthefinancialandeconomicactivityofCompany The maincustomersofelectricitytransmissionare theRussianFederation residents; the In order toreduce tariffriskstheCompanyhasrecourse todebtportfolioimmunization.In The tariffrisksare assessedasmedium. Within theplannedfinancialandeconomicpolicyCompanyplanstoraiseborrowed MANAGEMENT OFIN-COMPANY PROCESSES 6 111

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

6.3. Change in judicial practice related to activities of the Company (including licensing matters)

The probability of judicial practice changes on issues, associated with the Company’s activity is small. The management of legal risks is based on optimization of the process of document legal execution and of support of the Company's activities. To minimize legal risks any business processes of the Company subject to risks (for example, the conclusion of contracts), shall pass a mandatory legal examination. In the case of changes in the judicial practice on issues associated with activity of the Company, its financial and economic activities will be planned subject to these changes.

6.4. BUSINESS PROCESS MANAGEMENT

In order to increase the effectiveness of the Company's activities, the achievement of the best results in the field of reliability and quality of services, maximum satisfaction of the current and future needs of customers in 2010 in accordance with the order of JSC «MOESK», they started the introduction of the Company’s business process management system.

The main objective of the project – is to develop and implement the methodology of the process approach to management of JSC «MOESK», including effective mechanisms for description, analysis and improvement of business-processes of the Company, which will allow to reduce non-productive losses and to get the economic effect.

The main objectives of the project: 112 to train the personnel for the methods of process management and continuous improvement; to standardize the business-processes of the enterprise; to introduce a system of continuous improvement of business processes and reduction of unproductive losses; to raise the power supply reliability and quality of provided services.

IN 2010 THE establishment of the project Management Committee; FOLLOWING creation of the working groups on development and reengineering of business-processes; MEASURES WERE training of the Company’s personnel on the approaches and methods of process management (basic terminology, process control technologies), on the practical skills of business-processes by TAKEN: the means of special software; development and approval by the project Management Committee of the Company top-level process model; carrying out classification of the Company’s processes; drafting the agreement on the business-processes modeling.

IN 2011 THE development of the basic normative and methodical documents in the field of process man- FOLLOWING agement; ACTIVITIES ARE establishment of Process office – a unit performing centralized works support (methodological, technical, technological) in the field of modeling of the processes, its improvement and PLANNED FOR THE changes support management; IMPLEMENTATION measures on the description and optimization of key business-processes of the company; OF THE PROJECT: introduction of business processes continuous improvement system. TELECOMMUNICATIONS «MOESK»: operation ofJSC the communication Failure causesin indicators: by thefollowing characterized in2010 «MOESK» was network ofJSC The communication and technologicalmanagementmeans: 6 Company andMoscowRDO. technological managementmeans. dispatching andtechnologicalmanagementmeans; Dispatching OfficewithJSC«MoscowUnitedElectricalGridCompany»atoperationof technologies andfiberoptics. cation network onthebaseofmoderndigital develop production-technological communi- munications ofJSC«MOESK».Itcontinuedto es intheorganization anddelivery ofcom- tional areas oftheCompany'sactivities. tion systemsthatautomatevarious func- sponse tochangingbusinessneeds. systems, aswell astheirdevelopment inre- able functioningoftheexistingautomated for JSC«MOESK»effective work isthereli- esne ro,%050200- 0.0 0.2 - - - 0.5 52.6 42.1 5.3 22.8 72.5 4.5 37.5 60.6 1.4 - Personnel % error, - - Electric power supplysystemmalfunction,% 116 99.91 Сable communicationlinefault,% 3093 Equipment failure, % 591 99.41 40188 367 99.74 14247 hours Average communicationchannelrecovery time, Overall downtime,channelhours Failure totalamount,pcs. % Readiness factor, It developed andapproved thefundamentaldocumentson theoperationofdispatching It held29specializedtrainingsonrestoring theconnectionbetween thezonenodesof ◆ ◆ It putintooperation173kmoffiber-optic The year 2010observed qualitative chang- JSC «MOESK»iseffectively usinginforma- One ofthemostimportantconditions .5. INFORMATION TECHNOLOGIES ANDTELECOMMUNICATIONS Theinteractionregulations ofJSC«MOESK»departmentsatoperationdispatchingand theRegulationsonoperative interactionofJSC«SOUPS»BranchMoscowRegional MANAGEMENT OFIN-COMPANY PROCESSES Failure description Indicatorname Communication channelsin Communication channelsin 0020 002009 2010 2009 2010 0020 002009 2010 2009 2010 96 7- 27 68 39 six 43-inchvideopanels. with thehelpoffunctionalworkstation and tem forelectricpower fiscalaccounting– automated measuringandinformationsys- channels andofJSC«MOESK» of datatransmissionprocessing network patch channels,ofteleautomatics of thestatetelephoneconnectiondis- out themonitoringatabreakthrough level of theoperationalcommunication,carrying 2009 –25sets). sets ofFOX-515 andOME-6130equipment(in tion channels(in2009–324channels),30 cable (in2009–240km),412communica- Moscow RDO Moscow RDO It created amodernmanagementcenter in network control center in network control center Communication channels Communication channels of JSC«MOESK» of JSC«MOESK» 6 113

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

The highest stability of the communication system was reached by the Central and Western electric networks, as well as by the Network Control Centre of JSC «MOESK».

The main objectives of the department of information-technological systems and communication systems in 2010 were: ◆ organization of operation of the automated control systems; ◆ development of the automated dispatch control system on the basis of a unified hardware and software complex ENMAC; ◆ completion of construction and erection works by the Network control centre of JSC «MOESK», in part of the engineering-technological equipment.

At the current moment JSC «MOESK» has in its operation 44 substation, equipped with automated control systems of technological processes (ACS TP); in 2010 – periodic preventive works were carried out on 40 power facilities, on 8 substations – works on troubleshooting, on the replacement of system elements and software configuration.

To increase the work efficiency of branches’ dispatching and transport service experts, JSC «MOESK» has a functioning transport monitoring operational and technological system. At the current moment the transport monitoring system includes more than 300 units of transport.

In order to reduce the elimination time of technological disturbances in the electrical networks, JSC «MOESK» has emergency process registration systems on the basis of the air- lines fault localization equipment – more than 400 terminals at 168 substations and fault recording complexes (Central Fault Recorder), functioning on the 126 substations of the 114 Company. In the reporting year the Network control centre of JSC «MOESK» was equipped as follows: ◆ completion of works to provide the NCC with power supply system of the 1 reliability category (the switchboard room is equipped with precision air conditioning systems, Automated gas fire-fighting system, power distribution network was mounted); ◆ completion of works to implement engineering systems and NCC building life-support systems; ◆ JSC «MOESK» communication system monitoring system was put into operation.

For the Network control centre of JSC «MOESK» to fulfill operational functions for the supply facilities management, they organized the exchange of telemetric information in the amount of 7 178 units between the Network control centre of JSC «MOESK» and the dispatch station of Moscow Communication Centre of electric power industry – the branch of «FGC UES», JSC.

In the field of telemechanics the following activities were carried out in 2010: ◆ maintenance and repair of the existing fund of telemechanics complexes at 320 substations; ◆ emergency fault elimination of telemechanics complexes at 47 substations; ◆ complex (extended) testing of the System of telematics information retransmission from the regional dispatch station to the dispatch station of the branch of JSC «SO UPS» of Moscow RDU. TECHNOLOGIES INFORMATION the executive apparatusofJSC«MOESK»; and theimplementationofthesefunctionsbyinformationtechnologiesdepartment nance andoperationofITsystemsinfrastructure, including: tion systems,anditimplementedaswell anumberofmeasures toreduce ITcostsformainte- on theintroduction ofnewinformationsystemsandonthedevelopment ofexistinginforma- and reliable servicesin2010,thedepartmentofinformationtechnologiescontinuedtowork the spaceintegrationofprocessing systemsandbusinessapplicationsdata. role andarchitectural solutionoftheCIMSintegrationcomponentwere revised inthepartof platform inthearchitecture ofJSC«MOESK»complexinformation systemdevelopment, the program establishmentandrealization, theSAPsoftware platformwassaved asacentral on thetransparency ofprocesses ofconsumertechnologicalconnections,theinvestment ness processes, therequirements oftheMinistryenergy andtheGovernment ofMoscow count: therequirements ofbusiness-userstosupporttheirsupervisedanddeveloped busi- tion andstagesofitsrealization. solutions, plannedinthecourseofproject implementation,andtotheoptimizationofdura- construction planandtoadjustmentstheCIMSimplementation,updateoftechnical results of whichledtotheidentificationofCIMSdevelopment directions, totheupdateof current statusoftheCorporateinformationmanagementsystemJSC«MOESK»(CIMS), istry ofenergy, ofJSC«IDGCHolding»and other shareholders conductedasurvey onthe revised its priorities,theorder andtermsofitsbusinessinformationmanagement. ply reliability anddevelopment ofSmartGridandMeteringtechnologies,theCompany planning oftheCompany'snetwork, increased requirements forimproving theconsumersup- Company’s transfertoRAB regulation, andalsotheneedtoimprove thequalityof strategic messages, integratedwiththe MSActive Directory corporatedirectory service,withthe ◆ 4) cidents); management abouttechnologicalviolations,operational schemestatechangesandac- tered informationforviewingandanalysis,theautomatedwarning ofJSC«MOESK» operational schemestatechangesandaccidentswithpeople, fortheaccesstoen- «MOESK» (intendedfortheinformationregistration abouttechnological violations, ◆ rials andequipmentpayments); procedures, formationandmanagementofcontracts,itemizedsupplytrackingmate- tion (planning)oftheannualcomplexprocurement program, repercussions oftender FEM) «TheProcurement Management»(includestheapplicationcampaign,forma- ◆ recording ofusers'requests tomodifythem); terparties andfortheautomationofprocess ofadding,editingmanuals,aswell as signed forthemanagementofgeneral(centralized)manualscompany'scoun- ◆ 3) automated systemsofJSC«MOESK»; ◆ ments control andofservers withthe1C platform); after thetransferofservicefunctionstoautomatedsystemadministrative docu- ◆ 2) 1) To maintainthecurrent electricgridbusiness-processes byeconomicallycost-effective When preparing anewCIMSplanthefollowingrequirements have beentakenintoac- In thefourthquarterof2010,Companytogetherwithrepresentatives oftheMin- Due toupdatingthelistofprioritydirections ofJSC«MOESK»development, causedbythe Itintroduced thehardware-software filteringcomplexforinfectede-mail andspam- software complexforoperative notificationofincidents intheelectricalgridsofJSC themoduleofAutomatedsystemfinancialand economicmanagement(AS NSI«Counterparties»onthebasisofSAPNetWeaver (theinformationsystem,de- toreduce by37%thecostsonconsultingservicestosupportandrefine thecurrent toreduce operatingcostsformaintenanceofIT-infrastructure by12.5%(aswell as MANAGEMENT OFIN-COMPANY PROCESSES Was improved reliability andJSC«MOESK»ITinfrastructure safety: thefollowinginformationsystemswere putintooperation: thecreation ofitsownITcompetencecenterthatenabled: therefusal ofathird-party contractortoperformgeneralsystemintegratorfunctions 6 115

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

use of real-time reputation filtering technologies, sender-based identification, the anti-virus scanning, and completeness of e-mail messages, the context adaptive scanning, which replaced a part of e-mail servers; ◆ with a view to strengthening the measures on information security and to improve the user performance effectiveness they installed a software and hardware complex integrated with the corporate directory service MS Active Directory, which is a scanning proxy-server for corporate users access to the Internet; this unit actively uses in its composition the IP– and URL-addresses reputation filtering mechanisms, and the signature and heuristic analysis to control the software use; ◆ they completed the transfer of High-voltage cable networks in a single domain ar- chitecture on the basis of Microsoft products (in the framework of works they carried out the migration of workstations and user data (e-mail, profiles) without the operation disturbance, and included the branch computers in a single information space, transferred the computing and printing equipment into a single corporate range of IP addresses, migrated the servers and operating system service, the work of the branch is accompanied by corporate domain service catalog of MS Active Directory, by a unified corporate mail, printing service, service backup and data recovery, by network file storage service, by terminal access service and transparent integration with the automated document control management system); ◆ it took actions to increase the work reliability of engineering systems and to ensure stable operation of the cooling system in the data center due to the replacement of the indoor units and division of premises into isolated cold and hot corridors without stop- ping the access to information resources subject to small size rooms with high-density computing equipment.

116 and software: information systems used thefollowing In 2010theCompany 44 uiespann 1С:Enterprise8.1 1С:Enterprise8.1 1С:Enterprise8.1 1С:Enterprise8.1 14.5. Business-planning 14.4. Contractmanagement 14.3. Budgeting 14.2. Treasury 14.1. 46 rcrmn aaeet1С:Enterprise 8.1 Procurement management 14.6. o NamePlatform No. 3 emnlsresCti eAp4MSWindowsServer 2003EE MSWindowsServer 2003EE Automatedsystemoffinancial-economicdepartment (AS FED),includingthemodules: 14. MSWindowsServer 2003EE Terminal servers CitrixXenApp4 13. Dispatchapplications(ASUREO) 12. 11. InformationsystemCodex 10. 1. 3. Internetaccess–scanningproxy server 2. 4. .Croaepra SSaeon otlSre 07MSWindowsServer 2003EE MSWindowsServer 2003EE CorporateportalMSSharePoint MSWindowsServer Portal 2003EE Server 2007 9. MSWindowsServer 2003EE Preventive protection provision Symantec MSWindowsServer 2003EE 8. Anti-virusprotection, dataarchiving Symantec Suite 7. InformationsystemConsultant 6. InformationsystemGarant 5. MANAGEMENT OFIN-COMPANY PROCESSES PAK from spam-messages Electronic mailMicrosoft ExchangeServer 2003;protection Gateway EnterpriseEdition–Per Processor Interconnection screening Forefront Threat Management SCOM Monitoring usingsoftware products ofMicrosoft SCCM, tions management(ACS TCM) The automatedcontrol systemoftechnologicalconnec- and datarestore communication andinformationresources SMTIR,backup The systemofmonitoringandmanagementCIMStele- MS WindowsServer 2003EE MS WindowsServer 2003EE MS WindowsServer 2003EE 1С: Enterprise8.1 MS WindowsServer 2003SE,HPOpenView 6 117

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

No. Name Platform

The automated system of consolidated accounting and tax 15. 1С: Enterprise 8.1 accounting (ASCATA)

The automated personnel and payroll control system (AP- 16. 1С: Enterprise 8.1 PCS)

17. The investment planning subsystem SAP ERP 2005 (PS module)

18. The equipment maintenance and repair subsystem SAP ERP 2005 (PM module)

SAP NetWeaver 2004 (BW, EP, SAP Busi- 19. The load exchange forecast recording system ness Explorer, Java Web Dynpro)

The Subsystem «Accounting of fixed and intangibles assets 20. SAP ERP 2005 (FI-AA module) in accordance with IFRS»

SAP NetWeaver 2004 (MDM, EP, XI, Java 21. Reference data «Counterparties» Web Dynpro)

SAP NetWeaver 2004 (MDM, EP, BW, Java 22. MOESK reference data «Electric equipment» Web Dynpro)

RedHat5, Windows 2003, DBMS Oracle, 23. The corporate electronic document control system (ASUD) EMC Documentum

Oracle DBMS, PO «Ortolazer» (develop- The corporate control system of the diffused resources 24. ment of JSC «Infrastructural Projects (CCSDR) Center»)

118 25. «Alpha Center» AC_UE Windows (Oracle v.11)

26. «Alpha Center» AC_UE Windows (Oracle v.11)

JSC «MOESK» electric grids control software and hardware 27. UNIX, ENMAC – ENMAC

28. TC Monitoring system Windows 2003/XP

29. Telemetry and SCADA fault-locating system Windows 2003/XP

30. Fault recording system (Central Fault Recorder) Windows 2003/XP

Further development of information technologies in JSC «MOESK» will be carried out in accordance with the approved plans by the Board of directors of the System project on creation of the Corporate information management system of JSC «MOESK». The priority directions of the Company’s information system development in 2011 are as follows: 1) The implementation of the first stage of ACS FEM (automated control systems of financial and economic management) of JSC «MOESK» on the SAP platform, designed to improve the JSC «MOESK» management through the use of best integration practices of business-processes and modern information technology solutions, which carry out a comprehensive and integrated support of the activity of structural divisions and ensure the transparency of JSC «MOESK» activity for the management, shareholders and JSC «MOESK» as a whole due to the introduction of a unified corporate information system. The ACS FEM implemented the following functions: ◆ accounting and tax accounting; ◆ management accounting (Controlling, Cost Accounting); ◆ material management (inventory management); ◆ sales control subsystem; ◆ management of technical maintenance and equipment repair; ◆ management of agreements in terms of performance; simulation ofpossibleconsequencesincasethedispatch operations. networks; electrical gridsofJSC«MOESK». indication ofthecurrent statusoftechnologicalinfringements; headquarters ofthecompanyonoperationalsituationtechnologicalviolationswith task description,optimizationoftheFSTroute totheinfringement place; of energy, CAIDI,SAIDI,CAIFI,SAIFIindexesandetc.; analytical problems associatedwithswitching-offofconsumers–calculationundersupply life cycle oftechnologicalinfringements; Investment program ofJSC«MOESK»; ◆ «MOESK», intendedfor: 7) 6) ◆ ◆ ◆ ◆ ◆ ◆ implementation oftheOMSsubsystem,providing: 5) quality informationservicesforemployees ofJSC«MOESK»; information exchangebetween thedepartmentsofCompanyandproviding high- unification inJSC«MOESK»duetotheconstructionofeffective linksforthedaily controllability oftheenterpriseandensuringprocesses ofstandardization and 4) 3) ◆ ◆ ◆ ◆ ◆ construction (MIACC) at1and2stages.TheMIACC informationsystemincludes: 2) ◆ ◆ ◆ ◆ ◆ ◆ 8) ◆ ◆ ◆ ◆ development planning,process connections,control oftripsandetc.; provide geo-informationsupportoftasksrelated tothetechnicalrecord-keeping, network lines of35-220kv(thedevelopment ofgeoinformationsolutionsinJSC«MOESK» )to information spaceofJSC«MOESK»withintheCIMS; of informationsupportbusiness-processes ofJSC «MOESK» bycreating aunified providing acomprehensive solutiondesignedtoimprove thequalityandeffectiveness reference datamanagement. control ofthetechnologicalconnections; managementofanalyticalreporting; cashmanagementinthepartofproceeds; thebeginningofworks onintroduction ofITinfrastructure monitoring system. thebeginningofworks oncompletionoftheserviceIT-infrastructure; simulationofthefailure effectsofelectricnetwork equipment,aswell ascomputer choiceofoptimalvariants ofconsumersconnection; analysisofthereliability ofexistingandprospective electricnetworks; optimizationoftheconfigurationandsettingsexisting andprospective electric planningthedevelopment ofelectricalnetworks with6-220 kVvoltage; recording of results and statisticsmanagementoftechnologicaldisturbancesinthe informingthemanagementofJSC«MOESK»,«IDGCHolding»,aswell astheOperational fieldserviceteams(FST)management,includingtheidentificationofavailable teams, display ofoperatinginformationonthetripsdigitalmap; thelistingofconsumersaffectedbytechnologicalviolations,aswell asthesolutionof theregistration oftripsonthebasisdatafrom different sources, aswell asconducting businessprocess managementsupportofinvestment activities. theautomaticexecutioncontrol process oftheInvestment program ofJSC«MOESK»; theautomaticadministrative andanalyticalaccountabilitymechanismunderthe thecreation ofaunifieddatarepository ofthecompany’sinvestment activity; theinvestment process automaticperformance; MANAGEMENT OFIN-COMPANY PROCESSES The development oftheITsystemsintegrationconceptonbasisanetwork model, The creation ofanelectronic mapwithmarkingofsubstationsandpower transmission The development andfurthercentralization ofIT-infrastructure: The development ofthesoftware complexofoperative notificationofincidentsinthe The creation ofinformationmanagementsysteminvestment activityandcapital The program complexintroduction ofthedevelopment ofelectricnetworks ofJSC The improvement ofthecorporateinformationintranet-portalforincrease of 6 119

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

120 PERSONNEL STRUCTURE OF NUMBER AND PERSONNEL POLICY 7 INFORMATION ABOUTAVERAGE STAFFING NUMBEROFPERSONNEL Management Program oftheJSC«MOESK». resulted in approval bytheCompany'sBoard ofDirectors ofanamendedHumanResources pany's personnelpolicyinthenear-term. a HumanResources ManagementProgram. TheProgram consolidatedkeyaspectsoftheCom- pany. velop theircapabilityinsolutionoftechnical,economicalandsocialtasksgiven totheCom- a businessteamconsistingofhighlyskilled,reliable andefficientemployees seekingtode- complex islargely dependentonstability, qualificationsandexperienceofthepersonnel. for theCompany. Qualityandreliability ofoperationanenterpriseinthedistributiongrid development ofworkforce capacity, andsocialsupportassistancetoworkers oftheCompany: main objectives andsolvingassignedtasksinrespect ofpreservation, replenishment and Company; of reserves foroptimizationofthenumberemployees; vocational educationandadditionalprofessional education; exercise the functionsinthearea ofcommercial energy accounting. as opposedto2009wascaused byemploymentofpersonnelfrom theLLC «Energobalans» to made up15552people.The increase intheaverage staffing numberofpersonnelin2010 2010 sawcarryingoutoftheactivitiesforpurposeupdatingProgram, which By theresolution of14October2009,theBoard ofDirectors oftheJSC«MOESK»approved The majortaskoftheCompanyinarea ofpersonnelmanagementliesincreation of Industrial affiliationoftheJSC«MOESK»determinesaspecialvalue ofthehumancapital  The followingisdefinedbytheProgram askeytrends ofthepersonnelpolicyforachieving        The average staffingnumberofpersonnelthe JSC«MOESK»asof31December2010 .1. PERSONNELMANAGEMENT ensuring ofthereliability ofpersonnel'sprofessional activitiesandthepersonnel'sefficiency. determination ofacategorythoseworkers whoseretaining isofakeyimportanceforthe development andimplementationofpersonneljuvenation measures; improvement oftheworkers' motivation system,anddevelopment of asocialpartnership; creation anddevelopment ofthepersonnelreserve; development ofpersonneltraining,retraining andeducationsystem; optimization oftheorganizational andfunctional structure of theCompany, identification enhancement of cooperation with specialized institutions of higher and intermediate enhancement ofcooperationwithspecializedinstitutionshigherandintermediate SOCIAL RESPONSIBILITY 11 241 2008 14 651 2009 15 552 2010 7 121

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

The level of personnel supply in the JSC «MOESK» as of 31.12.2010 increased by 2 percentage points as opposed to the same indicator of the previous year, and made up 94%.

The indicator of an active turnover tariff of the Company in 2010 exceeded the value of 2009 and made up 7.9% versus 5.9% in the previous year. The increase in the active turnover tariff was caused by competitive proposals in the labor market. The most active categories in the course of personnel movement in 2010 were managers and specialists.

STRUCTURE OF THE COMPANY’S PERSONNEL BY CATEGORIES IN 2010 19.2% Managers

31.2% Specialists and officers

49.6% Workers

The personnel structure of the JSC «Energobalans». Workers making up about «MOESK» over the period of last three 50% of the total number remain the main 122 years has remained stable. There was a category of personnel in the JSC «MOESK», minor change in the proportion of workers' which is caused by the basic type of activity categories throughout 2010, caused by of the Company. employment of specialists from the LLC

AGE STRUCTURE OF THE COMPANY 100% 8.8% 8.8% 9.1%

43.3% 41.3% 41.0%

under 25 25-35 20.3% 20.7% 20.0% 35-45 45 (retirement age) working retirees

19.5% 21.1% 22.5%

7.8% 8.4% 7.4% 2008 2009 2010 Despite a minor decrease in the ratio of the category of workers in the age of 45 years and more, this category remains prevailing over the other age categories in the period from 2008 through 2010. This being the case, it is necessary to point out a trend of stable, albeit minor, increase in the ratio of those workers whose age does not exceed 35 years. STRUCTURE OFPERSONNELBY EDUCATIONAL LEVEL PERSONNEL DEVELOPMENT OF EDUCATION AND 100% 2008 –2010indicatesastableriseinthe ture byeducationallevel over theperiodof Company. structure ofpersonnelmettheneeds Company: secondary schools. all branchesoftheJSC«MOESK»forstudentsspecializededucationalinstitutionsand Board ofYoung Specialists, aswell asopendays andvisitstopower facilitiesconductedin among themwhichshouldbeparticularlypointedoutare: creation oftheCompany's young specialists,theiradaptationandconsolidationintheCompany;onesfrom who quitthejobinthisagecategory. the numberofemployed workers intheageofunder35isexceedingnumberthose shows thatinallpersonnelcategories—managers,specialistsandofficers,workers— trainings (including4983off-the-job trainings); Advanced Training Planisbeingimplemented. in theCompany, withinthescopeofwhichanannualPersonnel Training, Retrainingand Comparison ofdataforpersonnelstruc- Throughout 2010,thequalification    There is a numberofadditionalopportunitiesforyoung specialistsforeseen inthe There isa setofmeasures beingimplementedtopreserve thetendencyofemploying An analysisofage-related dataforworkers employed anddismissedover theyear of2010 ◆ ◆ ◆ 2010 saw16796trainingsconducted (including10295off-the-jobtrainings): There isasystemofinternalandexternaleducationpersonneltuned upandfunctioning trainingofspecialists andofficers:3391(including 1971off-the-jobtrainings). trainingofmanagers:5154 (including 3341off-the-jobtrainings); training,retraining andadvanced traininginrespect ofworking specialties:8251 annual paidleave forfamiliesofyoung specialistsworking togetherintheCompany. opportunity togethighereducationandraisetheirowneducationallevel; opportunity ofcareer development; 41.6% 24.7% 32.7% 2008 1.0% 39.1% 24.3% 33.6% 3.0% 2009 SOCIAL RESPONSIBILITY 37.1% 24.5% 2010 34.2% 4.2% ticularly pointedout. in 2008upto4.2%2010shouldbepar- cation degrees oranacademictitlefrom 1% the ratioofspecialistswithtwo higheredu- level ofworkers' education.Anincrease in academictitle Two highereducationdegrees, Higher Specialized secondary Secondary 7 123

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Out of production necessity, many workers of the JSC «MOESK» had undergone training more than once in the reporting year. Altogether, the ratio of the Company's workers that went under training in 2010 made up 90%. The JSC «MOESK» cooperated in 2010 in the area of personnel training, retraining and advanced training with the following educational institutions of the Russian Federation: ◆ Energy Institute of Moscow; ◆ Moscow State Open University; ◆ Moscow State Technical University named after N.E. Bauman; ◆ State University of Management; ◆ Academy of National Economy under the Government of the Russian Federation; ◆ Non-governmental Educational Institution «Mosenergo Personnel Training Center»; ◆ Non-governmental Educational Institution of Higher Vocational Education «Moscow Institute of Energy Security and Saving»; ◆ Non-governmental Educational Institution «Energy Personnel Training Center»; ◆ Non-governmental Educational Institution of Higher Vocational Education «Institute of Economics and Energy»; ◆ Federal State Educational Institution «Methodological Office for Mining, Petroleum and Energy Education» etc. In 2010, at the expense of the Company, 123 employees went under postal tuition under programs of higher and secondary vocational education.

Now the JSC «MOESK» is developing a methods of power facilities management 124 project of its own Energy Training and In- that are intended to reduce the number of novations Center that will become a center incidents and casualties. of effective professional training and ad- One of the most important directions in vanced training for the personnel of the JSC preserving human resources of the Company «MOESK» and other enterprises in the elec- is an activity with the purpose of defining a tric power industry. list of workers and specialists whose preser- Regular professional skills competitions vation is critical for the Company, whose out- are holding a prominent place in the person- flow is impossible to replenish in the short- nel training system and being aimed at rais- term prospects, as well as development of ing the level of professional qualifications of measures for their retaining. employees, introduction of new forms and

INTERACTION WITH 2010 saw updating and putting in force of the regulation titled 'Creation and Develop- THE COMPANY’S ment of Personnel Reserve of the JSC «MOESK»' in the JSC «MOESK» (Order No. 219 dated 05.04.2010). Pursuant to this regulation, activities were being conducted throughout the PERSONNEL year of 2010 aimed at creation of a personnel reserve in the Executive Board and branches RESERVE of the Company. A list of candidates for the reserve and positions of the personnel reserve (Level 2) was being created in the Executive Board of the Company: deputy chief engineer, directorate chief, director of division, managing director. A list of candidates for the reserve and positions of the personnel reserve (Level 2) was being created in the branches of the Company: deputy director of the branch, chief engineer of the branch, deputy chief engineer of the branch, director of division, chief accountant of the branch, chief of distribution zone. In the course of selection, all reservists were going under the psychophysiological examination procedure. The selection was being carried out in respect of age, level of education and length of work in the Company. After all evaluation procedures, a list of 67 candidates was created. In connection with holding of organizational and staffing activities in the Company, the approval of personnel reserve lists is set back to 2011, which is also specified in the Hu- man Resources Management Program. 7 youth were created. social andlivingissuesministeringto which specializedcommitteesfortackling actively working intheCompany, under erans ofWar andLaboroftheJSC«MOESK» tent medicalcare wasgiven to349non-working retirees. force intheJSC«MOESK»,Companyprovided materialaidto2791retirees. Thecompe- in thedistributionelectricgridcomplex. in theAll-RussianWinterandSummerSportsContestofpower industryspecialistsworking Contest ofpower industryspecialistsoftheMoscowRegion. free-of-charge tripticketstochildren's holiday camps,healthresorts andholiday hotels. trip tickets.Moreover, several categoriesofworkers, andnon-working retirees were granted Company, membersoftheirfamilies, andnon-working retirees were granted2515privileged and healthimprovement ofworkers andtheirchildren. Over theyear of2010,workers ofthe care andprovision ofsocialsecurityfortheworkers. in theCompany, aimedatpreservation ofhealththepersonnelbyway ofqualitymedical «MOESK» madeupmore than9000peoplein2010. worker andtheCompanyinaspecificproportion. being financedfrom theCompany'sownfunds,andaParity one,beingfinancedjointlybythe and socialsecurityofpersons,includestwo majorretirement plans:aCorporative one, in theCompany, whichisaimedatattractionandretention ofworkers, increase ofloyalty are specified inthecurrent Collective Agreement. the RussianFederation. tions fortheCompany'sworkers inexcessofthestandard onesspecifiedinthelegislationof tation oftheCollective Agreement liesinprovision ofadditionalsecuritiesandindemnifica- and theMoscowCityRegion«Electroprofsoyuz» Committee.The priorityorien- structure oftheMoscowRegion. ment andcorporatesolidarityofemployees, butalsoproviding supportforthesocialinfra- aimed toraisethelevel ofsocialsecurityworkers, create conditionsforall-round develop- Since 2008,there hasbeena Board ofVet- Pursuant totheProvisions onPrivilegesandRemunerationsforVeterans in2010 beingin Best athletesoftheCompanyconstitutingpickedteamJSC«MOESK»tookpart In 2010,sportsteamsoftheCompany'sbranchestookpartin5thmultifacetedSports There are activitiesbeingcarriedoutdynamicallytoorganize health resort treatment, rest Now there are voluntary healthinsuranceandcasualtyprograms beinginforce Total numberofparticipantsinnon-governmental retirement benefitsprograms oftheJSC Since 2005,there hasbeenanon-governmental retirement benefitsprogram beinginforce By theendof2010,Companyhaddischarged allobligationsbefore theworkers, which The Collective Agreement oftheJSC«MOESK»for2010isconcludedbetween theCompany The JSC«MOESK»isasociallyorientedCompanythatnotonlyimplementingprograms .2. SOCIALPOLICY SOCIAL RESPONSIBILITY ditional forms ofrecipient-oriented charity. are beingimplementedalongwiththe tra- charitable andsocialinvestments programs «Spiritual Heritage»–under whichspecial force intheCompany– «Childhood» and Victory». the scopeof«Relay of the Bannerof participated inthecelebrationsheldwithin community, aswell asyouth organizations, thorities andrepresentatives oftheveteran with representatives ofgovernment au- than 300workers oftheCompany, along organized bytheJSC«IDGCHolding».More event –«Relay oftheBannerVictory»– JSC «MOESK»inthehistoricalandmemorial There are giveaway programs beingin 2010 sawanactive participationofthe 7 125

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

7.3. PROTECTION OF THE ENVIRONMENT There is an Environmental Policy being in force in the Company and approved by the Board of Directors of the JSC «MOESK» (Minute No. 75 of 03.12.2008), which establishes principles, goals, tasks and principal lines of the Company's activity in the area of environment protection and environmental safety in the long-run period. Within the scope of Environmental Policy, the following measures were implemented by the JSC «MOESK»: ◆ activities for functioning of integrated management system in the area of ecology; ◆ development of regulatory environmental documentation; ◆ internal instrumental monitoring of regulatory compliance in respect to admissible impact on the environment; ◆ maintenance of oil receiving devices in the substations; ◆ activities for construction of oil receivers, oil collectors, reconstruction of treatment facilities. According to the Environmental Policy, there is modernization of the control system in the area of environmental protection and management being held in the Company on the basis of functioning of the environmental management system adopted by the Company in 2008 with due consideration of the requirements of the international standard ISO 14001:2004. In 2010, a compliance audit of ecology management was held in the branches of the JSC «MOESK»—Northern Electric Networks and Moscow Cable Network—within the framework of the functioning environmental management system. Following the results of the audit, a report was drawn, based on which the environmental management system was recommended for renewal of certification. The package of measures for implementation of the environmental policy 126 includes: ◆ scheduled modernization and replacement of processing installations; ◆ introduction of new effluent treatment technologies; ◆ industrial waste utilization; ◆ organization of environmental education of employees. In the year under report, representatives of the JSC «MOESK» repeatedly participated in specialized exhibitions and conferences devoted to environmental protection. The Company obtained a participant's diploma of international Ecwatech-2010 exhibition that is currently being the largest aquatic forum in the Eastern Europe. Participation in the VI All-Russian Environmental Conference «New Priorities of National Environmental Policy in the Real Sec- tor of the Economy» brought the JSC «MOESK» a medal of honor and a certificate «For the environmental safety». Becoming a laureate of one of the most prestigious contests held in November 2010, «100 Best Russian Organizations. Ecology and Industrial Safety», the JSC «MOESK» proved its high rating in the area of ecology and industrial safety. Materials on implementation, development and introduction of environmental protection measures, and adherence to standards of industrial safety on the electric grid facilities of the Company, brought to the contest were highly praised by the Independent Community Board of the contest's organizing committee. The JSC «MOESK» was given a diploma of the laureate of the Contest and a golden medal «100 Best Russian Organizations. Ecology and Industrial Safety», along with awarding Andrey Ko- novalov—the General Director of the JSC «MOESK»—with a honorary title «Best Manager in the Area of Environmental and Industrial Safety». In 2010, expenditures on environmental protection made up 94 922.4 thousand Rubles, including on the following directions: ◆ protection and prudent management of the flowing storage: 24 557.8 thousand Rubles; ◆ protection of the atmospheric air: 9 905.2 thousand Rubles; ◆ protection of the environment (land resources) against production and consumption waste: 43 711.2 thousand Rubles; ◆ environmental payments for the negative impact on the environment: 3 890.6 thousand Rubles; ◆ overhaul repairs of fixed production assets for environmental protection: 12 857.6 thousand Rubles BASIN OF THEWATER PROTECTION PROTECTION ENVIRONMENTAL EXPENDITURES ON the followingmeasures were implementedinthebranchesofJSC «MOESK»: household anddrinkingneeds,109.6thousandm3forproduction needs. m3 ascompared to2009and madeup482.2thousandm3,ofwhich372.6m3for use; from theterritoryofproduction facilities; DZ, treatment facilitiesofacarwashintheSerpukhovsky DZ; Base oftheVolokolamsky DistributionZone; of thelandandstormwaterdrainage; xedtrso vralrpis2 1. 1. 12857.6 3890.6 2010 8911.8 3429.0 2009 24311.7 5808.2 2008 protection Total expenditures onenvironmental Expenditures onoverhaul repairs Payment fornegative impact against production andconsumptionwaste Expenditures onprotection oflandresources atmospheric air Expenditures onprotection ofthe management oftheflowingstorage Expenditures onprotection andprudent Description management ofthe ◆ To improve thequalityofeffluentwaterandincrease thetreatment facilities'efficiency, totalwaterconsumptionbytheJSC«MOESK»hasdecreased by5.3thousand In 2010year, ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ replacement ofoil-filled cablewiththepolyethylene insulatedcable. timelyrenewal ofpermitsforthedisposalcontaminators; accountingofthequantity contaminatorsdisposedintotheeffluentstormwaters; chemicalanalysisofartesian watersamplesfrom theborehole; control over conditionoftreatment facilitiesinmotortransport washes; installationofnewfiltersandreagents onthecarwasheswith closedcycle ofwater instrumentalmonitoringofthequalitysurfacewater (rainwaterandsnowmelt) reconstruction oftheoilfacilityCentralElectricNetworks; conditioningoftreatment facilitiesofthestormwaterdrainage intheDomodedovsky bringingofacarwashwithrecycling watersupply systemintoserviceontheCentral equipmentoftheSSNo.445«Sigma»,172«Khlebnikovo» withtreatment facilities flowing storage on protection Expenditures and prudent 13 703.6 18 442.8 24 557.8 protection ofthe Expenditures on atmospheric air

3 791.4 7 266.0 SOCIAL RESPONSIBILITY 9 905.2 consumption wastes protection ofland resources against Expenditures on production and 16 911.3 28 690.1 43 711.2 45636 3. 94922.4 66739.7 43711.2 64 526.3 28690.1 24557.8 16 911.3 18442.8 13 703.6 9. 6. 9905.2 7266.0 3 791.4 negative impact Payment for 5 808.2 3 429.0 3 890.6 Expenditures on overhaul repairs 24 311.7 8 911.8 12 857.6 thousand Rubles 7 127

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

PROTECTION Total volume of contaminants emitted in 2010 made up 51.3 t. As compared to 2009, the OF THE AIR BASIN quantity of contaminants emitted into the atmosphere decreased by 23.7% or by 15.9 t. The main part of emissions falls on the motor transport. The decrease of the quantity of contaminants emitted into the atmosphere in 2010 was due to implementation of the following measures: ◆ activities for sanitary and chemical control over the atmospheric air on the boundaries of the production impact areas; ◆ control over emission of contaminants from dust and gas treatment facilities, checking of cyclone collectors' efficiency; ◆ instrumental monitoring of compliance to the regulations on maximum permissible emissions into the atmosphere from stationary sources; ◆ measurements and adjustment of contaminant emissions from motor transport, toxicity check of vehicles with gasoline engines and smokiness check of diesel vehicles, public checks of gas analyzers and smoke meters.

PROTECTION For the purpose of protection and prudent management of land resources, the following OF LAND measures were implemented in 2010: ◆ for the purpose of temporary production and consumption waste accumulation, special RESOURCES places were provided on production sites of the Company. Agreements for waste collection and utilization were concluded with specialized organizations; ◆ timely preparation of draft regulations on waste formation, limits for its emplacement and renewal of waste emplacement limits was made; ◆ timely cleaning of territories, disposition of construction waste and domestic garbage was carried out; 128 ◆ persons in charge of handling production and consumption waste were appointed by the order of the director, as well as procedures for concluding agreements on disposition (discarding) of waste and procedures for accounting and control over waste transportation were established in every branch of the JSC «MOESK».

PRODUCTION Formation of production and consumption waste made up 16 450.8 t in 2010, which AND CONSUMPTION exceeds the previous year’s indicator by 17.2% or by 2 416.6 t. Growth of waste quantity as compared to 2009 is related to an increase of volume of work on reconstruction of existing WASTE facilities and construction of new ones. Low-hazard and non-hazard waste – hazard class 4 and 5 – still constitute the main part of the waste in the JSC «MOESK». The Company has a license for carrying out of activities on collection, use, decontamination, transportation, emplacement of hazardous production and consumption waste No. OT-00- 009028(00) of 15.07.2008. Solid domestic waste is transferred for burial exclusively on the landfills having licenses on this type of activity and agreed limits for emplacement of waste. 1 to 3 class wastes is discarded to special processing plants for utilization or processing with the purpose of recycling.

Formation of production and 1 class hazard 2 class hazard 3 class hazard 4 class hazard 5 class hazard Year consumption waste waste, tons waste, tons waste, tons waste, tons waste, tons in the Company over the period of 2008 – 2008 5.0 3.9 328.5 3 348.8 12 186.3 2010: 2009 8.2 25.2 273.3 3 115.8 10 611.8

2010 3.3 21.6 304.8 4 771.7 11 349.4 SUPPRESSION ACOUSTIC EDUCATION ENVIRONMENTAL Company overtheperiodof2008–2010: Formation ofproduction andconsumptionwaste inthe noise impactoftheCompany'sfacilitiesonenvironment: from electricandelectromagnetic emissionsonthepersonnel. sanitary regulations. TheCompanyisalsoimplementingmeasures tominimizetheimpact noise emissionsfrom thefacilitiesofJSC«MOESK»are beingplannedpursuanttothe taken ascalculationmethods,basedonwhichmeasures forreduction andoptimizationof suppressors atthestagesof designandconstruction.Aggregate levels ofnoiseare being in theimmediateproximity totheresidential areas are obligatorilyequippedwithacoustic are takenindesignworks forconstructionofnewelectricalsubstations; in theCompany'sfacilitiesonapartmentblocks; specialists oftheJSC«MOESK» intheareas ofenvironmental activity. management system,certificates ofadvanced traininginthe area of environment protection. production andconsumptionwaste,certificates forinternalauditofanenvironmental for Specialists».Workers ofspecializeddivisionsobtainedcertificatestherighttohandle Non-governmental EducationalInstitution«Instituteof Additional Vocational Education «Center forExecutionofWorks andRenderingofServicestheEnvironmental Purposes», environmental protection issuesineducationalinstitutionssuchasStateUnitaryEnterprise education. In2010,managersandspecialistsoftheJSC «MOESK»undergone trainingin environmental protection. activity isadvanced trainingof managersandspecialistsoftheJSC«MOESK»inarea of 5.0 1 class ◆ ◆ ◆ ◆ ◆ ◆ In 2010,thefollowingmeasures were implemented intheJSC«MOESK»tocontrol the All substationsinMoscowCityandRegionnewlyconstructedorreconstructed andlocated In thefuture, itisplannedtocontinueeffortsonadvanced trainingofmanagers and Company's employees regularly advance intheirskillsthearea ofenvironmental One ofthekeyprerequisites forcarryingoutofaneffective environment-related development ofprojects torationalize the sizesofsanitaryprotection zones. measures forreduction ofandoptimization ofregulations forelectromagnetic emission instrumentalmonitoringofacousticsituationintheareas ofimpactfrom noisesources makingcalculationsinrespect ofnoise; identifyingthenoiseimpactonboundariesofareas oftheCompany'sfacilities; measuringthelevels ofnoise,magneticradiation,vibrationfrom electricsubstations; 8.2 3.3

3.9 2 class 25.2

21.6 SOCIAL RESPONSIBILITY WASTE HAZARDCLASS

3 class 328.5 273.3 304.8

4 class 3348.8 3115.8 4771.7

5 class 12 186.3 10 611.8 11349.4 7 129

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

130 8 market relations. to thecommondevelopment tendenciesof trol over naturalmonopolies'activities,and to thegovernmental policyinrespect ofcon- chase systeminelectricalenergy industry, common development tendenciesofthepur- the Company'sownneedscorresponds tothe purchase ofgoods,works andservicesfor petitive andschedulednon-competitive of carryingoutandorganization ofcom- the Company: and brought intoaction. Program, anautomatedAS FEM«Procurement Management»system Internet notlaterthanin7calendardays from thedateofapproval. and ispublishedinthe«Purchases» sectionoftheCompany’scorporative website inthe Annual ComplexPurchasing Program (ACPP) ecutive bodyhave beendeveloped. procedure oftheirreconciliation bysupervisorytechnicalservicesundertheCompany’sex- form andcontentsoftechnicaltasksbeingpartcompetitive documentation,aswell asa and servicesfortheCompany'sneeds. control over procurement of goods,works tion, regulatory andmethodicalsupport, «MOESK» exercises functionsofcoordina- Directors. established bytheresolution oftheBoard of andtheCentralTendertor, Committee (CTC) tablished bytheorder oftheGeneralDirec- the Permanent Tender Committee(PTC) es- ties oftheCompanyin2010were madeby of informationtechnologies and newconstruction). activity stipulatedbytheconcept ofthebusinessplan); on production andsalesofproducts (goods,works andservices)asaresult oftheordinary For thepurposeofcreation andreconciliation of Procurement activitiesintheCompanyare executedwithastrictcomplianceto ecology.  OHSAS 18001);  14.04.2008 No.58); for theneedsofJSC«MOESK»(approved bytheCompany'sBoard ofDirectors, Minuteof   services, works, servicesforneedsofstateandmunicipalneeds»;  Procurement activitiesinthe JSC«MOESK»are regulated bythefollowingdocuments: The policyoftheJSC«MOESK»inrespect ACPP iscreated basedonthefollowingprograms determiningtheproduction activitiesof For improving qualityofprocedures beingimplemented,commonrequirements astothe The CentralTender CommitteeoftheJSC All decisionsrelated topurchase activi- ◆ ◆ ◆ .1. POLICYINRESPECTOFPROCUREMENTACTIVITIES investment program (alongwithtechnicalupgradingandreconstruction, also inrespect maintenanceprogram (planofrepairs); production program (inclusive ofallpurchases constitutingtheestimateofexpenditures International standards inrespect ofmanagementsystems(ISO9000,ISO14000,standards Federal Lawof27.12.2002No.184–FZ«Ontechnicalregulation»; Company's policiesinrespect ofquality, laborsafety, occupationalhealthandsafety, and Provision onprocedure ofcarryingoutscheduled purchase ofgoods,works andservices Federal Lawof21.07.2005No.94-FZ«Onplacementpurchasing orders forgoods, PROCUREMENT ACTIVITY approved annually by theBoard ofDirectors, foremost, priceandqualityofproducts). analysis ofprofits andexpenses(first the mostpreferred offersalongwithcomplex chasing; honestandreasonable choiceof ment; priorityofcompetitive ways ofpur- thorough planningofproduction require- principles ofopennessandtransparency; pany hasbuiltapurchase systembasedon cedures andreduction oftheirduration. ganizing implementationofpurchasing pro- considerable decrease inexpenditures onor- outside organizations, whichcontributedtoa were implementedin2010withoutinvolving chasing procedures fortheCompany'sneeds curement Department.Thus,scheduledpur- istration beingpartoftheLogisticsandPro- a Competitive Purchases Organization Admin- own resources, theJSC«MOESK»hascreated scheduled purchasing procedures usingits Within thescopeofthispolicy, theCom- For thepurposeofimplementation the AnnualComplexPurchasing hasbeendeveloped the the 8 131

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

The Annual Complex Purchasing Program is executed by way of implementation of purchasing procedures within the set time limits. In the course of execution of the ACPP, it is allowed to adjust it: ◆ following the results of defending the tariffs for electric power in the regulatory agencies; ◆ in connection with adjustments of the Company's business plan; ◆ following the results of formation of the Company's need in products for the next year, satisfaction of which requires implementation of competitive procedures in the 3 or 4 quarter of the current year; ◆ based on other reasons connected with a previously unforeseen need to change the ACPP.

A report about implementation of the Annual Complex Purchasing Program is quarterly submitted by the General Director of the Company to the Board of Directors.

8.2. RESULTS OF PROCUREMENT ACTIVITIES

Over the year of 2010, 2 248 purchases were carried out to the total amount of 37 193 463 thousand Rubles including VAT.

THE STRUCTURE Total amount Ratio in the Quantity, OF PURCHASES BY Types of activity (thousand Rubles total amount items TYPES OF ACTIVITY incl. VAT) of purchases IS SHOWN IN THE New construction and expansion of electric 132 TABLE: 319 2 699 642 7% grid facilities Reconstruction and technical upgrade of 729 9 675 235 26% electric grid facilities Repairs (energy repairs) production, mainte- 752 5 031 094 14% nance service

IT purchases 9 91 158 less than 1%

Advisory services 10 53 996 less than 1%

Other purchases 429 19 642 338 53%

TOTAL: 2 248 37 193 463 100%

FollowingF ll i the th results lt of f 2010, 2010 purchasing h i procedures d were implementedil t d with ith prevailing ili of f open procedures, the ratio of which was 64% of the total quantity of purchases. TABLE: SHOWN INTHE PURCHASES IS BY METHODSOF OF PURCHASES THE STRUCTURE amount of15 section oftheCompany’scorporative website intheInternet. cation copy)andinformationaboutresults ofpurchases are alsoplacedinthe«Purchases» b2b-energo.ru. Messagesaboutimplementationofscheduledprocedures (informofnotifi- mean ofeCommerce forimplementationofpurchasing procedures. Board ofDirectors hasapproved theuseofanelectronic tradingvenue b2b-energo.ru asa curement activitiesandensuringacompetitive purchasing environment. TheCompany's implementing scheduledpurchasing procedures oftheJSC«MOESK». OA:2283 9 6 100% 37193463 2248 1% 55% 20339559 503665 lessthan1% 471 20% 12 2950 7306943 TOTAL: 19% 25 Purchase from asolesource* 958 Closed competitive tenders 7105652 of competitive negotiations Closed request forpricefollowingtheresults 451 Open competitive negotiations Open requests forquotes Open competitive tenders,auctions * –includesthepurchaseofa«Servicefortransmissionelectricalenergyby«FGCUES», hhfSiftiifltilbt G UES FGC th b l i t l f i i t f i S f h th d l i * All openprocedures oftheCompanywere implementedontheelectronic tradingvenue Use ofelectronic tradingvenues plays afundamentalrole inenhancingefficiencyofpro- Methods ofpurchases are definedbyregulations ofthe«Provision ontheprocedure of , 230 Methods ofpurchases , 306 thousandRublesincl.VAT, whichmakes40.9%inthetotalamountofpurchases. PROCUREMENT ACTIVITY Quantity, items 3 3 9 5% 1934694 331 (thousand Rubles Total amount incl. VAT) total amount of purchases Ratio inthe JSC tothe tth 8 133

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

134 MASS MEDIA INTERACTION WITH munication environment, theCompanyfollows the publicitycapital inthestructure ofthe of thebusinessreputation andwidening of of theCompany, aswell asstrengthening at buildingofapositive andintegralimage ticipation oftheGeneralDirector were aimed JSC «MOESK».Publicmediaevents withpar- Komsomolets newspapers,aswell asinthe cy, Komsomolskaya Pravda andMoskovsky been heldonthevenues oftheInterfaxagen- of theJSC«MOESK»,4press conferences have references. 2009 (4400references) more thanby2000 which isexceedingthesameindicatorof riod from 10.03.2010through 31.12.2010, and Internetmedia6 ing, theJSC«MOESK»wasmentionedinprint the average). over thesameperiodonlyby1.7pointon of 90largest Russiancompanieshasgrown years (theindexofinformationtransparency grown almostby20pointsover thelasttwo tion transparency oftheJSC«MOESK»has Developments (CEFED),theindexofinforma- Economical andFinancialExaminations agency Standard &Poors andtheCenterof in 2010»–madebytheinternationalrating mation transparency ofRussian companies of thestandard report –«Studyaboutinfor- vanced considerably. According tothedata Company's informationtransparency hadad- regional andindustrial-orientedmassmedia. has organized aninteractionwithleading largement oftheaudience,JSC«MOESK» Company, aswell asfor thepurposeofen- tion andanimageofinformationallyopen brand awareness, buildingofpositive reputa- uniform informationpolicy, enhancementof PUBLIC RELATIONS, RELATIONS WITHPUBLICAUTHORITIES With participationoftheGeneralDirector According tothedataofon-linemonitor- By theendof2010,average indexof For thepurposesofimplementation and anoptimizationofcom- strategy ofcommunications implementing thelong-term agement. Indeveloping and the Company'sstrategicman- «MOESK» isanintegralpartof information policyoftheJSC M AND CONGRESSEXHIBITIONACTIVITY , 590 timesover thepe- within thescopeof municative processes anagement ofcom- carried outin2010. transmission linesofdistribution gridswas petitions ofcrews servicinghigh-voltage (July), All-Russianprofessional skillscom- repairs personnel of high-voltage networks petitions for(June),contestsofoperational tenance ofdrivers' professional skillscom- profession, alarge scaleinformationmain- tric gridcomplexandpopularizationofthe brand imageoftheRussiandistributionelec- ence. messages per1000peopleofthetarget audi- Rubles basedonthecostofallinformative Rubles, aswell asapproximately 150mln. of advertising publications, madeup24mln. formation activities,insteadofplacement ists. novalov answered thequestionsofjournal- General Director oftheJSC«MOESK»A.P. Ko- JSC «MOESK».Inthecourseofevent, the nual GeneralMeetingofshareholders ofthe Russian massmediawere invitedtothean- pany's existence,representatives ofleading aired (6itemsin2009). Starting from 10.03.2010,217TVitemswere grown considerablyascompared to2009. nized forjournalists. the facilitiesofJSC«MOESK»were orga- weather abnormalities. tion oftheconsequenceschallenging gency recovery works aimedtorectifica- Company's activitiesinthecourseofemer- loyal positionsinpublicopinionaboutthe tioned events alsocontributedtobuildingof tion oftheGeneralDirector intheaforemen- Company’s marketvalue. Personal participa- tivity, aswell astointernational cooperation. and exhibitional,charitablesponsoringac- attention ispaidtoadvertising, congressional ing apublicity(image)capital.Considerable portant lineofactivityinthearea ofwiden- public andgovernmental authoritiesisanim- panies. Holding» anditsaffiliatedassociatedcom- mation policyestablishedintheJSC«IDGC uniform principlesofreputational andinfor- For thepurposeofsustainingapositive Economical effectoftheCompany'sin- For thefirsttimein 5years oftheCom- The volume ofvideoinformationhas In thecourseof2010,14mediatoursto Creation of effective communicationswith 9 135

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

In the period of holding the «Fair Kilo- in the exhibition center «Krokus-Expo», the INTERACTION WITH watt» and «Kind Electricity – Safe Holi- JSC «MOESK» was represented in the consoli- GOVERNMENTAL days» events, upon the initiative of the JSC dated booth of the Moscow Region's Fuel and AUTHORITIES AND «MOESK», heads of constituent entities of Energy complex. NON-GOVERNMENTAL the Federation – Moscow City and Moscow 8 September 2010, the JSC «MOESK», ORGANIZATIONS Region – spoke to the heads of regions about jointly with the JSC «IDGC Holding» and the a necessity to interact with the JSC «MOESK» National Innovations and Technology Cham- in holding these activities. ber, took part in the international exhibi- Within the scope of international exhibition «Innovative Projects in the Electric Grid tional presentation «Moscow Region-2010» Complex». which was held on 23 – 25 September 2010

In April 2010, an updated version of the Moscow and Moscow Region can make free PUBLIC RELATIONS corporate website of the JSC «MOESK» was phone calls to the number 8-800-700-40-70 put into operation in the Internet. Website concerning any technological violations and redesigning works are currently being car- power supply interruptions. ried out for the purpose of further enhance- One of the essential lines of activity in the ment of its customer-orientedness. area of intracorporative information interac- The new visual solution, as well as the tion is a work with internal audience. For the technical update of the website, are connect- purpose to enhance efficiency of internal ed with Company's striving to conform to communications in the Company, 17 issues standards of quality presentation of obliga- of a corporative information edition «MOESK torily and voluntarily disclosed information News» were published in 2010. There is also a in on-line mode with the purpose to ensure JSC «MOESK» internal website (intranet por- the maximum transparency of the Company. tal) operating in the Company, a number of 136 The new version of the website uses an ex- corporate contests were held, an information tensive toolbox for communication with cli- support of sports events held in the Company ents and business community, among which and the JSC «IDGC Holding» was organized. is a well-proven and time-proved feedback The internal target audience of the Com- channel between consumers of services pro- pany consists of not only its employees, but vided by the JSC «MOESK» and its manage- also of veterans of the industry. Information ment – a web waiting room of the General about activities of the Board of Veterans, as Director. well as information about veterans of electri- First electronic visit to the web waiting cal energy industry is regularly published in room took place on 16 February 2009. About the mass media. 1900 messages have been received over the The JSC «MOESK» took an active part in entire period of its operation. the historical and memorial event «Relay of This is indicative of the fact that the web the Banner of Victory» organized by the JSC waiting room has gained acceptance among «IDGC Holding». For the veterans of branches the Company's clients and reached the status and the Company's executive body, celebra- of a reliable communication channel. tions devoted to the transfer of a precise rep- There is an important channel for commu- lica of the official symbol of the Victory in nication of the JSC «MOESK» with custom- the Great Patriotic War were organized. ers, the 24/7 Light Line. Power consumers of ACTIVITY AND EXHIBITIONAL CONGRESSIONAL «Labor SafetyinMoscow»,«TheBestto gion—2010», «KindElectricity»seminar, categories ofpublic,suchas:«MoscowRe- took partinevents meantforthebroad investment community, theJSC«MOESK» ment were presented. ing itscoursetowards renovation ofequip- technological development trends determin- Networks ofRussia-2010»,where Company's cow RegioninLeningradRegion»,«Electric of Research andProduction ComplexofMos- «CABEX-2010», «SAPE-2010»,«Presentation hibitions ofelectricalandpower equipment responsibility andclientservice. ing tothemaximumdevelopment ofsocial road ofinnovation development andadher- pany inRussiaandEurope, goingalongthe transparent distributionelectric gridcom- expert communityandpresented asalargest introduced tointernationalinvestment and During theseevents, theJSC«MOESK»was International Forum «Energy oftheFuture». burg», «WEC2010(World Energy Congress)», «International EconomicForum inSt.Peters- and Power SectorofRussiainXXIcentury», in internationalstatusevents suchas:«Fuel categories ofpublic.TheCompanytookpart manufacturers, representatives ofdifferent research institutes,electricalequipment ties withinvestment community, leading power industry. tions, investment forumsfortheelectrical largest internationalandall-Russianexhibi- activity. tralized itscongressional andexhibitional mestic power market,theCompanyhascen- image ofJSC«MOESK»intheworld anddo- able conditionsforstrengthening thebrand PUBLIC RELATIONS, RELATIONS WITHPUBLICAUTHORITIES Apart from research andtechnology The Companytookpartinspecializedex- The JSC«MOESK»maintainsbusiness In 2010,theCompanytookpartin12 For theconvenience ofcreating favor- AND CONGRESSEXHIBITIONACTIVITY specialists from Germany. ence withparticipationofpower industry took partinaresearch-to-practice confer- andapartfrom that,theJSC«MOESK» sector, French representatives oftheelectricpower were heldin2010withKorean, Japaneseand power facilitiesoperatinginMoscowRegion eration, working meetingsonthebaseof consumption intheMoscowRegion. non-metered andnon-contractualenergy JSC «MOESK»inrespect ofidentification formed ofthework beingcarriedoutbythe media andthepublicwere operatively in- Yu.M. LuzhkovandS.S.Sobyanin. former andthecurrent Mayors ofMoscow, cow RegionB.V. Gromov, aswell asbythe edly emphasizedbytheGovernor oftheMos- holding classesineducationalinstitutions. mary andmiddleschoolagewere created for rules ofelectricalsafetyforchildren ofpri- Flash-cartoons demonstratingelementary on subjectofelectricalsafetywasensured. essary printmediaandsouvenir materials than 10thousandpeople.Anissueofnec- for children, withatotalcoverage ofmore tional institutions,placesofpackageholiday more than 200preschool andschooleduca- event, electricalsafetyclasseswere heldin electrical injuries.Withinthescopeof for children aimedatprevention ofchildren's held inschoolsandpreschool institutions Holidays» event, preventive classeswere ity andorientednesstothefinalconsumer. phasizes theCompany'ssocialresponsibil- and life,participationinsuchevents em- by thefactorsofanincreased risktohealth activity oftheJSC«MOESK»isaccompanied Children» exhibition.Sincetheday-to-day Within thescopeofinternationalcoop- During the«Fair Kilowatt»event, mass Importance oftheseevents wasrepeat- In courseofthe«KindElectricity—Safe 9 137

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

138 MEASUREMENT: UNITS OF USED INTHETEXT: ABBREVIATIONS 2004) System ofRussia branch oftheJSC«SO-CDOUES» GLOSSARY OFBASIC NOTIONSANDABBREVIATIONS MWt/h: megawatt-hourastheelectricpower measurement unit kWt/h: kilowatt-hourastheelectricpower measurement unit MVA: megavolt-ampere asthefulltransformingpower measurement unit kVA: kilovolt-ampere asthefulltransforming power measurement unit MWt: megawattasthepower measurement unit kV: kilovolt asthevoltage measurement unit CTC: centraltendercommittee FTS: Federal Tariff Service FSFM: Federal ServiceforFinancialMarkets FGC UESofRussia:Federal GridCompanyoftheUnifiedEnergy SystemofRussia FCSM: Federal CommitteeforSecuritiesMarket(transformed intoFSFMofRussiainAugust HPP: heatpower plant TGO: territorialgridorganization TUaR: technicalupgradingandreconstruction TS: transformingsubstation6-10/0.4kV SO-CDO UESofRussia:SystemOperator—CentralDispatchingOfficetheUnifiedEnergy MSM: masscommunicationmedia RETO: JSC«Plantforrepairing electrotechnical equipment» REC: RegionalEnergy Committee RTS: RussianTrading System RPAE: relay protection andautomaticequipment SS: substationwiththevoltage of35kVand higher PTC: permanenttendercommittee LCR: large-scale consumers—resellers ODS: on-linedispatcherservice WGC: wholesalegenerationcompany MEC: mobileemergency crew R&D: research anddevelopment MUE: municipalunitaryenterprise Moscow RDO:RegionalDispatchingOfficeofCityandRegionpower systemasthe MICEX: MoscowInterbankCurrency Exchange MKER: JSC«Moskabelenergoremont» MKSM: JSC«Moskabelsetmontazh» PTL: power transmissionline KPI: keyperformanceindicators CL: cableline CDMS: corporative datamanagementsystem UNEG: UnifiedNational(All-Russian)ElectricGrid AAC: affiliatedandassociatedcompanies HPS: hydroelectric power station SRPS: stateregional power station(historicalname) ACPP: annualcomplexpurchasing program AL: aerialline AS FEM:automatedsystemoffinancialandeconomicmanagement ATPCS: automatedtechnologyprocess control systems ADMC CMEP:automateddatametricalsystemsforcommercial meteringofelectricpower Abbreviations usedinthetext: GLOSSARY 139

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

140 ACCOUNTING BALANCESHEETAS OF31DECEMBER2010 APPENDIX 1. purchasers andcustomers including: months afterreporting date) Accounts receivable (payments are expectedinmore than12 eerdepniue 1 7 7 2819605 3772178 BALANCE (sum oflines 216 5728 Total forthesectionII Other circulating assets 2640 Cash assets Short-term financialinvestments 214 purchasers andcustomers including: after reporting date) Accounts receivable (payments are expectedwithin12months Value addedtaxforacquired values deferred expenditures finished products andgoodsforresale stock, materialsandothersimilarvalues including: Reserves II. Circulating assets Total forthesectionI Deferred taxassets Long-term financialinvestments Construction inprogress Fixed assets I. Non-circulating assets (RFRS) TO THERUSSIANFINANCIALREPORTINGSTANDARDS FINANCIAL STATEMENTS FOR2010PREPARED ACCORDING 190 +290) ASSET 1234 APPENDIXES indicator Code of 0 5 3 6 245236212 250633660 300 9 6595262789001 76509532 290 7 190 0 1 108030 0 4844580 270 9 245200 2968747 106913 260 6573051 23661064 250 33037744 241 240 33034733 61114 29159381 231 307796 230 220 2098537 4923870 2416466 6191284 211 210 790446 182447211 174124128 4186 583386 190 3685697 27894491 145 36678074 149576088 140 133176971 130 120 beginning reporting As ofthe of the year thousand Rubles end ofthe reporting As ofthe period 141141

MOESK ANNUAL REPORT 2010 1 MOSCOW UNITED ELECTRIC GRID COMPANY

thousand Rubles

Code of As of the beginning As of the end of the LIABILITIES indicator of the reporting year reporting period

1234 III. Capital and reserves Registered capital 410 24 353 546 24 353 546 Additional capital 420 63 720 537 63 670 978 Reserve capital 430 810 513 1 126 439 including: reserve funds established pursuant to the 431 810 513 1 126 439 legislation

Undistributed profits (uncovered loss) 470 30 792 331 45 699 793

Total for the section III 490 119 676 927 134 850 756 IV. Long-term obligations Loans and credits 510 13 962 190 26 724 540 Deferred tax liabilities 515 1 675 709 2 593 010 142 Other long-term obligations 520 21 786 335 10 672 309

Total for the section IV 590 37 424 234 39 989 859 V. Short-term obligations Loans and credits 610 26 797 543 4 603 031 Accounts payable 620 64 281 805 62 623 459 including: providers and contractors 621 10 997 114 12 269 634 payables to personnel of the organization 622 1 621 9 202

payables to state non-budgetary funds 623 115 3 527

taxes and dues payable 624 261 951 601 880 other creditors 625 53 021 004 49 739 216

Revenues payable to members (founders) 630 2 483

Deferred revenues 640 2 450 668 3 169 107

Total for the section V 690 93 532 499 70 395 597 BALANCE (sum of lines 490 + 590 + 690) 700 250 633 660 245 236 212 PROFIT ANDLOSS STATEMENT FORTHEPERIODFROMJANUARY THROUGHDECEMBER 2010 eurn a iblte ast)20143791742999 -13365 -3338810 1493729 -5062219 -704580 281672 328 200 150 -917300 207059 180 11151999 -13584886 142 141 5580774 -7085520 -3663643 339078 090 -2696074 100 200787 070 060 Recurrent taxliabilities(assets) 029 FOR REFERENCEONLY: 050 Net profit (loss) overthereporting period Other compulsorypayments Current profit tax Deferred taxliabilities Deferred taxassets Profit (loss)before taxation Other expenditures -69381805 Other receipts -85240359 Interest payable 020 Interest receivable Profit (loss)onsales Gross profit 23703 549 Self-cost ofsoldgoods,products, works andservices of value addedtax,excisetaxesandsimilarcompulsorypayments) 25552 (Net) proceeds from sellinggoods,products, works andservices(net 38660871 529 2890 76711715 39135192 940 66330563 5355 970 911 910 950 Deterioration ofhousingfacilities Secured obligationsandpayments received Bad debtwrite-off including onleasing Leased fixedassets REFERENCE INFORMATION aboutavailabilityof valuesincludedinoffbalancesheetaccounts Receipts andexpenditures onordinary typesofactivities ecito code description 1234 Indicator Other receipts andexpenditures APPENDIXES 190 140 85232848 110634049 010 1336710093591 21 393657 15851043 25 393690 15851043 25 393690 561556318508 15 621525 reporting For the period thousand Rubles thousand Rubles previous year period inthe For thesame 143

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

BREAKDOWN OF PARTICULAR PROFITS AND LOSSES thousand Rubles For the same period in the For the reporting period Indicator previous year description code profit loss profit loss 1 23456 Fines, penalties and forfeits recognized or to be collected subject to any court judgments 210 65 472 20 770 16 803 10 620 (arbitration awards)

Profit (loss) from previous years 220 -17 769 108 846 30 208 150 906

Reparation of losses caused by non-performance 230 69 434 365 74 059 2 659 or unduly performance of obligations

Exchange differences in foreign currency 240 625 004 617 502 5 815 116 5 819 910 transactions

Allocation to allowances 250 Х 308 685 Х 286 395

Depreciation of receivables and payables with 260 7 385 576 6 895 15 866 expired limitation period

144 STATEMENT ON CHANGES IN EQUITY FOR 2010 thousand Rubles

Undistributed Registered Additional Reserve code profits (uncov- Indicator description capital capital capital Total ered loss)

1234567 Balance as of December 31 of the year before previous 010 24 349 748 36 243 169 695 356 24 400 180 85 688 453 year 2009 (previous year) Changes in accounting 011 х х х – – policy

Results of fixed asset items 012 х 27 532 285 х – 27 532 285 revaluation

Changes in the accounting 013 х – х 133 883 133 883 rules

Balance as of January 01 of 020 24 349 748 63 775 454 695 356 24 534 063 113 354 621 the previous year

Results of foreign currencies 023 х – х х – revaluation

Net profit 025 х х х 6 318 508 6 318 508 Dividends 026 х х х – –

Allocation to reserve fund 030 х х 115 157 (115 157) – te 5 9 5 1) 5 1 3798 54917 – – х (54917) 3798 054 х – – – – х the previous year Balance asofJanuary01 х – other – entity reorganization oflegal 044 052 х decreasing numberofshares shares decreasing nominalvalue of way of: х Decrease incapitalizationby other entity – reorganization oflegal shares 041 increasing nominalvalue of issuing additionalshares way of: Increase in capitalizationby sun diinlsae 2 ххх– х (450000) 15621525 (450000) – 15621525 х х х (315926) х 315926 х х – х х 121 х 106 issuing additionalshares х 105 way of: Increase incapitalizationby 110 Allocation toreserve fund Dividends Net profit revaluation Results offoreign currencies the reporting year Balance asofJanuary01 rules Changes intheaccounting revaluation Results offixedassetitems policy Changes inaccounting Indicator description 1234567 code 5 – – – – 3798 х х 63 24353546 54917 060 х –х х – – – 053 –х х (54917) х 051 3798 х 050 –х – 043 042 – – – – 040 2 –– 0 2304 2304 – – – х – – х – – 120 0 – х х х – х 103 720 63 – 24353546 100 х х х 063 х 062 061 Registered capital 2010 (reporting year) Additional capital 2 3 1 1 3 9 3 119676927 30792331 810513 720 537 3 1 1 3 9 3 119676927 30792331 810513 537 APPENDIXES Reserve capital profits (uncovered Undistributed loss) Total 145

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Undistributed Registered Additional Reserve code profits (uncovered Indicator description capital capital capital Total loss)

1234567 increasing nominal value of 122 – х х х – shares

reorganization of legal 123 – х х – – entity

other 124 – – – 2 304 2 304

Decrease in capitalization by 130 – (49 559) – 49 559 – way of: decreasing nominal value of 131 – х х х – shares

decreasing number of shares 132 – х х х –

reorganization of legal 133 – х х – – entity other 134 – (49 559) – 49 559 –

Balance as of December 31 146 140 24 353 546 63 670 978 1 126 439 45 699 793 134 850 756 of the reporting year

RESERVES thousand Rubles

Indicator Balance Received Used Balance description code 1 23456 Reserves generated according to legislation: data of the previous year 150 695 356 115 157 – 810 513 data of the reporting year 151 810 513 315 926 – 1 126 439

Reserves generated according to constitutive documents: data of the previous year 152 – – – – data of the reporting year 153 – – – –

Allowances: doubtful debt allowance data of the previous year 160 – – – – data of the reporting year 161 – 340 427 – 340 427 aao h rvosya 8 – – – – – – – – – – – – – – – – – – – – 189 – – – 188 – – – – – 187 data oftheprevious year – – 186 – data oftheprevious year – – – – – other 185 data ofthereporting year – 184 – data oftheprevious year – – – – – – allowance forrepairs offixedassets 183 data ofthereporting year 182 – data oftheprevious – year – – – – allowance forannuallong-servicebonuses – – 181 data ofthereporting year 180 data oftheprevious year – – – – – allowance forvacationbonuses(includingallocation) – – – data ofthereporting year 171 data oftheprevious year – – 170 – – allowance forendofyear bonuses – – 169 data ofthereporting year 286395 168 – – data oftheprevious year – 254653 – other 167 – data ofthereporting year 166 – – data oftheprevious year – allowance fordepreciation oftangibleassets 286395 165 data ofthereporting year (31742) 164 data oftheprevious year 286395 – allowance generatedinviewofconsequencescontingency 163 data ofthereporting year 162 data oftheprevious year allowance forliabilitiesoriginatingfrom terminationofactivity data ofthereporting year data oftheprevious year allowance fordepreciation offinancialinvestments ecito code description Indicator 23456 1 Allowance forfuture expenditures: aac eevdUe Balance Used Received Balance APPENDIXES 147

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

REFERENCE INFORMATION thousand Rubles

Balance as of the beginning of Balance as of the end of the code Indicator description the year year 123 4 1) Net assets 200 122 127 595 138 019 863 From the budget From non-budgetary funds for the for the for the for the reporting year previous year reporting year previous year 345 6

2) Received for expenditures on ordi- 210 – – – – nary types of activity – total including: for payments to Chernobyl cleanup 211 – – – – veterans 212 – – – – capital investments in non-circulating 220 – – – – assets including: 221 – – – – 148 222 – – – –

CASH FLOW STATEMENT FOR 2010 thousand Rubles

For the reporting For the same period in code Indicator description period the previous year

1234 Balance of cash assets as of the beginning of the 010 4 844 580 5 195 924 reporting year Cash flow from the current Money received from purchasers and customers 020 116 289 832 99 593 053 Purchased foreign currency 030 1 450 2 255 Other revenues (receipts) 050 11 491 210 6 509 828

Cash assets directed for: payment for purchased goods, works, services, raw 150 (63 274 955) (47 907 680) materials and other circulating assets

remuneration of labor 160 (8 466 036) (7 172 504) repayment of dividends, interest 170 (3 165 272) (3 565 066) settlements on taxes and dues 180 (11 976 194) (8 738 624) other expenditures (payments) 190 (10 465 018) (3 636 540)

Net cash assets from the current activity 200 30 435 017 35 084 722 te xedtrs45–– – – (13 584317) (9200935) – – 405 (14802949) (8490035) 380 foreign currency andRuble 410 Effect ofchangesintheexchange tariffbetween the 400 – (3768) period Balance ofcashassetsas theendofreporting (13083382) lents Net increase (decrease) ofcashassetsandtheirequiva- 370 (40256484) – Net cashassetsfrom financialactivity – – 390 Other expenditures – Repayment onfinanciallease (21851749) Repayment ofloansandcredits (withoutinterest) 320 Other revenues – – (19368619) Receipts from target financing – – – 94348 nizations 340 Receipts from loansandcredits provided byother orga- 350 Receipts from issueofshares andotherequitysecurities 310 (4143000) 260 – 59361 Net cashassetsfrom investment activity – (452407) Other expenditures 280 240 Loans provided tootherorganizations 230 300 Acquisition ofsecuritiesandotherfinancialinvestments and intangibleassets Acquisition offixedassetitems,profitable investments Acquisition ofaffiliatedcompanies Other receipts organizations Receipts from repayment ofloansprovided toother Received interest Received dividends investments Revenue from salesofsecuritiesandotherfinancial circulating assets Revenue from salesoffixedassetitemsandothernon- Indicator description 1234 Cash flowfrom investmentactivity Cash flowfrom financialactivity code 3 0 2 4844580 19 209 (351344) 1108029 440 (3736551) 430 420 8700000 33943570 360 (17883557) (18975573) 290 – 84228 250 – – 220 210 APPENDIXES For thereporting period For thesameperiodin the previous year 149

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

APPENDIX TO THE ACCOUNTING BALANCE SHEET FOR 2010

INTANGIBLE ASSETS thousand Rubles

Availability Availability Indicator as of the as of the beginning of Received Retired end of the the reporting reporting description code year period 123456

Intellectual property items (exclusive rights 010 – – – – on results of the intellectual property)

including: patent holder's right to invention, industrial 011 – – – – design, useful model

possessor of right's right to software, databases 012 – – – –

owner's right to trademark and service mark, ap- 014 – – – – pellation of origin of goods

150 Goodwill of the organization 030 – – – – Other 040 – – – – TOTAL 045 – – – –

thousand Rubles

Indicator As of the As of the end of beginning of the the reporting description code reporting year period 1234 Depreciation of intangible assets – total 050 – –

FIXED ASSETS thousand Rubles

Availability as Availability as Indicator of the begin- of the end of Received Retired ning of the the reporting description code reporting year period 1 23456 Buildings 110 11 466 570 1 899 809 (773) 13 365 606 Structures and transfer 111 52 759 395 11 196 627 (84 771) 63 871 251 mechanisms

Machinery and equipment 112 110 392 604 15 106 913 (113 105) 125 386 412

Vehicles 113 517 139 457 497 (8 053) 966 583 Production and household 114 – – – – equipment te 6 88285 33689501 48822895 163 710786 – 42304 242 – 2334699 76704 529 15172969 – – 161 – 84660 153 – 162 66330563 under stateregistration – 156 Real estateitemsacceptedfor operationandbeing 66235 151 160 – – other machinery, equipmentandvehicles 143 buildings andstructures 9088702 152 155 – 45054 057 Fixed assetstakenforlease–total 6071575 Fixed assetitemstransferred forpreservation other 35993256 150 machinery, 141 equipmentandvehicles structures 142 buildings Fixed assetitemsleasedout–total other machinery, equipmentandvehicles buildings andstructures ercaino ie ses–ttl104 3 6 54227 419 42131066 140 Depreciation offixedassets – total eena rwn tc 1 – – 201834 (2659) – 41495 162998 – TOTAL reclamation Capital investments inland 118 117 environmental management – – – – Land plotsanditemsof Other typesoffixedassets Perennial growing stock 115 116 Producing Draft livestock livestock ecito code description 23456 1 Indicator ecito code description 1234 Indicator 1 3 240 – 11821 – – – 175308037 2490 – 130 9331 120 119 reporting year Availability as of thebeginning ofthe including: including: including: 6 690 3057331 56910 165

APPENDIXES As ofthebeginning the reporting year 28 704831 eevdRetired Received

(209 361) As oftheend reporting period

huadRubles thousand Rubles of thereport- as oftheend 203 803507 Availability ing period

151

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

thousand Rubles

As of the beginning of As of the end of the code For reference only the reporting year reporting period 23 4

Results of fixed asset items revaluation: 170 – 27 532 285

historical (replacement) cost 171 – 41 001 514 depreciation 172 – 13 469 229 As of the beginning of As of the end of the code the reporting year reporting period 23 4 Changes in value of fixed asset items resulting from additional construction works, equipping, recon- 180 9 360 108 9 492 946 struction and partial liquidation

INTEREST-BEARING INVESTMENTS IN TANGIBLE ASSETS thousand Rubles

Indicator Availability as of Availability as the beginning of the end of Received Retired of the reporting the reporting description code year period 123456 152 Property to be leased 210 - - – –

Property given under lease agreements 220 - - – –

Other 230 - - – – TOTAL 240 - - – – As of the begin- As of the end code ning of the of the report- reporting year ing period 1234 Depreciation of interest-bearing investments 250 - - in tangible assets

EXPENDITURES ON RESEARCH, DEVELOPMENT AND TECHNOLOGICAL WORKS thousand Rubles

Availabil- Availability as ity as of the Types of works of the end of beginning of Received Written off the reporting the report- period description code ing year 123456 Total 310 – – – – including: 311 – – –– 312 – – –– 313 – –– – EXPENDITURES ONRESOURCEDEVELOPMENT unproductive to miscellaneousexpenditures as work charged inthereporting period Expenditures onresource development – activities have yet tobecompleted groundwater survey andothersimilar sessment ofwells, explorationand(or) – resources where prospecting and as- Expenditures onareas withmineral – – – – – – 413 412 – 411 – – total Expenditures onresource development – – miscellaneous expenditures technological works withnegative results, charged to Expenditures onresearch, development and and technologicalworks inprogress Expenditures onresearch, development For reference only For reference only ecito code description 123456 Indicator 1 – – – 410 including: the beginning of thereport- Balance asof ing period code 3 – – – – 430 420 code 2 – – 320 234 234 APPENDIXES code 3 – 330 234 eevdWritten off Received beginning of the report- reporting As ofthe beginning ing year reporting As ofthe For the period of the year thousand Rubles of thereport- previous year As oftheend period ofthe For thesame the reporting of theend Balance as end ofthe reporting ing year As ofthe period period 153

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

FINANCIAL INVESTMENTS thousand Rubles

Indicator Long-term Short-term as of the as of the beginning as of the beginning as of the description code of the end of the of the end of the reporting reporting reporting reporting year period year period 1 23456 Contributions to registered (reserve) capitals of 510 3 685 697 3 717 439 – – other organizations – total

including affiliated and associated companies 511 3 685 697 3 717 439 – –

Government and municipal securities 515 – – – –

Securities issued by other companies – total 520 – 468 747 2 968 747 –

including debt securities (bonds, bills of 521 – 468 747 2 968 747 – exchange) Loans granted 525 – – – – Deposits 530 – – – – 154 Other 535 – – – –

TOTAL 540 3 685 697 4 186 186 2 968 747 –

Financial investments with current market value, ex total amount: 550 – – – – Contributions to registered (reserve) capitals of other organizations – total

including affiliated and associated companies 551 – – – –

Government and municipal securities 555 – – – –

Securities issued by other companies – total 560 – – – –

including debt securities (bonds, bills of 561 – – – – exchange) Other 565 – – – –

TOTAL 570 – – – –

For reference only. 580 – – – –

For financial investments with current market value, changes in the cost resulting from valua- 590 – – – – tion adjustment ACCOUNTS PAYABLE ANDRECEIVABLE TOTAL TOTAL on 5 5 0 – 10672309 21786335 26724540 2356507 11605683 – 655 654 1772711 3847519 653 37396849 – – 14098775 755512 59251 35748525 26738292 – 646 652 645 47979234 650 – 601880 644 other 38923965 loans 261951 651 credits – settlements ontaxesanddues 642 settlements withproviders andcontractors 12269634 32927820 643 10997114 long-term –total 12394279 29159381 623 other 33034733 21453499 loans 106913 credits 2021585 29159381 641 622 settlements ontaxesanddues advances received 5011194 613 – settlements withproviders andcontractors 620 short-term –total Accounts payable: 612 9245200 621 other 6573051 advances granted settlements withpurchasers andcustomers long-term –total 611 other advances granted settlements withpurchasers andcustomers short-term –total Accounts receivable: ecito code description 1234 Indicator including: including: including: including: 6 126827873 660 67226490 91079348 62197125 640 630 23661064 33037744 610 APPENDIXES Balance asofthe beginning ofthe reporting year

thousand Rubles reporting year the endof Balance asof 104 623339 56 695797

155

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

EXPENDITURES ON ORDINARY TYPES OF ACTIVITY (BY ITEMS OF EXPENDITURES) thousand Rubles

Indicator For the reporting For the previous year year description code 1234 Material expenditures 710 1 500 906 1 658 083 Labor remuneration expenditures 720 8 730 296 7 515 443 Fringe benefit expenditures 730 1 523 611 1 357 480 Depreciation 740 12 160 210 11 046 905 Other expenditures 750 61 325 336 47 803 894 Total for items of expenditures 760 85 240 359 69 381 805 Change in balances (increase +, decrease -): production in progress 765 – – deferred expenditures 766 (952 573) (342 439) reserves for future expenditures 767 – –

COLLATERALS thousand Rubles 156 Indicator Balance as of the Balance as of the beginning of the end of the reporting description code reporting year period 1234 Received – total 810 5 355 2 890 including: bills of exchange 811 – – Mortgaged property 820 5 355 2 890 wherefrom: – 821 items of fixed assets –

securities and other financial investments 822 – –

other 823 5 355 2 890

Granted – total 830 – – including: bills of exchange 831 – – Property pledged 840 – – wherefrom: – 841 items of fixed assets –

securities and other financial investments 842 – –

other 843 – – 1. OVERVIEW GOVERNMENT AID 1 – – – – 912 911 reporting year –total Budget fundsreceived inthe 2 – – – – – – – – – – – 922 921 – – 920 Budgetary credits –total EXPLANATORY NOTETO THEACCOUNTING REPORTSFOR2010 ecito code description 234 3 12 Indicator Company. the private joint-stockcompany«NPConsult» wasappointedasanAuditorofthe United ElectricGridCompany» dated30June2010(minuteNo.9of02.07.2010), with thenominalvalue of0.50Ruble. seven hundred seven millionninetyonethousandfive hundred seventy four)shares dred eightyseven) Rubles,numberofshares is48707091574(fortyeightbillion billion three hundred fiftythree millionfive hundred fortyfive thousandseven hun- BBasic typesofactivitytheJSC«MOESK»are: nel oftheJSC«MOESK»as31December2010madeup15780people. holders oftheJSC«Mosenergo» (minuteNo.1of29June2004).Number ofperson- way ofspin-offbasedontheresolution adoptedontheannualmeetingofshare- DDate andnumberofstateregistration: LLegal address: SShort name: FFull name: h u e a a By theresolution oftheGeneralMeetingshareholders oftheJSC«Moscow As of31.12.2010,theregistered capitalmakesup24353545787(twenty four JSC «MOESK»wascreated asaresult ofreorganization oftheJSC«Mosenergo» by g l s o t l e i – othertypesofactivitynotforbiddenbythelegislation oftheRF. ones, – addingnewconsumers'capacitiestothepower gridand expanding existing City andMoscowRegion, – rendering servicesontransmissionanddistributionofelectricpower inMoscow a r

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a r e : For thesameperiodofprevious returned over the reporting period year thousand Rubles as oftheend the reporting period 157

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

The PJSC «NP Consult» is a member of the Non-commercial Partnership «Institute of Professional Auditors» (IPAR), a self-regulated auditors' organization, and the So- ciety of Appraisers, as well as a Member of the International Union of Tariff Experts. The meeting of the Company's Management Board held on 08 October 2007 (minute No. 13 of 08.10.2007) adopted a resolution to consolidate the following Company's branches: Northern Electric Networks (on the base of the branches Okyabrskiye Elec- tric Networks and Dmitrovskiye Electric Networks), Southern Electric Networks (on the base of the branches Podolskiye Electric Networks and Kashirskiye Electric Net- works), Western Electric Networks (on the base of the branches Mozhayskiye Electric Networks and Volokolamskiye Electric Networks), Eastern Electric Networks (on the base of the branches Noginskiye Electric Networks, Kolomenskiye Electric Networks, and Shaturskiye Electric Networks). According to the resolution of the Board of Di- rectors of the JSC «MOESK» dated 02 November 2007 (Minute No. 51 of 07.11.2007), branches of the JSC «Moscow United Electric Grid Company» were liquidated, on base of which the Company's branches are to be enlarged. By the resolution of the Board of Directors of the JSC «MOESK» dated 26 February 2008 (Minute No. 56 of 27 Febru- ary 2008), amendments were entered into the Articles of Association, according to which the structure of enlarged branches of the JSC «MOESK» was secured. By virtue of the resolution by the extraordinary General Meeting of shareholders of the JSC «MOESK» (hereinafter referred to as the Company) dated 18.04.2008 (Minute No. 6 of 28.04.2008), the Company was reorganized by way of accession of the Open Joint-Stock Company «Moscow City Electric Grid Company» thereto (hereinafter referred to as the JSC «MGEsK»). Pursuant to the transfer act approved by the extraordinary General Meeting of shareholders of the JSC «MGEsK» dated 18.04.2008 158 (Minute No. 1 of 28.04.2008), from the moment an entry is made in the Uniform State Register of Legal Entities about discontinuation of activities by the JSC «MGEsK», the Company shall be the legal successor in respect of all their rights and obligations. Pursuant to the resolution by the Board of Directors of the JSC «MOESK» dated 29 April 2008 (Minute No. 61 of 04.05.2008), a branch of the OJSC «Moscow United Electric Grid Company»—Moscow Cable Networks—was created on the base of the Company (JSC «MGEsK») being accessed to the JSC «MOESK».

In connection with changes that happened to the structure of the JSC «MOESK» in 2007-2008, the JSC «MOESK» has the following 7 branches as of 31.12.2010: 11.. SSouthernouthern EElectriclectric NNetworksetworks 22.. EEasternastern EElectriclectric NNetworksetworks 33.. NNorthernorthern EElectriclectric NNetworksetworks 44.. WWesternestern EElectriclectric NNetworksetworks 55.. HHigh-Voltageigh-Voltage CCableable NNetworksetworks 66.. CCentralentral EElectriclectric NNetworksetworks 77.. MMoscowoscow CCableable NNetworks.etworks. Pursuant to the resolutions by the Company's Board of Directors dated 07.12.2007 (Minute No. 53 of 07.12.2007) and by the Company's Management Board dated 07.12.2007 (Minute No. 19/1 of 07.12.2008 ), the JSC «MOESK» established the following three affiliated companies in December 2007 on the base of the property of repairs and service branches: the JSC «MKSM», the JSC «RETO Plant», and the JSC «MKER», with the 100% of participatory interest as a shareholder in the registered capital of the each specified company. On 29.12.2007, the Interregional Inspection of the Federal Tax Service No. 46 for the city of Moscow has made an entry in the Uniform State Register of Legal Enti- ties about incorporation of the Open Joint-Stock Company «Moskabelmontazh», the Open Join-Stock Company «Plant for repairing electrotechnical equipment», and the Open Join-Stock Company «Moskabelenergoremont». THE BOARD OFDIRECTORS OFTHECOMPANY INCLUDES: LVOVICH DENIS GURYANOV ANATOLYEVICH ANATOLY GAVRILENKO NIKOLAYEVICH NIKOLAY SHVETS FELIKSOVICH ALEXEY BODUNKOV MIKHAYLOVICH SERGEY KERBER VIKTOROVICH YEVGENY SKLYAROV VIKTOROVICH ALEXEY NUZHDOV Full name bles. «A» ofthesecondlevel oftheJSC«RTS». list «A»ofthefirstlevel oftheJSC«MICEXStockExchange»andquotationlist the JSC«RTS»and«MICEXStockExchange»includedintoquotation thereinto upontheaccession. placement ofadditionalshares byway ofconversion oftheshares oftheJSC«MGEsK» tion dated18.04.2008toincrease theregistered capitaloftheJSC«MOESK»through of theJSC«MGEsK»thereto, theshareholders oftheJSC«MOESK»adoptedaresolu- 07.12.2005. on 02.05.2006according totheMoscowRegionGovernment Regulationdated As of31.12.2010,capitalizationtheJSC«MOESK»madeup79343.85mln.Ru- The shares oftheJSC«MOESK»are tradedontheorganized securitiesmarketsof In connectionwiththereorganization oftheJSC«MOESK»byway ofaccession – JSC«MoscowUnitedElectricGridCompany»50%ofshares. – JSC«MoscowRegionalInvestment Trust Company»–50%ofshares; The shareholders are: An associatedOpenJoin-StockCompany«Energocenter» wasincorporated Position intheBoard Member oftheBoard Member oftheBoard Member oftheBoard Member oftheBoard Member oftheBoard Member oftheBoard Board ofDirectors Chairman ofthe of Directors of Directors of Directors of Directors of Directors of Directors of Directors management company) management company) management company) Moscow Government (Pension fundassets (Pension fundassets (Pension fundassets JSC «IDGCHolding» JSC «IDGCHolding» Moscow Region NPF «Gazfond» lc fwr Position asof31.12.2010 Place ofwork JSC «Leader» JSC «Leader» JSC «Leader» Government APPENDIXES Programs –ManagingDirector the DepartmentforCorporate Administration forCorporate General Director Chairmanof Fuel andEnergy Economyof Governance andInteraction Head oftheDepartmentfor First DeputyoftheHead Head oftheDirectorate for Counselor oftheMoscow the MoscowGovernment for Security, Headofthe Investment Projects and Deputy GeneralDirector the ManagementBoard with Shareholders Region Governor General Director Security 159

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Position in the Board Full name Place of work Position as of 31.12.2010 of Directors

POPOV Member of the Board Deputy General Director Chief ALEXANDER JSC «IDGC Holding» of Directors of Staff ALBERTOVICH PETUKHOV Member of the Board Director for Strategy and KONSTANTIN JSC «IDGC Holding» of Directors Development YURYEVICH GRISHCHENKO Deputy Head of the Member of the Board «Gazprombank» (Open SERGEY Department for Direct of Directors Joint-Stock Company) VALENTINOVICH Investments

Managing Director of the SKRIBOT Member of the Board «Gazprombank» (Open Department for Direct WOLFGANG of Directors Joint-Stock Company) Investments

SHULGINOV Member of the Board First Deputy of the Chairman NIKOLAY JSC «SO UPS» of Directors of the Management Board GRIGORYEVICH YURCHUK Member of the Board SERGEY JSC «IDGC Holding» Finance Director of Directors 160 YEVGENYEVICH

THE MANAGEMENT BOARD OF THE COMPANY INCLUDES:

Full name Place of work Position as of 31.12.2010

KONOVALOV JSC «Moscow United Electric Grid General Director ANDREY PAVLOVICH Company»

BULANOVA JSC «Moscow United Electric Grid Deputy General Director for OLGA LEONIDOVNA Company» Economy and Finance,

Deputy General Director for KRUPIN JSC «Moscow United Electric Grid Technological Connections in MIKHAIL LVOVICH Company» Moscow

KUZNETSOV JSC «Moscow United Electric Grid Deputy General Director for DAVID FELIKSOVICH Company» Special Projects

MARAKIN JSC «Moscow United Electric Grid Deputy General Director for YURI VADIMOVICH Company» Security VOLKENSHTEYN GRIGORY YAKOVLEVICH

CHEGODAYEV JSC «Moscow United Electric Grid Deputy General Director – ANATOLY VASILYEVICH Company» Technical Director THE CHECK-UPCOMMITTEEINCLUDES: POLICY 2. ACCOUNTING ALEXANDROVNA IRINA FILIPPOVA NIKOLAYEVICH VLADIMIR ARKHIPOV MIKHAYLOVICH MAXIM SAUKH DMITRIEVNA LYUDMILA KORMUSHKINA ALIGADZHIEVNA IZUMRUD ALIMURADOVA Full name 43n; approved bytheorder oftheMinistryFinance ofRussiadated06.07.1999No. of FinanceRussiadated 27.11.2006No.154n; of whichisdenominatedin foreign currency», approved bytheorder oftheMinistry dated 24.10.2008,No.116n; capital construction»,approved bytheorder oftheMinistryFinance ofRussia by theorder oftheMinistryFinanceRussiadated 06.10.2008No.106n; approved bytheorder oftheMinistryFinanceRussiadated29.07.1998 No.34n; applicable intheRussianFederation, particularly: for accountingandfinancialstatementsinrespect ofbookkeepingandtaxation 22.1. Regulatorybackground explanatory note. Director No.823of30.12.2009. period inrespect ofbookkeepingandtaxation,approved bytheorder oftheGeneral . 1 Provision on accounting No.4/99«Financialstatementsofthe organization», Provision onaccountingNo.3/2006«Accountingofassetsandliabilitiesthevalue Provision onaccountingNo.2/2008«Accountingofagreements (contracts)on Provision onaccountingNo.1/2008«Accountingpolicyofanenterprise»,approved Provision onaccountingandfinancialstatementsintheRussianFederation, Federal Lawof21.11.1996No.129-FZ«Onaccounting»; The accountingstatementsoftheCompanyhave beencreated basedontherules The accountingpolicyinrespect ofbookkeepingandtaxationisattachedtothe There wasanaccountingpolicybeinginforce intheCompanywithinreporting .

R Check-up Committee Check-up Committee Check-up Committee Check-up Committee Check-up Committee Check-up Committee e g Chairman ofthe Position inthe Member ofthe Member ofthe Member ofthe Member ofthe u l a t o r y

b a c k g r o u n d JSC «IDGCHolding» JSC «IDGCHolding» JSC «IDGCHolding» JSC «IDGCHolding» JSC «IDGCHolding» lc fwr Position asof31.12.2010 Place ofwork APPENDIXES Realization ofAuditunderthe Department forInternalAudit Department forInternalAudit Organization andRealization Section forOrganization and Governance andInteraction First DeputyoftheHead for InternalAuditandRisk Deputy oftheHead Department forCorporate the SecurityDepartment Head oftheDepartment Head oftheSectionfor Leading Expertofthe of Auditunderthe with Shareholders Management 161

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Provision on accounting No. 5/01 «Accounting of inventories», approved by the order of the Ministry of Finance of Russia dated 09.06.2001 No. 44n; Provision on accounting No. 6/01 «Accounting of fixed assets», approved by the order of the Ministry of Finance of Russia dated 30.03.2001 No. 26n; Provision on accounting No. 7/98 «Events after the reporting date», approved by the order of the Ministry of Finance of Russia dated 25.11.1998 No. 56n; Provision on accounting No. 8/01 «Conditional facts of financial and economic activity», approved by the order of the Ministry of Finance of Russia dated 28.11.2001 No. 96n; Provision on accounting No. 9/99 «Income of an enterprise», approved by the order of the Ministry of Finance of Russia dated 06.05.1999 No. 32n; Provision on accounting No. 10/99 «Expenditures of an enterprise», approved by the order of the Ministry of Finance of Russia dated 06.05.1999 No. 33n; Provision on accounting No. 11/2008 «Information about affiliated persons», approved by the order of the Ministry of Finance of Russia dated 29.04.2008 No. 48n; Provision on accounting No. 12/2010 «Information by segments», approved by the order of the Ministry of Finance of Russia dated 08.11.2010 No. 143n; Provision on accounting No. 13/2000 «Accounting of the government aid», approved by the order of the Ministry of Finance of Russia dated 16.10.2000 No. 92m; Provision on accounting No. 14/2007 «Accounting of intangible assets», approved by the order of the Ministry of Finance of Russia dated 27.12.2007 No. 153n; Provision on accounting No. 15/2008 «Accounting of loans and credits and expenditures on their servicing», approved by the order of the Ministry of Finance of Russia dated 06.10.2008 No. 107n; 162 Provision on accounting No. 16/02 «Information about discontinued activity», approved by the order of the Ministry of Finance of Russia dated 02.07.2002 No.66n; Provision on accounting No. 17/02 «Accounting of expenditures on research, development and design», approved by the order of the Ministry of Finance of Russia dated 19.11.2002 No. 115n; Provision on accounting No. 18/02 «Accounting of settlements on profit tax», approved by the order of the Ministry of Finance of Russia dated 19.11.2002 No. 114n; Provision on accounting No. 19/02 «Accounting of financial investments», approved by the order of the Ministry of Finance of Russia dated 10.12.2002 No. 126n; Provision on accounting No. 20/03 «Information about participation in joint ventures», approved by the order of the Ministry of Finance of Russia dated 24.11.2003 No. 105n; Provision on accounting No. 21/2008 «Changing of estimated values», approved by the order of the Ministry of Finance of Russia dated 06.10.2008 No. 106n; Provision on accounting No. 22/2010 «Rectification of errors in accounting and financial statements», approved by the order of the Ministry of Finance of Russia dated 28.06.2010 No. 63n; other rules (standards) of accounting applicable in Russia. Tax, Labor, Land and other Codes. Assets and liabilities of the Company are evaluated in the statements against actual expenditures on their acquisition.

22.2..2. Short-termShort-term aandnd llong-termong-term aassetsssets

In statements, assets are charged to short-term ones if the term of their circulation does not exceed 12 months from the reporting date, the rest are represented in the statements as long-term ones. 2010. 22.8. Reservesforfuture expenditures between theCompanyandpurchasers/customers. 22.7. Tradereceivables relating to. subject towrite-offforintendedpurposeevenly withintheperiodswhichtheyare relating tothenextreporting periods,are specifiedasdeferred expenditures and 22.6. Deferred expenditures was madein2010basedontheaverage self-cost. 22.5. Inventories specified intheProfit andLossStatementaspartofotherreceipts andexpenditures. assets andtheremaining usefullife. was madeinlinearway inrespect oftypes,from theremaining bookvalue offixed remaining bookvalue whichisthegross bookvalue fortheJSC«MOESK».Depreciation «Mosenergo» asof01.04.2005andfrom theJSC«MGEsK»asof01.07.2008with assets are specifiedwiththeremaining bookvalue. expenditures onacquisition,constructionandmanufacture. Instatements,fixed other relevant itemswiththeservicelifeofmore than12months. 22.4. Fixedassets 22.3. Intangibleassets in whichtheyactuallytook place,irrespective ofactualreceipt ofcashassets. method. According tothismethod,receipts are recognized insuchreporting period are specified intheProfit andLossStatement netofvalue addedtax. purchasers andpresenting settlement documentstothemwasadvancing. Proceeds for thepurposesofaccountingasshippingproducts (orrendering services)tothe 22.9. Recognitionofreceipts ...... 8 7 6 5 4 3 9 There were noreserves forfuture expenditures created bytheJSC«MOESK»in Trade receivables are determinedbasedonthepricesstipulatedinagreements Expenditures incurred bytheCompanyinyear underreport, butnevertheless Evaluation of inventories upontheirrelease into production orotherretirement Inventories are evaluated asthesumofactualexpenditures onacquisition. Receipts andexpenditures from retirement andwrite-offoffixedassetsare There wasnodepreciation inrespect oflandplotsandhousingfacilities. Fixed assetitemswere entered intotheaccountingrecords from theJSC Fixed assetitemsare entered intotheaccountingrecords basedonactual Fixed assetsincludelandplots,buildings,machinery, equipment,vehicles and The JSC«MOESK»doesnothave intangibleassets. For thepurposeoftaxation,receipts are calculatedbytheJSC «MOESK»byaccrual Proceeds from salesofproducts andgoodsrendering serviceswere recognized ......

I R T D F I R n n i r e e e x a v t s c f a e d e e e o n d n e r r g r

v g

t n a r e e o i e s i d b s r t s c

l i

i e e e f e e o o t i x

s n v s a r p

s o f e s b u f n e l

t r e d t u e s s i r c t e e u

i r e p e x t s p s e n d i t u r APPENDIXES e s 163

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

The following is charged to the receipts from ordinary types of activity: – receipts from transportation of electric power; – receipts from rendering services on addition of capacities; – receipts from property let on lease; – receipts from performing installation and construction works.

22.10..10. RecognitionRecognition ofof expendituresexpenditures

Expenditures were entered into the accounting records by amounts calculated in monetary terms, equal to the amount of monetary payment.

The following is charged to the expenditures on ordinary types of activity: – expenditures on transportation of electric power; – expenditures on rendering services on addition of capacities; – expenditures on property let on lease; – expenditures on performing installation and construction works.

22.11..11. ReserveReserve ccapitalapital

The JSC «MOESK» is creating a reserve capital meant for coverage of losses which, while not defined exactly, can still take place in economic circularization. The reserve capital is created on account of net profits of the JSC «MOESK».

22.12..12. SupplementSupplement toto tthehe aaccountingccounting ppolicyolicy 164 There were no supplements and amendments entered into the accounting policy of the JSC «MOESK» in 2010.

3. DISCLOSURE 33.1..1. FixedFixed assetsassets ((lineline 120120 ooff tthehe AccountingAccounting BBalancealance Sheet)Sheet) OF ESSENTIAL INDICATORS IN As of 31.12.2010, the following breakdown of fixed assets of the JSC «MOESK» is STATEMENTS given:

VALUE OF FIXED ASSETS BY THEIR TYPES: mln. Rubles

Remaining book Gross book value Deterioration No. Name of fixed assets group value 31.12.2010 as of 31.12.2010 31.12.2010 1 Buildings 13 366 1 416 11 950

2 Constructions and transfer devices 63 871 7 671 56 200

3 Machinery and equipment 125 387 44 781 80 606

4 Vehicles and other 967 273 694

5 Other fixed assets 213 87 126

Total 203 804 54 228 149 576

UUseful f llif life set tf for new power equipment i ti is 15 15t to 20 years, 10 to t 15 years for f aerial i l lines, and 30.5 years for cable lines. LONG-TERM FINANCIALINVESTMENTS(LINE140OFTHEACCOUNTING BALANCESHEET) STRUCTURE OFTHEINDICATOR: oa 66827894 36678 Total oa 3664186 3686 Total ecito 10.0031.12.2010 01.01.2010 Description № ecito 10.031.12.10 01.01.10 Description № otiuint h eitrdcptlo h S ME»41456 468 1793 662 471 0 1793 662 Acquisitionofabillexchange oftheJSC«LLC Energo-Finance» 807 5 Contributiontotheregistered capitaloftheJSC«MKER» 4 Contributiontotheregistered capitaloftheJSC«MKSM» 760 3 Contributiontotheregistered capitaloftheJSC«RETO» 2 Contributiontotheregistered capitaloftheJSC«Energocenter» 1 634 3473 532 0 15 485 3086 21299 0 6 5 08.09«Designandsurvey work (D&S)» 4 08.01«Fixedassetitemswithfinishedconstruction» 3 08.03«Constructionoffixedassetitems» 2 07«Equipmenttobeinstalled» 1 items» 08.11 «Reconstructionandmodernizationoffixedasset 08.12 «Capitalconstructiondepartment 3L 3.3. Long-termandshort-termfinancialinvestments33 including 16 connection. Buildingprojects fortheamountof28694mln.Rubleswere initiated, of 19530mln.Rubles,including12637Rublesonprojects oftechnological 2010, works related toconstructioninprogress were carriedouttotheamount 33.2. Constructioninprogress (line130oftheAccountingBalanceSheet) items totheamountof773mln.Rubleswere acquired. with thedate ofmaturityuponpresenting, butnotearlier than12December2014. value wasnotdefined. . 2 JSC «MOESK»constructs,reconstructs andmodernizesbuildingprojects. Over An Ordinary BillofExchangewasacquired from theLLC «Energo-Finance» in2010, market fair their value; book gross the on based specified are investments Financial investments are specified basedonthegross bookvalue; theirfairmarket .

C o ong n s t r te u , ma rm c 076 mln.Rublesonprojects oftechnologicalconnection.Fixedasset t i o n nd

i n s

p ho r o tt rt g » r e erm s s

( l i fi n nanc e

APPENDIXES 1 3 0 a in ial

o f

t h ve e

st A me c 1798302 11 759 c o nt 2 u n s t i n g

B a l a n c e

S h mln. Rubles e mln. Rubles e t ) 165

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

SHORT-TERM FINANCIAL INVESTMENTS (LINE 250 OF THE ACCOUNTING BALANCE SHEET) mln. Rubles

№ Description 01.01.10 31.12.10

1 Acquisition of the bill of exchange «Otkrytie» 2 969 0

Total 2 969 0

The bill acquired from the LLC «Financial Corporation «Otkrytie» was repaid on 28 June 2010.

RReserveeserve fforor iimpairmentmpairment ooff ffinancialinancial investmentsinvestments ooff aaffiliatedffiliated aandnd aassociatedssociated ccompanies.ompanies.

In connection with reduction in value of net assets of the affiliated JSC «MKER», and the associated JSC «Energocenter», the Company created a reserve for impairment of financial investments in 2010, in the amount of 255 mln. Rubles, including for impairment of:

JJSCSC ««MKER»—inMKER»—in tthehe aamountmount ofof 6262 mln.mln. RRubles,ubles, 166 JJSCSC ««Energocenter»—inEnergocenter»—in thethe amountamount ofof 193193 mln.mln. RRublesubles

Pursuant to the p. 38 PBU 19/02 «Accounting of financial investments», the reserve for impairment of financial investments was created to the amount of difference between the reported value and the estimated value of financial investments. When defining the estimated value of financial investments, the Company used the method of estimating net assets. The reserve is created on account of financial results of the Company as part of other expenditures. Financial statements for 2010 show the value of the said financial statements based on the reported value net of reserve for impairment.

33.4..4. InventoriesInventories ((lineline 221010 ooff tthehe AAccountingccounting BalanceBalance Sheet)Sheet)

Inventories are evaluated as the amount of actual expenditures for acquisition, their amount as of the end of 2010 makes up 4 923.8 mln. Rubles or 8% of the circulating assets of the JSC «MOESK».

33.5..5. SStructuretructure ooff ddeferredeferred eexpendituresxpenditures ((lineline 221616 ooff tthehe AAccountingccounting BBalancealance SSheet)heet)

The balance of deferred expenditures as of 31.12.2010 makes up 2 920 mln. Rubles. Among the deferred expenditures the following are the most essential ones: Services for technological connection accepted from JSC «MGESK» upon reorganization by way of accession to the JSC «MOESK», to the amount of 2 240 mln. Rubles.

33.6..6. TradeTrade receivablesreceivables ((lineslines 230230 aandnd 224040 ooff tthehe AAccountingccounting BBalancealance SSheet)heet) BREAKDOWN OFACCOUNTS RECEIVABLE BY THELINE230 oa 91933035 29159 Total ecito 10.0031.12.2010 01.01.2010 Description № dacsmd 91932928 29159 107 Otherdebtors 4 Advances made 3 Billsreceivable, 2 Purchasers andcustomers, 1 connection ofcapacities. Rubles. Thisamountconsists ofadvances received underagreements oftechnological 33.8. Otherlong-termliabilities(line520oftheAccounting BalanceSheet) date. with Barclays BankPLC inRublesattheexchangetariffofUSDollarasdue revolving credit lines,aswell astheamountofrepayment underthecredit agreement as againstcredits intheamountof36688920thousandRubleswere repaid. presented billsoftheCompanyinamount6067567thousandRubles,aswell period. thousand Rubles,ofwhich5021679Rubleswere repaid in thereporting repaid inthereporting period. activity—5 053891thousandRubles,ofwhich2662778Rubleswere thousand Rubles. thousand Rubles,including: assets, aswell asfinancinginvestment activity, theCompanyattracted33 33.7. Loansandcredits Rubles withinthescopeofswapagreement whichwasrepaid on16April2010. 01.01.2010, theplacementofcurrency isshownintheamountof11 in respect oftechnologicalconnectionintheamount8495mln.Rubles;as receivable) thepayment tothevalue addedtaxbudgetfrom theadvances received . . 8 7 As of31.12.2010,long-term liabilitiesoftheJSC«MOESK»makeup10672mln. The AppendixNo.1showssummarydataonborrowed fundsoftheJSC«MOESK». The amountofdebtrepaid againstcredits includesdebtsrepaid inrespect of Over 2010,there were no billsofexchangeissuedandplaced,thedebtsagainst In 2010,forthepurposeofrefinancing recurring debtsandreplenishing circulating The line240ofthebalancesheetas31.12.2010shows(aspartotheraccounts . .

O L – inrespect ofrevolving credit linesforreplenishing circulating assets—5 – inrespect ofrevolving credit linesforfinancingtheCompany'sinvestment – inrespect ofnon-revolving credit linesforrefinancing debts—23 o t h a n e r s

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( l i n APPENDIXES e

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S mln. Rubles h , 060 mln. e , , , 766 123 943 e t ) , , , 679 000 570 167

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

33.9..9. Short-termShort-term ppayablesayables ((lineline 662020 ooff tthehe AAccountingccounting BBalancealance SSheet)heet)mln. Rubles

№ Short-term payables 01.01.2010 31.12.2010

Providers and contractors: (item 621 of the balance 1 sheet) 10 997 12 270 Payables in respect of labor remuneration (item 622 of 2 the balance sheet) 29 Payables to non-budgetary funds (item 623 of the bal- 3 ance sheet) 04

4 Payables to the budget (item 624 of the balance sheet) 262 602 Payables in respect of advances received under agree- 5 ments of TC (item 627 of the balance sheet) 38 924 47 979 6 Other creditors, total (item 628 of the balance sheet) 14 097 1 759

Total 64 282 62 623

Overdue liabilities under agreements of technological connection as of 31.12.2010 31 12 2010 make up 11 143 mln. Rubles.

168 33.10..10. RegisteredRegistered capitalcapital ofof thethe CompanyCompany (line(line 420420 ooff tthehe AAccountingccounting BBalancealance SSheet)heet) AS OF 31.12.2010, THE REGISTERED CAPITAL OF THE JSC «MOESK» MAKES UP 24,353,545,787 RUBLES AND CONSISTS OF:

Nominal value of shares Nominal value Description of shares Total amount (items) being in ownership of (Rubles) the Company

Ordinary shares 48 707 091 574 0.5 24 353 545 787

Preferred shares - --

Total 48 707 091 574 24 353 545 787

– 50.9%50 9% of the registered capital belongs to the t JSC ««HoldingHoldingH MRSK» – 445.0%5.0% ttoo ootherther llegalegal eentitiesntities – 44.1%.1% toto iindividualndividual persons.persons.

33.11..11. AdditionalAdditional capitalcapital (line(line 420420 ofof thethe AccountingAccounting BBalancealance SSheet)heet)

The additional capital of the JSC «MOESK» made up 63 720 537 thousand Rubles as of 01.01.2010, and 63 670 978 thousand Rubles as of 31.12.2010. The reduction of the additional capital took place through writing off the ratio of the value increase upon writing off of basic production assets having the remaining book value. The additional capital is generated on the account of the following sources: – revaluation of basic production assets; – merge of the own capital of the organizations being under reorganization upon carrying out reorganization by way of accession. ON ORDINARYTYPESOFACTIVITY FOR2009AND2010 THE TABLE SHOWS DATA ONRECEIPTSANDEXPENDITURES OTHER RECEIPTSANDEXPENDITURESCONSISTOFTHEFOLLOWING ITEMS: oa 5231064Ttl6 8 85240 69382 Total 110634 85233 Total te 7 1 te 4 27 144 other 513 173 Other maintenance ofpower facilities Receipts from technological works installation andconstruction receipts from performing lease receipts from property leton on additionofcapacities receipts from rendering services electric power receipts from transportation of te eeps11152 Other receipts te 9 1246 995 625 144 65 0 3484 17 5815 88 17 11 4194 32 Other Exchange tariffdifferences Receipts inreturn oflosses Fines, penaltiesandforfeits From selling offotherassets Selling offfixedassets From selling offinventories including: eeps20 00Epniue 092010 2009 Expenditures 2010 2009 Receipts 33.15. Otherreceipts andexpenditures 33.14. Receiptsandexpenditures onordinary typesofactivity As of31.12.2010,there were noassetsandliabilitiesinforeign currencies. 33.13. Assetsandliabilitiesinforeign currencies There wasnosubvention received bytheJSC«MOESK»from thefederalbudget. 33.12. Governmentaid . . . . 1 1 1 1 5 4 3 2 . . . .

O R A G t e o s h s c v e e e e r t 49491239 74 904 i r 6 18945 9 469

s p r n 4 284 245 63 374

840 68 e t a m s c n

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a s

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r f e d of power facilities technological maintenance expenditures on construction works performing installationand expenditures on on lease expenditures onproperty let capacities services onadditionof expenditures onrendering power transportation ofelectric expenditures on o s i r

t e o u i n APPENDIXES r g e

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c d u i n r r a e r n y c 092010 2009

t i y e p s e s

o f

a c t i v i 31880488 63 178 t 8 4466 5 587 7 63 374 y 6 188 62 78 37

5 581 mln. Rubles mln. Rubles 169

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

mln. Rubles

2009 2010 Other expenditures 13 584 7 085 including: On selling off inventories 23 12 On selling off other assets 4 196 3 480 Selling off fixed assets 10 Retirement of assets 376 142 Banking services 98 47 Exchange tariff differences 5 820 618 Technical Inventory Bureau(s) services 104 47 Bonuses, material aid 475 540 Social activities 49 55 Charitable contributions 28 Swap expenditures 816 371 Advisory, information and legal services 790 537 Expenditures in emergency situations 113 120 Creation of the reserve for impairment of financial investments 286 -32 Creation of the reserve on bad debts 0 341 170 Other 435 799

3.16.3 16 AAccounting ti of f settlements ttl t on profit fit tax t (PBU 18/02) DEFERRED TAX ASSETS (DTA) AND DEFERRED TAX LIABILITIES (DTL) ARE SHOWN EXPLIC- ITLY IN THE BALANCE SHEET. mln. Rubles Conditional expenditure (conditional receipt) on (from) the profit tax 4 299 Permanent and temporary differences that occurred in the reporting period and resulted in adjustment of the conditional expenditure (conditional receipt) on (from) 1 469 the profit tax for the purpose of defining current profit tax, including: Depreciation of fixed assets (revaluation) 1 126 Non-sale expenditures (bonuses, material aid, etc.) 152 Interest on loans and credits (the above-level ones) 7 Advisory and information services 110 Losses of previous years 12 Other 62 Permanent and temporary differences that occurred in previous reporting periods yet resulted in adjustment of the conditional expenditure (conditional receipt) on (from) 4 the profit tax of the reporting period Sums of DTA and DTL written-off in connection with retirement of the asset or the type of liability, including: -710 Depreciation of fixed assets 128 Depreciation bonus -1 040 Deferred revenues (fixed assets received free of charge) 166 Other expenditures 36 PARTIES: 5. RELATED ACTIVITY 4. DISCONTINUED ai annsprsae uls01 0.32 0.13 15722 6319 Basic earningspershare, Rubles over thereporting period,mln.shares Weighted average oftheoutstandingordinary shares Net earningsover thereporting period,mln.Rubles 33.17. Earningspershare shareholders on28May 2008. the Board ofDirectors» approved bytheannualgeneralmeetingofCompany's the «Provision onremunerations andcompensations tobepaidthemembersof compensations tothemembers oftheBoard ofDirectors have beenestablishedby Company's shareholders. data ofannualfinancialstatementsfor2009approved bythegeneralmeetingof members ofCommitteestheCompanyin2010made up: tthe Company RRemuneration ofmembers oftheBoard ofDirectors andmembers ofCommittees of 506 mln.Rubles; Company fororganization offunctioninganddevelopment ofUEStotheamount (acquisition ofgoods,works andservices)totheamountof1453mln.Rubles; uunder audit: TThe followingbusinesstransactionswere carriedoutbytheCompanyinperiod rraskrytiy u/Spiskiaffilirovannykh_lits/index.php located at to theJSC«MOESK»); Explanatory Note), Explanatory Note), AAs of31.12.2010,thelistpartiesrelated totheJSC«MOESK»includes: h a h . n e s s 1 e

Since 01September2008the amountandprocedures ofpaying remunerations and – 1754512Rublesformarketcapitalization. – 15699834RublesfortheindexofCompany's netprofit according tothe – 1604698RublesforparticipationinCommitteesunder theBoard ofDirectors. – 8085170Rublesforparticipationinmeetingsof the Board ofDirectors. Total amountofremuneration charged tomembersoftheBoard ofDirectors and – withthecontrolling entity, inconnectionwithrendering ofservicestothe – withassociatedandaffiliatedcompanies,inconnectionproduction activity The listofpersonsaffiliatedwiththeCompanycanbefoundonweb page –Persons includedinthegroup ofpersonstheJSC«IDGCHolding». –JSC«Moskabelenergoremont» (100%ofshares belongstotheJSC«MOESK»); –JSC«Plantforrepairing electrotechnical equipment»(100%ofshares belongs –JSC«Moskabelsetmontazh»(100%ofshares belongstotheJSC«MOESK»); –JSC«Energocenter» (50%ofshares belongstotheJSC«MOESK»); –JSC«IDGCHolding»(holds50.9%ofordinary shares oftheJSC«MOESK»; –GeneralDirector oftheJSC«MOESK» –MembersoftheManagementBoard oftheJSC«MOESK»(section1 –MembersoftheBoard ofDirectors oftheJSC«MOESK»(section1 hhttp://www.moesk./ru/invest_news/Informatsiya%20podlezhashchaya%20 There wasnodiscontinuationofactivitiesbytheJSC«MOESK»in2010. m e d o k

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MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

RRemunerationemuneration ooff mmembersembers ooff tthehe CCompany'sompany's CCheck-upheck-up CCommitteeommittee Total amount of remuneration charged to members of the Check-up Committee of the Company in 2010 for auditing the Company's financial and economic activities made up 1 077 037 Rubles following the results of the audit of the first six months of 2009 and the entire 2009.

RRemunerationemuneration ooff ttopop mmanagersanagers Accruals to the top managing personnel of the company over 2010 made up 196,405 944 Rubles.

6. INFORMATION PPrimaryrimary iinformation—operationalnformation—operational ssegmentsegments BY SEGMENTS Types of activities are the operational segment of the company. In 2010, the JSC «MOESK» rendered services for transportation of electric power, on connection of consumers, and other services. This information is disclosed in the section 3.14 of the explanatory note.

SSecondaryecondary iinformation—geographicalnformation—geographical ssegmentsegments The JSC «MOESK» is conducting a registered activity in Moscow and Moscow Region, rendering services on transportation of electric power and connection of consumers. The table shows financial and economic indicators for 2010 broken down to segments:

Including Description of indicator TOTAL 2010 172 MOSCOW Moscow Region

Proceeds from selling goods, works and services 110 634 049 61 732 981 48 901 068 Including Proceeds from transportation of electric power 91 238 959 49 075 787 42 163 172

Including Proceeds from technological 18 944 958 12 285 208 6 659 750 connection

Including Proceeds from other goods, works and 450 132 371 986 78 146 services Self-cost 85 240 359 43 633 183 41 607 176

Including on transportation of electric power 80 487 524 39 632 313 40 855 211

Including on technological connection 4 466 762 3 756 700 710 062 Including on other 286 073 244 170 41 903 Interest receivable 200 787 200 787 Interest payable 2 966 074 2 334 800 361 274 Other receipts 5 580 774 3 330 367 2 250 407 Other expenditures 7 085 520 3 691 149 3 394 371 Profit tax 5 772 132 4 166 381 1 605 751

Net profit 15 621 525 11 438 622 4 182 903 OF THERF» LEGISLATIVE ACTS PARTICULAR AND AMENDING ENERGY EFFICIENCY ENHANCING SAVING, «ON ENERGY 23.11.09 №261 FEDERAL LAW OF SUBJECT TO THE 9. INFORMATION ECONOMIC ACTIVITY FACTS OFTHE 8. CONDITIONAL DATE THE REPORTING 7. EVENTSAFTER performance oftheCompany'seconomicactivity: General MeetingoftheCompany'sshareholders. one share oftheJSC«MoscowUnitedElectricGridCompany»willbeapproved bythe DDividends thousand Rublesrespectively. Rubles, andtoassesscontributionsnon-budgetaryfundsintheamountof106 pay bonusesfollowingtheresults of2010intheamount312603.2thousand payments totheworkers oftheCompanyin1quarter2011,itisplannedto PPayments totheworkers ofthecompany the production andcommercial operationsoftheCompany. making statements,itisimpossibletoestimatethepredicted effectofthisfacton on 101fixedassetitemstotheamountof157mln.Rubles.Asmoment 1 May 2011.Asof01.04.2011,theJSC«MOESK»hadmadepermanentimprovements Company» aboutcancellationofthepower property leaseandsubleaseagreement on OOJSC «UnitedEnergy Company» TTermination oftheelectricgridproperty leaseandsubleaseagreement withthe thousand Rubles. the cityofMoscowis124518036thousandRubles,inRegion79 obligations additionallyclaimedis640mln.Rubles,including: the Companyisadefendantmakesup2295mln.Rubles,ofwhichamount reporting datetheCompanyhasfollowingconditionalfacts: of theeconomicactivity. Itwas determinedinthecourseofanalysisthatas of theCompany. of additionalobligationswhichmay occurasaresult ofalegaljudgmentnotinfavor construction contracts; agreements onelectricenergy transportation; agreements ontechnologicalconnection; etpwrGa 51165638 65181 Gcal Heat power networks for compensationoflosses in for economicneeds including: Electric power: total e a J i v y r S As of31.12.2009,thefollowingenergy resources hadbeenusedinthecourseof The amountofanannualdividendfollowingtheresults of2010fallingwithin In connectionwithadherence toallindicatorsspecifiedintheProvision onbonus The JSC«MOESK»hasreceived a written noticefrom theJSC«UnitedEnergy As of01.01.2011,thegross bookvalue ofthefixedassetsJSC«MOESK»in As of31.12.2010,thetotalamountclaimsinunfinishedlegalproceedings where As of31.12.2009,theCompanyhadcarriedoutevaluation ofconditionalfacts Financial statementsoftheCompanydonotspecifyanyreserves forperformance m i m C d

i « e e n n n U a d t 44) 33) 22) 11) n t s s i ) ) ) ) i

o t 287mln.Rublesagainstotherlegalclaims. 6mln.Rublesagainstlegalclaimsrelated to theperformanceof 259mln.Rublesagainstlegalclaimsrelated totheperformanceof t 89 mln.Rublesagainstlegalclaimsrelated to theperformanceof o n e

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, , 471 285 173

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

10. VALUES 11)) TThehe JJSCSC ««MOESK»MOESK» ttakesakes oonn lleaseease ffixedixed aassetsssets wwhichhich iincludenclude ttransportransport aandnd REFLECTED IN OFF ppowerower eequipment:quipment: BALANCE SHEET a) The value of leased fixed assets is 38 051 mln. Rubles, including ACCOUNTS Counterparty mln. Rubles – «United Energy Company» 26 735

Please see p. 7 «Events after the reporting date» about this property. – «Mosenergo» 600 – «Moscow Property Department» 164 – other 10 552

The others show the value of the land on lease in the amount of 9 901 mln. Rubles.

b) The value of fixed assets under leasing is 38 661 mln. Rubles, including Counterparty mln. Rubles – «Business-Alliance» 26 850 – «Gazprombank Leasing» 8 056 – «RB Leasing» 3 755

22)) TThehe JJSCSC ««MOESK»MOESK» hhasas rreceivedeceived aann oobligationbligation ttoo sstandtand ssuretyurety fforor tthirdhird ppartiesarties ((workersworkers ofof thethe JSCJSC «MOESK»)«MOESK») pursuantpursuant toto thethe separationseparation balancebalance ssheetheet ffromrom tthehe JJSCSC ««Mosenergo»,Mosenergo», wwhichhich mmakesakes uupp 22.9.9 mmln.ln. RRublesubles aass ooff 331.12.2010.1.12.2010. TheThe managementmanagement ofof thethe JSCJSC «MOESK»«MOESK» doesdoes nnotot eexpectxpect ooccurrenceccurrence ooff aanyny ssubstantialubstantial oobligationsbligations iinn rrespectespect ooff tthishis ssurety.urety. 174 33)) TThehe CCompanyompany hhasas lleasedeased llandand pplotslots llocatingocating uundernder eelectriclectric nnetworketwork ffacilities,acilities, iinn qquantityuantity 3 445252 ppiecesieces aandnd ssquarequare ooff 5503.603.6 hha.a.

11. ANALYSIS FFinancialinancial sstandingtanding ofof thethe CompanyCompany bbyy iindicesndices ooff lliquidity,iquidity, ffinancialinancial sstability,tability, OF FINANCIAL pprofitability,rofitability, aandnd businessbusiness aactivityctivity iiss sspecifiedpecified iinn tthehe ffollowingollowing wway:ay: RATIOS

Index Standards 31.12.2009 31.12.2010

Absolute liquidity ratio 0.15 – 0.5 0.1 0.02

Speedy liquidity ratio 0.3 – 0.7 0.5 0.4

Current liquidity ratio 2 0.5 0.4

Proprietary funds autonomy ratio 0.5 0.5 0.6

Output (sales) profitability % >0 18.60 22.95

Return on equity % >0 5.17 11.32

Return of assets % >0 2.52 6.37

Receivables trend (increment tariff) <0 0.03 -0.09

Payables trend (increment tariff) <0 0.20 -0.03

Balance between receivables and payables >1 0.97 0.91 financial ratiosasof31.12.2010would bethefollowing: in theamountof23528mln.Rubleswere excludedfrom calculation,theanalysisof transferred tocooperatingenterpriseswithintheframework ofthe«SingleWindow» short-term payables. of 2010. attribute showingareduction ofdebttotheCompanystartingfrom thebeginning AAssessment ofbusinessactivity: with thepurposeofprofit earningand makes up6.37%followingtheresults of2010. makes up1.32%followingtheresults of2010. of 22Rubles95kopecksisreceived per1Rubleofproceeds. AAssessment ofbusinessprofitability: credits. Thevalue oftheratioas31.12.2010makesup0.56. more theenterpriseisfinanciallystableandlessitdependentonthird party of anenterpriseinthetotalvolume ofassets.Thehigherthevalue oftheratio, AAssessment oftheCompany'sfinancialstability: makes up0.4. be usedforrepaying short-termliabilities,thevalue ofthisratioas31.12.2010 assets toshort-termliabilitiesandmakesup0.4asof31.12.2010. and makesup0.02asof31.12.2010. term liabilitiesontheaccountofcashassetsandshort-termfinancialinvestments, AAssessment oftheCompany'sliquidity: s s s s If long-termpayables againstadvances received fortechnologicalconnectionand The balancebetween receivables andpayables asof31.12.2010was0.91. – theindexofpayables trend was(–0.03),whichisindicative ofareduction in – theindexofreceivables trend hasanegative value (-0.09),whichisapositive As awhole,followingtheresults of2010thebusinessCompanyisprofitable. The indexofreturn onassets*describestheefficiencyofCompany'sassetsusage The indexofreturn onequity*describestheefficiencyofcapitalconsumptionand In 2010,22.95%ofsalesprofitability* is reached, i.e.agross profit intheamount The proprietary fundsautonomyratio*describestheownershipratioofowners The current liquidityratio*showssufficiencyoftheCompany'sassetswhichcan The speedyliquidityratio*reflects theratioofmostliquidpartcirculating The absoluteliquidityratiodescribesthecapabilityofacompanytorepay short- s s s s e e e e s s s s s s s s m m m m e e e e n n n n t t t t

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t a f l y i i b q n : i u a l i i n t APPENDIXES d y c i i : t a y l :

s t a b i l i t y : 175

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

FFinancialinancial sstandingtanding ofof thethe CompanyCompany bbyy iindicesndices ooff lliquidity,iquidity, ffinancialinancial sstability,tability, pprofitability,rofitability, aandnd bbusinessusiness aactivityctivity iiss sspecifiedpecified iinn tthehe ffollowingollowing wway:ay:

Index Standards 31.12.2009 31.12.2010

Absolute liquidity ratio 0.15 – 0.5 0.1 0.1

Speedy liquidity ratio 0.3 – 0.7 0.8 1.3

Current liquidity ratio 2 0.9 1.5

Proprietary funds autonomy ratio 0.5 0.5 0.6

Output (sales) profitability % >0 18.60 22.95

Return on equity % >0 5.17 11.32

Return of assets % >0 2.52 6.37

Receivables trend (increment tariff) <0 0.03 -0.09

Payables trend (increment tariff) <0 0.20 -0.03

Balance between receivables and payables >1 0.97 0.91

176 AAssessmentssessment ofof thethe CCompany'sompany's lliquidity:iquidity:

The absolute liquidity ratio describes the capability of a company to repay short- term liabilities on the account of cash assets and short-term financial investments, and makes up 0.01 as of 31.12.2010. The speedy liquidity ratio* reflects the ratio of the most liquid part of circulating assets to short-term liabilities and makes up 1.3 as of 31.12.2010. The current liquidity ratio* shows sufficiency of the Company's assets which can be used for repaying short-term liabilities, the value of this ratio as of 31.12.2010 makes up 1.5.

AAssessmentssessment ofof thethe CCompany'sompany's ffinancialinancial sstability:tability:

The proprietary funds autonomy ratio* describes the ownership ratio of owners of an enterprise in the total volume of assets. The higher the value of the ratio, the more the enterprise is financially stable and the less it is dependent on third party credits. The value of the ratio as of 31.12.2010 makes up 0.6.

AAssessmentssessment ofof businessbusiness pprofitability:rofitability:

In 2010, 22.95% of sales profitability* is reached, i.e. a gross profit in the amount of 22 Rubles 95 kopecks is received per 1 Ruble of proceeds. The index of return on equity* describes the efficiency of capital consumption and makes up 11.32% following the results of 2010. The index of return on assets* describes the efficiency of Company's assets usage with the purpose of profit earning and makes up 6.37% following the results of 2010. Chief AccountantoftheJSC«MOESK» General Director oftheJSC«MOESK» of informationbyissuersequitysecurities» dated 10October2006No.06-117/pz-n«OnestablishingtheProvisionondisclosure methods ofcalculationsubjecttotheOrderFederalServiceforFinancialMarkets theratioofprofitabilityindicesweremade using of proprietaryfundsautonomy, in indicesofreceivables andpayables. pprofitable. AAs awhole,followingtheresults of2010thebusinessCompanyis r s o * The indicesofbusinessactivityassessmentdonotchangeincaseanychanges

a f Calculations of the financial ratios of the speedy and current liquidity, theratio Calculations ofthefinancialratiosspeedyandcurrentliquidity,

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t h e

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o f APPENDIXES

2 0 1 0

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b u s i n e s s

o f

t h e L.A. Sklyarova A.P. Konovalov

C o m p a n y

i s

177

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

APPENDIX 2 AUDITOR’S REPORT

NNPP CCONSULTONSULT CConsultingonsulting aandnd AAuditinguditing GroupGroup ooff CompaniesCompanies

115191, Moscow, Dukhovskoy Pereulok 14 Phone/Fax. (495) 954-4408 (495) 952-1041 E-mail: [email protected] www.npg.ru

AUDITOR’S REPORT No. 1-006-03-11 178 To: Shareholders of the JSC «Moscow United Electric Grid Company»

IInformationnformation aaboutbout tthehe aauditedudited ppersonerson

Name Open Joint-Stock Company «Moscow United Electric Grid Company» State registration number 1057746555811 Location 142100, Moscow region, Podolsk, Ordzhonikidze St. 27.

IInformationnformation aaboutbout tthehe aauditoruditor

Name Private Joint-Stock Company «NP Consult»

State registration number 1027700283566

Location 115191, Moscow, Dukhovskoy Pereulok 14

Name of the self-regulated Non-commercial Partnership «Institute of organization of auditors, of which the Professional Auditors» (IPAR) auditor is a member

Number of the self-regulated 10302000041 organization of auditors in the register of auditors and auditing organizations

Independent Firm «NP Consult», member of Moor Stevens International Ltd., Member Companies in Major Cities Worldwide; Associated with AKG MOOR STEVENS RUS OOpinion RResponsibility oftheauditor RResponsibility oftheauditedperson forfinancialstatements balance sheet,profit andlossstatementexplanatorynote. flow statementfortheperiodunderaudit,aswell asotherappendixestotheaccounting as of31December2010,profit andlossstatement,statementonchangesinequitycash Company «MoscowUnitedElectricGridCompany»,consistingoftheaccountingbalancesheet 01 March 2011 general auditingforanindefiniteperiod) (Qualification certificateNo.K012971in «NP Consult» of thePrivate Joint-StockCompany Deputy GeneralDirector Russian Federation. cash flowover 2010 according totherulesasforpreparation offinancialstatementsinthe Company» asof31December2010,theresults ofitsfinancialand economicactivityandthe of thefinancialstandingOpenJoint-StockCompany«MoscowUnitedElectricGrid grounds toexpress anopinionaboutreliability ofthefinancialstatements. well anassessmentofpresentation ofthefinancialstatementsasawhole. reasonableness ofestimatedfigures received bythemanagementofauditedperson,as but notwiththeaimtoexpress anopinionabouttheefficiencyofinternalcontrol system. reliability offinancialstatements,withthepurposechoosingrelevant auditingprocedures, of thisrisk,we have reviewed thesystemofinternalcontrol ensuringthepreparation and risk ofmaterialdistortionscausedbyanyunfairactionsorerrors. Inthecourseofassessment Choice ofauditingprocedures issubjecttoourownreasoning whichisbasedonassessmentof evidence toprove theindicesinfinancialstatementsandinformationdisclosure inthem. financial statementscontainnomaterialdistortions. planned andconductedinsuchaway toensure thatasufficientconfidenceisgained auditing standards. These standards require thatethicalpracticesbeusedandtheaudit based ontheauditconductedbyus.We have conductedthisauditincompliancewithfederal errors. statements thatshouldnotcontainmaterialdistortionscausedbyanyunfairactionsor Russian Federation, andfortheinternalcontrol systemnecessaryforpreparation offinancial financial statementsinaccordance withrulesforpreparation offinancialstatementsinthe p e e We have conductedanauditoftheattachedfinancialstatementsOpenJoint-Stock To ouropinion,thefinancialstatementsare, inallsubstantialrelations, areliable reflection Be believe thattheauditingevidencereceived inthecourseofauditgives reasonable The auditalsoincludedanassessmentofpropriety oftheappliedaccountingpolicyand The auditincludedcarryingoutofauditingprocedures aimedatreceiving ofauditing Our responsibility istoexpress anopinionconcerningreliability offinancialstatements The Company'smanagementisresponsible forpreparation andreliability ofthesaid s s i n p p i o o o n n n s s i i b b i i l l i i t t y y

o o f f

t t h h e e

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p e r s o APPENDIXES n

f o r

f i n a n c i a l

s t a t e m e n t s V.Y. Skobarev 179

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

APPENDIX 3. CHECK-UP COMMITTEE’S REPORT

FFollowingollowing tthehe rresultsesults ooff aauditinguditing tthehe ffinancialinancial aandnd eeconomicconomic activityactivity ooff tthehe JJSCSC ««MOESK»MOESK»

15 April 2011 Moscow

INFORMATION ABOUT THE COMPANY

Full name Open Joint-Stock Company «Moscow United Electric Grid Company»

Legal address 142100, Moscow region, Podolsk, Ordzhonikidze St. 27.

Postal address 115114, Moscow, 2-nd Paveletsky Proyezd 3 bldg. 2

Contact details www.moesk.ru ; phones: (495) 982-35-74

State registration (OGRN, No. 1057746555811 dated 01.04.2005 180 date) TPIN 5036065113

Branches and standalone 7 branches: subdivisions with a separate Southern Electric Networks; Eastern Electric Networks; Northern balance Electric Networks; Western Electric Networks; High-Voltage Cable Networks; Central Electric Networks; Moscow Cable Networks Executive body Konovalov A.P., General Director

Chief accountant Sklyarova L.A.

INFORMATION ABOUT THE CHECK-UP COMMITTEE’S STRUCTURE

Chairman of the Check-up Committee Alimuradova I.A.

Secretary of the Check-up Committee Kormushkina L.D.

Members of the Check-up Committee Saukh M.M.

Arkhipov V.N.

Filippova I.A. I. ANALYTICAL PART INFORMATION ABOUTTHEAUDITOR TThe auditwas conductedbyusincompliancewith: other related parties. This Reportisanofficialdocumentbeingopenforpublication andintendedforshareholders, investors and with theapplicablelegislationandinternallocalregulatory acts. SSubject: and property standingoftheCompanyandmakereasonable decisionsbasedontheseconclusions. allows usersofthesestatementstodrawproper conclusionsaboutresults ofthebusinessactivity, financial ability isinallsubstantialrelations understoodasthelevel ofaccuracythedatainStatements,which «MOESK» (hereinafter referred toastheCompany)for2010,hereinafter referred toasStatements.Thereli- PPurpose oftheaudit: TThe auditwas conducted pursuant tothe: otlades115191,Moscow,Dukhovskoy Pereulok 14 1027700283566 115191,Moscow,Dukhovskoy Pereulok 14 Minute oftheannualmeetingshareholders Private Joint-StockCompany«NPConsult» ing, nameoftheself-regulated auditors’union Membership inself-regulated organizations, dateofjoin- State registration (OGRN,date) Postal address Legal address (location) Full nameoftheorganization pointed theauditorforconfirmationoffinancialstatements) uio’ eotNotmodified V.Y. Skobarev, cer- DeputyGeneralDirector, Persons whosignedtheauditor’sreport Auditor’s report u h h u b e e r p

j a a e – Otherlegislative andinternallocalacts. ments oforganizations»; – TheOrder oftheMinistryFinanceRFdated22 June2003No.67n«Ontypesoffinancialstate- accounting andfinancialstatements intheRussianFederation»; – TheOrder oftheMinistry ofFinanceRFdated29.07.1998No.34n«Onapproval oftheProvision on – TheFederal Lawof21.11.1996No.129-FZ«Onaccounting» other regulatory documentsandresolutions oftheCompany'sauthorizedbodies. Resolution oftheCheck-upCommitteeonapproval ofthisReport(minuteNo.5dated15.04.2011); 9 dated02.07.2010); Resolution oftheannualmeetingshareholders onelectionoftheCheck-upCommittee(minuteNo. Provision ontheCheck-upCommittee; Articles ofAssociationtheCompany; Federal Law«Onjoint-stockcompanies»; o u u c s t d d e : i i

financial statements,annualreport, conformityoftheCompany'sfinancialandeconomic activity t t o

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w i t h : APPENDIXES №103 tificate No.K012971 №9 dated02.07.2010 181

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Observing laws of the Russian Federation in the course of making financial and economic transactions is the responsibility of the executive body of the Company. The Audit was planned and conducted by us in such a way to gain sufficient confidence that the annual report and financial statements for 2009 (hereinafter jointly referred to as Statements) contain no material distortions. The Audit was planned on a sample basis and included examination based on testing evidence which proves meaning of the information about the Company's financial and economic activity and its disclosure in Statements, as well as evaluation of principles and methods of accounting, rules for preparation of State- ments, definition of essential assessed values. During the Audit, we reviewed observation of the Russian Federation legislation by the Company. We checked conformity of a number of financial and economic transactions carried out by the Company to the legislation exclusively for the purpose to gain reasonable and sufficient confidence that the Statements contain no material distortions. In the course of the Audit, we defined a materiality level (the level of cumulative tolerated distortion error of indices in statements). Under materiality we understand the ability of information disclosed in the annual statements and annual report to influence on making decisions by users of these Statements. The level of the tolerated error is a criterion for us to confirm the reliability of the Statements. The materiality level defined by us is 5 000 mln. Rubles.

AAuditedudited pperiod:eriod: We conducted the Audit of Statements attached to the Report for: 1) the reporting period: from 01.01.2010 through 31.12.2010 in respect of financial and economic activity throughout the year 182 of 2010. 2) Events after the reporting date: from 01.01.2011 through 15.04.2011 We dated the Report with the date of the last Audit day.

The Statements are prepared in compliance with legislative and regulatory acts of the Russian Federation (RSBU) and internal local regulatory acts of the Company.

STRUCTURE OF THE COMPANY’S STATEMENTS CONFIRMED BY THE CHECK-UP COMMITTEE:

Date of Number of No. Form No. Reporting form title signing by the pages in the management document

1. No. 1 Accounting balance sheet (consolidated for all 21.02.2011 2 standalone subdivisions of the Company)

2. No. 2 Profit and loss statement (consolidated for all 21.02.2011 2 standalone subdivisions of the Company)

3. No. 3 Statement on changes in equity 21.02.2011 3

4. No. 4 Cash flow statement 21.02.2011 1

5. No. 5 Appendix to the accounting balance sheet 21.02.2011 6 the Company'sStatements. from theopinionsetoutinfinalpart oftheReport. internal localactswithregard tocreation oftheannualreport oftheCompany. of financialstatements,conductingauditsandissuingauditor'sreports, aswell asincompliancewith prepared incompliancewithrequirements oftheRussianFederation legislationwithregard topreparation of theCompanywithinperiodfrom 01.01.2010through 31.12.2010inclusively. TheStatementswere relations, areliable reflection ofthefinancialstandingandresults offinancialandeconomicactivities DISSENTING OPINION II. FINALPART o omN.Reportingformtitle Form No. No. We believe thattheconductedAuditgives sufficientgrounds toexpress ouropiniononthereliability of himno h hc-pCmite Committee Check-up the of Chairman Approved bytheCheck-upCommittee'sMinute No.5dated15.04.2011. There isnodissentingopinionexpressed byanyMembersoftheCheck-upCommittee,whichwould differ To ouropinion,theStatementsofCompanyfor2010,attachedtothisReport are, inallsubstantial .-Auditor'sreport onfinancialstatementsoftheJSC - 7. .- 8. Explanatorynote 6. «MOESK» for2010 Annual report about affiliatedandassociatedcompanies) withreflectionofinformation visions oftheCompany, subdivisions oftheCompany) (consolidatedforallstandalonesubdi- (consolidatedforallstandalone APPENDIXES Alimuradova I.A. signing bythe management 10.122 21.02.11 Date of pages inthe Number of document 204 3 183

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

APPENDIX 4. STATEMENTS FOR THE YEAR 2010 PREPARED IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

JSC «MOESK»

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2010

CONTENTS Independent Auditors’ Report Consolidated Statement of Financial Position Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements

184 APPENDIXES 185

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

186

December 31, 2009 December 31, 2010 (recounted) Notes. Thousands roubles Thousands roubles ASSETS

Non-current assets

Property, plant and equipment 12 190 225 639 181 703 490

Intangible assets 13 85 535 95 514

Long-term investments 14 624 800 –

Other non-current assets 15 13 680 640 21 526 771

Total non-current assets 204 616 614 203 325 775

Total non-current assets

Reserves 17 1 674 664 2 199 534

Income tax return 631 841 692 508

Trade and other receivables 18 23 973 028 15 117 615

Short– term investments 14 1 187 2 500 000

Cash and cash equivalents 19 2 931 237 5 094 383

Total current assets 29 211 957 25 604 040 Total assets 233 828 571 228 929 815 nEooisadFnne onEconomicsandFinance HeadofDepartment O.L Bulanova V.V.on EconomicsandFinance Deputy Director General Bragova on itsbehalfbythefollowing: These consolidatedfinancialstatementswasapproved bythemanagementonMay 4,2011andsigned nprpitdpois6 4 7 46025791 18580888 24353546 62746579 18580888 24353546 20 Unappropriated profits Additional capital Share capital Shareholders interests rvsos2 4 8 107646 4033 74390232 228929815 287356 641084 43696070 233828571 78799936 30295127 24 – 763382 66764149 10631321 25 26 36000135 7588366 1289372 65182370 20304497 22 Total equityandliabilities Total 48957961 current liabilities 10893132 6943138 1649275 Provisions 29472416 Trade andotherpayables 25 Other taxespayable 16 23 Income taxpayable 89357213 22 396988 Loans andborrowings 106070674 Total long-termliabilities Trade andotherpayables 389661 deferred taxliabilities Employee benefit Credits andloans Total shareholders’ interests Uncontrollable retained interest by JSC«MOESK»shareholders Total shareholders’ interests owned SHAREHOLDERS INTERESTSANDLIABILITIES Long-term liabilities Current liabilities Notes. December 31,2010 Thousands roubles APPENDIXES 0 8 1 88960225 105 681013 December 31,2009 Thousands roubles (recounted) 187

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Year 2010 Year 2009 Notes Thousands roubles Thousands roubles

Revenues 6 111 731 578 85 830 810

Operating expenses 7 (89 358 961) (66 438 994)

Other operating expenses 9 1 454 203 1 093 945

Operating activity results 23 826 820 20 485 761

Financial income 10 253 957 348 400

Financial expenses 10 (2 490 394) (6 849 681)

Pretax profit 21 590 383 13 984 480

Income tax 11 (4 426 923) (3 476 221)

Profit for the year 17 163 460 10 751 435 Total profit for the year 17 163 460 10 508 259 Total profit owing by:

JSC «MOESK» shareholders 17 170 787 10 755 676

188 Uncontrollable retained interest owners (7 327) (247 417) Base and diluted profit for a common share (roubles) 21 RUB 0.3525 RUB 0.2208

Thousands roubles Share capital owned by the Group holders Uncontrollable Share capital Share assets Additional Undistributed Total retained Total share capital profit interest capital Balance as of January 24 353 546 (8 365) 18 580 888 35 272 726 78 198 795 644 405 78 843 200 1, 2009

Profit for the – – – 10 755 676 10 755 676 (247 417) 10 508 259 year

Total profit for – – – 10 755 676 10 755 676 (247 417) 10 508 259 the year

Shareholders assets sale – 8 365 – (2 610) 5 755 – 5 755 (described in 20 (b)) Balance as of December 24 353 546 – 18 580 888 46 025 792 88 960 226 396 988 89 357 214 31, 2009 Balance as of January 24 353 546 – 18 580 888 46 025 792 88 960 226 396 988 89 357 214 1, 2010 Profit for the – – – 17 170 787 17 170 787 (7 327) 17 163 460 year Cashflowsfrom operatingactivities hnei netre 3 2 671874 6952461 189714 (22158) 81826 (1773222) 535023 476026 179448 (348400) (548294) 4993 (336299) (253957) 791529 492295 98790 533437 6849 681 Change intaxespayable, other thanincometax 34574 268967 Change intradeandotherpayables 10236437 Change inretirement 2490394 benefit obligationsandrelated assets 13984480 connection services Change intradeandotherreceivables, non-current advances given for 13339559 (549244) Change ininventories in working capitalandprovisions 21590383 Cash from operatingactivitiesbefore changes Other non-cashitems 4153 Other non-cashitems Allowance forimpairmentofnon-current assets Allowance forimpairmentofaccountsreceivable Finance costs Finance income Provisions forlegalclaims Loss/(gain) ondisposalofproperty, plantandequipment Depreciation andamortisation Adjustments for: Profit before incometax 2010 31 December Balance at to owners distributions by and contributions Total shareholders Dividends to Contributions byanddistributionstoowners year income forthe comprehensive Total ahfosfo prtosbfr noetxsaditrs ad3 6 5 36 223137 35465 658 Cash flowsfrom operationsbefore incometaxesandinterest paid 43356–1 8 8 276591561033961106070674 389661 105681013 62746579 18580888 – 24 353546 4000 4000 (450000) – (450000) (450000) – (450000) (450000) – (450000) 17163460 – (7327) – 17170787 17170787 – – – – – – Transactions withowners, recorded directly inequity APPENDIXES 7442930487408 37 464209 20796 (2257769) (2 027906) ’000 RUB 2010 (restated) ’000 RUB 2009 189

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Income taxes paid (5 015 516) (4 095 617)

Net cash from operating activities 30 450 142 32 127 520 Cash flows from investing activities

Proceeds from disposal of property, plant and equipment 1 417 182 055

Proceeds from disposal of short-term investments 452 407 -

Acquisition of property plant and equipment (18 925 850) (17 261 829)

Acquisition of intangible assets (49 553) (17 837)

Acquisition of short-term investments (578 594) -

Interest received 60 587 120 365

Net cash used in investing activities (19 039 586) (16 977 246)

2010 2009 ’000 RUB (restated) ’000 RUB Cash flows from financing activities

Proceeds from borrowings 33 839 085 8 700 000

190 Repayment of borrowings (37 561 065) (13 355 763)

Payment of finance lease liabilities (5 818 938) (7 068 366)

Dividends paid (450 000) –

Proceeds from treasury shares – 5 755

Interest paid (3 590 286) (4 490 073)

Net cash used in financing activities (13 581 204) (16 208 447) Net decrease in cash and cash equivalents (2 170 648) (1 058 173)

Cash and cash equivalents at beginning of year 5 094 383 6 152 592

Effect of exchange tariff fluctuations on cash and cash equivalents 7 502 (36)

Cash and cash equivalents at end of year (Note 19) 2 931 237 5 094 383 OF COMPLIANCE STATEMENT (А) OPERATIONS ORGANISATION AND ) А ( ENVIRONMENT RUSSIAN BUSINESS (B) GUIDELINES AND ASSESSMENT PREPARATION (B) BASIS OF connection servicesaspartofitscore operations. networks locatedinMoscowandtheRegion.TheGroup alsoprovides Moscow, 115114,RussianFederation. Region, 142100,RussianFederation. Theactualaddress is3/2, 2ndPaveletskiy proezd, Holding», whichinturnowned50.9%ofJSC«MOESK». shareholders ofOJSCMosenergo on29June2004. electricity sectorrestructuring inaccordance withResolutionNo.1adoptedby Mosenergo, asubsidiaryofRAO UESofRussia,withintheframework ofRussian transference ofassetsandactivitiesrelated totheelectricitytransmissionofOJSC Kompaniya (JSC«MOESK»orthe«Company»)wasestablishedon1April2005by International FinancialReportingStandards («IFRS»). Group. Thefuture businessenvironment may differfrom management’sassessment. the Russianbusinessenvironment onthe operationsandthefinancialpositionof consolidated financialstatementsreflect management’sassessmentoftheimpact to thechallengesfacedbyentitiesoperatinginRussianFederation. The frequent changeswhichtogetherwithotherlegalandfiscalimpedimentscontribute frameworks continuedevelopment, butare subjecttovarying interpretations and which display characteristicsofanemerging market.Thelegal,taxandregulatory Group isexposedtotheeconomicand financialmarketsoftheRussianFederation value. except thatfinancialinvestments classifiedasavailable-for-sale are stated atfair The Group’s principalactivityiselectricity transmissionbymeansofelectrical The Company’sregistered officeisat27,Ordgonikidze street, Podol’sk, Moscow As at31December2010theRussianFederation owned52.7%ofJSC«IDGC - OJSCEnergocentr. - OJSCRepairofElectricalandTechnical EquipmentPlant(RETEP); - OJSCMoskabel’energoremont (MKER); - OJSCMoskabel’set’montaj(MKSM); The Group’s consolidatedfinancialstatementsincludethefollowingsubsidiaries: Open Joint-StockCompanyMoskovskaya Ob’edinennaya Electrosetevaya The consolidatedfinancialstatementshave beenprepared inaccordance with The Group’s operationsare locatedintheRussianFederation. Consequently, the The consolidatedfinancialstatementsare prepared onthehistoricalcostbasis 2. BASIS OFPREPARATION 1. BACKGROUND APPENDIXES 191

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

( C ) The national currency of the Russian Federation is the Russian Rouble («RUB»), FUNCTIONAL AND which is the Company’s functional currency and the currency in which these PRESENTATION consolidated financial statements are presented. All financial information presented CURRENCY in RUB has been rounded to the nearest thousand and its subsidiaries.

(D) The preparation of consolidated financial statements in conformity with IFRSs USE OF JUDGMENTS, requires management to make judgments, estimates and assumptions that affect the ESTIMATES AND application of accounting policies and the reported amounts of assets, liabilities, ASSUMPTIONS income and expenses. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes: • Note 18 – Allowance for trade and other receivables; • Note 23 – Employee benefits; • Note 24 – Provisions; • Note 27 – Financial risk management; • Note 30 – Contingencies.

(E) ii)) AAccountingccounting forfor bbusinessusiness ccombinationsombinations 192 CHANGES IN From 1 January 2010 the Group has applied IFRS 3 Business Combinations (2008) ACCOUNTING in accounting for business combinations. The change in accounting policy has been POLICIES applied prospectively and has had no material impact on earnings per share.

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.

Acquisitions on or after 1 January 2010 For acquisitions on or after 1 January 2010, the Group measures goodwill at the acquisition date as: • the fair value of the consideration transferred; plus • the recognised amount of any non-controlling interests in the acquiree; plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less • the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. lease contractsandtherefore, theclassificationwasnotchanged(see note28). as aresult itwasassessedthatexistinglandleasecontractsdonotqualifyasfinance are met.At1January2010,theGroup reassessed allexistinglandleasecontractsand reclassified ifnecessaryasfinanceleasestheleaseclassificationcriteria term. Theamendedguidancerequires allexistingleasesoflandtobereassessed and leases oflandtobeclassifiedasoperatingregardless ofthelengthlease from 1January2010.Theamendmentremoved theearlierexemptionwhichallowed iiii) Accountingforleasesofland subsidiary. controlling interests are basedonaproportionate amountofthenetassets no goodwillisrecognised asaresult ofsuchtransactions.Theadjustmentstonon- accounted forastransactionswithownersintheircapacityandtherefore share. had noimpactonearningsper interests. Thechangeinaccountingpolicyhasbeenappliedprospectively andhas Financial Statements(2008)inaccountingforacquisitionsofnon-controlling iii) Accountingforacquisitionsofnon-controlling interests value ofthecontingentconsiderationare recognised inprofit orloss. settlement isaccountedforwithinequity. Otherwise,subsequentchangestothefair date. Ifthecontingentconsiderationisclassifiedasequity, itisnot remeasured and are expensedasincurred. or equitysecurities,thattheGroup incursinconnectionwithabusinesscombination, of pre-existing relationships. Suchamountsare generallyrecognised inprofit orloss. profit orloss. i i i ) ) The amendmenttoIAS 17Leasesregarding theleasesoflandbecameeffective Under thenewaccountingpolicy, acquisitionsofnon-controlling interests are From 1January2010theGroup hasappliedIAS 27ConsolidatedandSeparate Any contingentconsiderationpayable isrecognised atfairvalue attheacquisition Costs related totheacquisition,otherthanthoseassociatedwithissueofdebt The considerationtransferred doesnotincludeamountsrelated tothesettlement When theexcessisnegative, abargain purchase gainisrecognised immediatelyin

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iiv)v) RRelatedelated ppartyarty ddisclosuresisclosures The management has early adopted the revised IAS 24 Related Party Disclosures which introduces an exemption from the basic disclosure requirements in relation to related party disclosures and outstanding balances, including commitments, for government-related entities.

vv)) VATVAT onon advancesadvances givengiven andand receivedreceived The Group has changed its accounting policy regarding VAT on advances given and received from net to gross presentation in order to harmonise its accounting policy with the parent company, JSC «IDGC Holding». The effect of this change in accounting policy on total assets and liabilities amounted to RUB 10 114 687 thousand.

vvi)i) ReclassificationReclassification ofof comparativecomparative iinformationnformation During the year the Group reclassified advances for capital expenditure in the amount of RUB 6 590 061 thousand recognised as other non-current assets as at 31 December 2009 (31 December 2008: RUB 11 868 184 thousand) into property, plant and equipment in the amount of RUB 4 592 266 thousand (31 December 2008: RUB 9 977 674 thousand) and into trade and other receivables in the amount of RUB 1 997 795 thousand (31 December 2008: RUB 1 890 510 thousand) to conform with the current period’s presentation.

During the year the Group reclassified amounts of provision for unused vacation 194 in the amount of RUB 326 725 thousand as at 31 December 2009 from provisions to current trade and other payables to conform with the current period’s presentation.

Reclassifications of comparative information were made in order to harmonise presentation with the parent company, JSC «IDGC Holding».

The effect of these changes in accounting policy and reclassification of comparative information is summarised below:

Consolidated Effect of changes statement As previously Total effect of VAT on Provision of financial reported As restated changes Other non- position as at 31 advances given current assets for unused December 2009 and received vacation thousand thousand thousand thousand thousand thousand roubles roubles roubles roubles roubles roubles

Property, plant and 177 111 224 181 703 490 4 592 266 – 4 592 266 – equipment

Other non-current 22 350 779 21 526 771 (824 008) 5 766 053 (6 590 061) – assets

Trade and other 8 771 186 15 117 615 6 346 429 4 348 634 1 997 795 – receivables

Total assets 218 815 128 228 929 815 10 114 687 10 114 687 – – CONSOLIDATION BASIS OF ) A ( Note 2(e)(v),(vi)). in Note2(e),whichaddresses changesinaccountingpolicies. consolidated financialstatements,andhave beenappliedconsistentlybyGroup entities,exceptasexplained January 2009ispresented. consolidated statementoffinancialposition.Hence,noopeningpositionasat1 rvsos4431107646 434371 liabilities Total equityand Provisions payables Trade andother other payables Long-term tradeand Certain comparative amountshave beenreclassified toconformwiththecurrent year’s presentation (see The accountingpoliciessetoutbelowhave beenappliedconsistentlytoallperiodspresented inthese Management considersthatthereclassifications donotresult inamaterialchangetotheGroup’s 1 1 2 2 2 1 014671 1 8 – – 10114687 10114687 228929815 218 815128 9007143696070 39 020711 36000135 30 234082 non-controlling interests tohave adeficitbalance. subsidiary are allocatedtothenon-controlling interests even ifdoingsocausesthe adopted bytheGroup. Lossesapplicable tothenon-controlling interests ina of subsidiarieshave beenchangedwhennecessarytoalignthemwiththepolicies that control commencesuntilthedatethatcontrol ceases.Theaccountingpolicies subsidiaries are includedintheconsolidatedfinancialstatementsfrom thedate that currently are exercisable are takeninto account.Thefinancialstatementsof obtain benefitsfrom itsactivities.In assessingcontrol, potentialvoting rights has thepower togovern thefinancialandoperatingpoliciesofanentitysoasto ((ii) Subsidiaries business combinations.SeeNote2(e)forfurtherdetails. i i) Businesscombinations ) i 3. SIGNIFICANTACCOUNTING POLICIES i B Subsidiaries are entitiescontrolled bytheGroup. Control existswhentheGroup The Group haschangeditsaccounting policywithrespect toaccounting for )

u S s u i b n s e i s d s i

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MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

iiii)ii) AAcquisitionscquisitions ffromrom eentitiesntities uundernder ccommonommon ccontrolontrol Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established; for this purpose comparatives are revised. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group’s controlling shareholder’s consolidated financial statements. The components of equity of the acquired entities are added to the same components within Group equity except that any share capital of the acquired entities is recognised as part of share premium. Any cash paid for the acquisition is recognised directly in equity.

iiv)v) LLossoss ooff ccontrolontrol Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

vv)) TTransactionsransactions eeliminatedliminated oonn cconsolidationonsolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated 196 financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(B) ii)) FForeignoreign ccurrencyurrency ttransactionsransactions FOREIGN CURRENCY Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange tariffs at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange tariff at that date.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange tariff at the date that the fair value was determined. Foreign currency differences arising in retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments which are recognised in other comprehensive income. INSTRUMENTS FINANCIAL (С) interest method,lessanyimpairmentlosses. recognition loansandreceivables are measured atamortisedcostusingtheeffective at fairvalue plus anydirectly attributable transactioncosts.Subsequenttoinitial payments thatare notquotedinanactive market.Suchassetsare recognised initially LLoans andreceivables losses. measured atamortisedcostusingtheeffective interest method,lessanyimpairment then theyare classifiedasheld-to-maturity. Held-to-maturity investments are HHeld-to-maturity investments cash andequivalents. financial investments, loansandreceivables, available-for-sale financialassetsand and settletheliabilitysimultaneously. offset theamountsandintendseithertosettleonanetbasisorrealise theasset statement offinancialpositionwhen,andonlytheGroup hasalegalrightto asset orliability. financial assetsthatiscreated orretained bytheGroup isrecognised asaseparate rewards ofownershipthefinancialassetare transferred. Anyinterest intransferred flows onthefinancialassetinatransactionwhichsubstantiallyallrisksand flows from theassetexpire, orittransferstherightstoreceive thecontractualcash Group becomesapartytothecontractualprovisions oftheinstrument. value through profit orloss)are recognised initially onthetradedateatwhich they are originated.Allotherfinancialassets(includingdesignatedatfair borrowings, andtradeotherpayables. debt securities,tradeandotherreceivables, cashandequivalents, loansand ii) Non-derivativefinancialinstruments ) o e

N Loans andreceivables are acategoryoffinancialassetswithfixedordeterminable If theGroup hasthepositive intentandability toholddebtsecuritiesmaturity, The Group hasthefollowingnon-derivative financial assets: held-to-maturity Financial assetsandliabilitiesare offsetandthenetamountpresented inthe The Group derecognises afinancialassetwhenthecontractualrightstocash The Group initiallyrecognises loansandreceivables anddepositsonthedatethat Non-derivative financialinstrumentscompriseinvestments inequityand a l d n o - s n t

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AAvailable-for-salevailable-for-sale ffinancialinancial aassetsssets Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified in any of the previous categories. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, are recognised in other comprehensive income and presented within equity in the fair value reserve. When an investment is derecognised or impaired, the cumulative gain or loss in other comprehensive income is transferred to profit or loss.

CCashash aandnd ccashash eequivalentsquivalents Cash and cash equivalents comprise cash balances, call deposits and highly liquid investments with maturities at initial recognition of three months or less.

iii)i) Non-derivativeNon-derivative ffinancialinancial lliabilitiesiabilities The Group initially recognises debt securities issued on the date that they are originated. All other financial liabilities are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset 198 and settle the liability simultaneously. The Group has the following non-derivative financial liabilities: loans and borrowings and trade and other payables. Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method

(D) ii)) RRecognitionecognition andand measurementmeasurement PROPERTY, PLANT Items of property, plant and equipment, except for land, are measured at cost less AND EQUIPMENT accumulated depreciation and impairment losses. The cost of property, plant and equipment at the date of transition to IFRSs, was determined by reference to its fair value at that date. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs. INTANGIBLE ASSETS (E) end andadjustedifappropriate. useful lives forthecurrent andcomparative periodsare 2to5years. useful lives ofintangibleassetsfrom thedatethattheyare available foruse.Theestimated as incurred. expenditure oninternallygeneratedgoodwillandbrands,isrecognised intheprofit orloss benefits embodiedinthespecificassettowhichitrelates. Allotherexpenditure, including measured atcostlessaccumulatedamortisationandimpairmentlosses. year endandadjustedifappropriate. by theendofleaseterm.Landisnotdepreciated. and theirusefullives unlessitisreasonably certainthattheGroup willobtain ownership embodied intheasset.Leasedassetsare depreciated over theshorterofleaseterm closely reflects theexpectedpatternofconsumptionfuture economicbenefits useful lives ofeachpartanitemproperty, plantandequipment,sincethismost iiii) Depreciation profit orlossasincurred. The costsoftheday-to-day servicingofproperty, plantandequipmentare recognised in embodied withinthepartwillflowtoGroup anditscostcanbemeasured reliably. in thecarryingamountofitemifitisprobable thatthefuture economicbenefits iii) Subsequentcosts and equipment,isrecognised netwithinotherincome/expensesinprofit orloss. by comparingtheproceeds from disposalwiththecarryingamountofproperty, plant equipment. they are accountedforasseparateitems(majorcomponents)ofproperty, plantand i i i ) ) Amortisation methods,useful lives andresidual values are reviewed ateachfinancialyear Amortisation isrecognised inprofit orlossonastraight-linebasisover theestimated Subsequent expenditure iscapitalisedonlywhenitincreases thefuture economic 4to8years Intangible assetsthatare acquired bytheGroup, whichhave finiteusefullives, are 20to40years 18years Depreciation methods,usefullives andresidual values are reviewed ateachfinancial • Other 13to16years • Transformers andtransformersubstations • Transmission networks • Buildings The estimatedusefullives forthecurrent andcomparative periodsare asfollows: Depreciation isrecognised inprofit orlossonastraight-linebasisover theestimated Depreciation isbasedonthecostofanassetlessitsresidual value. The costofreplacing apartofanitemproperty, plantandequipmentisrecognised The gainorlossondisposalofanitemproperty, plantandequipmentisdetermined When partsofanitemproperty, plantandequipmenthave different usefullives,

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(F) Leases in terms of which the Group assumes substantially all the risks and rewards LEASED ASSETS of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and the leased assets are not recognised in the Group’s statement of financial position.

(G) Inventories are measured at the lower of cost and net realisable value. The cost INVENTORIES of inventories is based on the weighted average principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(H) ii)) Non-derivativeNon-derivative ffinancialinancial aassetsssets IMPAIRMENT A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash 200 flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired can include default or delin- quency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the asset’s original effective interest tariff. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables or held-to-maturity investment securities. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. the CGU(group of CGUs)onapro ratabasis. respect ofCGUsare allocatedtoreduce thecarryingamountsofotherassetsin inflows ofotherassetsoraCGU. generates cashinflowsfrom continuing usethatare largely independent ofthecash be testedindividuallyare grouped togetherintothesmallestgroup ofassetsthat to theassetoraCGU.For thepurposeofimpairmenttesting,assetsthatcannot reflects current marketassessmentsofthetimevalue ofmoneyandtherisks specific cash flowsare discountedtotheirpresent value usingapre-tax discounttariffthat and itsfairvalue lesscoststosell.Inassessingvalue inuse,theestimatedfuture recoverable amount. amount ofanassetoritsrelated cash-generatingunit(CGU)exceedsitsestimated recoverable amountisestimated.Animpairmentlossrecognised ifthecarrying there isanyindicationofimpairment.Ifsuchexiststhentheasset’s and deferred taxassetsare reviewed ateachreporting datetodeterminewhether iii) Non-financialassets other comprehensive income. ery inthefairvalue ofanimpaired available-for-sale equity securityisrecognised in amount ofthereversal recognised inprofit anysubsequentrecov- orloss.However, loss wasrecognised inprofit orloss,thentheimpairmentlossisreversed, withthe the increase canberelated objectively toanevent occurringaftertheimpairment period, thefairvalue ofanimpaired available-for-sale debt securityincreases and interest methodare reflected asacomponentofinterest income.If,inasubsequent loss. Changesinimpairmentprovisions attributabletoapplicationoftheeffective the current fairvalue, lessanyimpairmentlosspreviously recognised inprofit or between theacquisitioncost,netofanyprincipalrepayment andamortisation, The cumulative lossthatisreclassified from equitytoprofit orlossisthedifference sifying thelossesaccumulatedinfairvalue reserve inequity, toprofit orloss. occurring aftertheimpairmentlosswasrecognised. i ) Impairment lossesare recognised inprofit orloss.Impairmentlossesrecognised in The recoverable amountofanassetoraCGUisthegreater ofitsvalue in use The carryingamountsoftheGroup’s non-financial assets,otherthaninventories Impairment lossesonavailable-for-sale financialassetsare recognised byreclas- An impairmentlossisreversed ifthereversal canberelated objectively toanevent

N o n - f i n a n c i a l

a s s e t s APPENDIXES 201

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

(I) ii)) DDefinedefined ccontributionontribution pplanslans EMPLOYEE A defined contribution plan is a post-employment benefit plan under which BENEFITS an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans, including Russia’s State pension fund, are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. Contributions to a defined contribution plan that are due more than 12 months after the end of the period in which the employees render the service are discounted to their present value.

iii)i) DefinedDefined benefitbenefit post-employmentpost-employment pplanslans A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and any unrecognised past services are deducted. The discount tariff is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed annually by a qualified actuary using the projected unit credit method. 202 When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised in profit or loss on a straight- line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in profit or loss.

The Group recognises all actuarial gains and losses in profit or loss for the reporting period under the 10% corridor of the post-employment benefit obligation.

iiii)ii) OtherOther nnon-currenton-current eemployeemployee benefitsbenefits The Group’s net obligation in respect of long-term employee benefits other than pension plans is the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The discount tariff is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Group’s obligations. The calculation is performed using the projected unit credit method. Any actuarial gains or losses are recognised in profit or loss in the period in which they arise.. REVENUE (K) PROVISIONS (J) to theliability. reflects current marketassessmentsofthetimevalue ofmoneyandtherisksspecific determined bydiscountingtheexpectedfuture cashflows atapre-tax tariffthat outflow ofeconomicbenefitswillberequired tosettletheobligation.Provisions are or constructive obligationthatcanbeestimatedreliably, anditisprobable thatan obligation canbeestimatedreliably. to pay thisamountasaresult ofpastserviceprovided bytheemployee andthe bonus orprofit-sharing plansiftheGroup hasapresent legalorconstructive obligation and are expensedastherelated serviceisprovided. iiv) Short-termbenefits acceptance issignedbythecustomer. stages, revenue isrecognized inproportion tothestageofcompletionwhenanact forcontractswhereto thegridnetwork,connectionservicesare or, performedin transmission services. fees are negotiatedseparatelyandare independentfrom feesgeneratedbyelectricity customer totheelectricitygridnetwork. Theterms,conditionsandamountsofthese iii) Connectionservices of MoscowRegion. Tariff AgencyandRegional Energy CommissionofMoscowandtheEnergy Committee transmitted isreceived. Thetariffsforenergy transmissionare approved byFederal comprehensive incomewhenthecustomer’sacceptanceofvolume ofelectricity ii) Electricitytransmission passed tothebuyer orwhentheservicesare provided. recognized whenthesignificantrisksandrewards ofownershipthegoodshave iiii) Otherservices v i ) i )

) i E A provision isrecognised if,asaresult ofapastevent, theGroup hasapresent legal A liabilityisrecognised fortheamountexpectedtobepaidundershort-termcash Short-term employee benefitobligationsare measured onanundiscountedbasis Revenue isrecognized whenelectricityisactivated andthecustomerisconnected Revenue from connectionservicesrepresents anon-refundable feeforconnectingthe Revenue from electricitytransmissionis recognised inthestatement of

) Revenue from installation,repair andmaintenanceservicesothersalesis

C S l

e o O h c n t o t h n r r e t i e c - r c t i

t s e t i y e r o

m r n t v r

i a s b c e n e e r s n s v m e i c f i i e s t s s s i o n APPENDIXES 203

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

(L) ii)) LLeaseease ppaymentsayments OTHER EXPENSES Payments made under operating leases are recognised in profit or loss on a straight- line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic tariff of interest on the remaining balance of the liability.

Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the contingency no longer exists and the lease adjustment is known.

DDeterminingetermining wwhetherhether aann aarrangementrrangement ccontainsontains a lleaseease At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Group the right to control the use of the underlying asset.

At inception or upon reassessment of the arrangement, the Group separates payments and other consideration required by such an arrangement into those for 204 the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments reliably, then an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance charge on the liability is recognised using the Group’s incremental borrowing tariff.

iii)i) SSocialocial eexpenditurexpenditure To the extent that the Group’s contributions to social programs benefit the community at large and are not restricted to the Group’s employees, they are recognised in profit or loss as incurred. TAX EXPENSE INCOME (N) AND COSTS FINANCE INCOME (M) liabilities willberealised simultaneously. intend tosettlecurrent taxliabilitiesandassetsonanetbasisortheir and same taxauthorityonthetaxableentity, orondifferent taxentities,butthey offset current taxassetsandliabilities,theyrelate toincometaxesleviedbythe or substantively enactedbythereporting date. temporary differences whentheyreverse, basedonthelawsthathave beenenacted foreseeable future; and trolled entitiestotheextentthatitis probable thattheywillnotreverse inthe nor taxableprofit orloss; transaction thatisnotabusinesscombinationandaffectsneitheraccounting used fortaxationpurposes.Deferred taxisnot recognised for: amounts ofassetsandliabilitiesforfinancialreporting purposesandtheamounts also includesanytaxliabilityarisingfrom thedeclarationofdividends. and anyadjustmenttotaxpayable inrespect ofprevious years. Current taxpayable using taxtariffsenactedorsubstantively enactedatthereportingfor theyear, date, income. combination, oritemsrecognised directly inequityorothercomprehensive tax are recognised inprofit orlossexcepttotheextentthatitrelates toabusiness net lossposition. or financecostdependingonwhetherforeign currency movements are inanetgainor interest method. or production ofaqualifyingassetare recognised inprofit orlossusingtheeffective finance leases,foreign currency losses. interest method. foreign currency gains.Interest incomeisrecognised asitaccrues,usingtheeffective Deferred taxassetsandliabilitiesare offsetifthere isalegallyenforceable rightto Deferred taxismeasured atthetaxtariffsthatare expectedtobeappliedthe • taxabletemporarydifferences arisingontheinitialrecognition ofgoodwill. • temporarydifferences related toinvestments insubsidiariesandjointlycon- • temporarydifferences ontheinitialrecognition ofassetsorliabilitiesina Deferred taxisrecognised inrespect oftemporarydifferences between thecarrying Current taxistheexpectedpayable orreceivable onthetaxableincomeorloss Income taxexpensecomprisescurrent anddeferred tax.Current taxanddeferred Foreign currency gainsandlossesare reported onanetbasisaseitherfinanceincome Borrowing coststhatare notdirectly attributabletotheacquisition,construction Finance costscompriseinterest expenseonborrowings, employee benefitsand Finance incomecomprisesinterest incomeoncashbalances,bankdepositsand APPENDIXES 205

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

In accordance with the tax legislation of the Russian Federation, tax losses and current tax assets of a company in the Group may not be set off against taxable profits and current tax liabilities of other Group companies. In addition, the tax base is determined separately for each of the Group’s main activities and, therefore, tax losses and taxable profits related to different activities cannot be offset.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

(O) The Group presents basic earnings per share (EPS) data for its ordinary shares. Basic EARNINGS PER EPS is calculated by dividing the profit or loss attributable to ordinary shareholders SHARE of the Company by the average number of ordinary shares outstanding during the reporting period.

(P) An operating segment is a component of the Group that engages in business activities SEGMENT from which it may earn revenues and incur expenses, including revenues and expenses 206 REPORTING that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Board of Directors to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available (see Note 5).

Inter-segment pricing is determined on an arm’s length basis. NOT YETADOPTED INTERPRETATIONS STANDARDS AND NEW (Q) on itsfinancialpositionorperformance. January 2011.TheGroup hasnotyet analysedthelikelyimpactofimprovements recognition ormeasurement purposes,willcomeintoeffectnotearlierthan1 basis. Allamendments,whichresult inaccountingchangesforpresentation, effect oftheamendment. 2011 andisappliedretrospectively. TheGroup hasnotyet determinedthepotential amendment becomeseffective forannualperiodsbeginningonorafter1January for prepayments madewhenthere alsoisaminimumfundingrequirement. The Funding Requirements andtheirInteractionclarifiestheaccountingtreatment of thestandard are issued.TheGroup doesnotintendtoadoptthisstandard early. of thesechangeswillbeanalysedduringthecourseproject asfurtherphases have a significantimpactonGroup’s consolidatedfinancialstatements.Theimpact introduces manychangestotheaccountingforfinancialinstrumentsandislikely be issuedduringthefirsthalfof2011.TheGroup recognises thatthenewstandard was publishedinOctober2010.Theremaining partsofthestandard are expectedto The secondphaseregarding classificationandmeasurement offinancialliabilities November 2009andrelates totheclassification andmeasurement offinancialassets. Instruments: RecognitionandMeasurement. ThefirstphaseofIFRS9wasissuedin ultimately toreplace InternationalFinancialReportingStandard IAS 39Financial or after1January2013.Thenewstandard istobeissuedinphasesandintended these pronouncements whentheybecomeeffective. following willhave animpactontheGroup’s operations.TheGroup planstoadopt these consolidatedfinancialstatements.Ofpronouncements, potentiallythe not yet effective asat31December2010,andhave notbeenappliedinpreparing • Various Improvements toIFRSshave beendealtwithonastandard-by-standard • AmendmentstoIFRIC14:IAS 19–ThelimitonaDefinedBenefit Asset,Minimum • IFRS9FinancialInstrumentswillbeeffective forannualperiodsbeginningon A numberofnewStandards, amendmentstoStandards andInterpretations are APPENDIXES 207

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

4. DETERMINATION OF FAIR VALUE

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and for disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to the respective asset or liability.

(A) The fair value of available-for-sale financial assets and held-to-maturity EQUITY AND DEBT investments is determined by reference to their quoted closing bid price at the SECURITIES reporting date. The fair value of investments in unquoted debt securities is determined based on the present value of future principal and interest cash flows, discounted at the market tariff of interest at the reporting date. The fair value of investments is determined for disclosure purposes only.

(B) The fair value of non-current trade and other receivables is estimated as the TRADE AND OTHER present value of future cash flows, discounted at the market tariff of interest at the RECEIVABLE reporting date. Management believes that the fair value of current trade and other receivables approximates their carrying amount.

(C) The fair value of financial liabilities, which is calculated for disclosure purposes, 208 NON-DERIVATIVE is calculated based on the present value of future principal and interest cash flows, FINANCIAL discounted at the market tariff of interest at the reporting date. In respect of issued LIABILITIES bonds the fair value is determined by reference to their quoted closing price at the reporting date. For finance leases the market tariff of interest is determined by reference to similar lease agreements.

5. OPERATING SEGMENTS

Operating segments are identified on the basis of internal reports on components of the Group that are reviewed each quarter by the Board of Directors, the chief operating decision maker, to allocate resources to a segment and assess its performance.

Management has determined the following reportable segments: • Electricity transmission in Moscow; • Electricity transmission in the Moscow region; • Connection services in Moscow; • Connection services in the Moscow region.

Other activities mainly represent rental income, installation services, repair and technical maintenance of electrical equipment, which have been included in the segment «other». None of these items meets any of the quantitative thresholds for determining reportable segments in 2010 or 2009. 31 DECEMBER2009AREAS FOLLOWS: COMPARATIVE SEGMENTREVENUEANDPROFITBEFOREINCOMETAX FORTHE YEAR ENDED OTHER MATERIAL ITEMSAREAS FOLLOWS: ENDED 31DECEMBER2010AREAS FOLLOWS: THE SEGMENTREVENUEANDPROFITBEFOREINCOMETAX FORTHEYEAR ocw9434485858108218132834 7278902 7024637 5193531 160852 21253 891313 182344 42683 11588 8528508 5949688 891313 182344 1073657 – 9443474 30 1307961 – – 48908995 61800220 1073657 6981954 5181913 439225 86073 110709215 – – Moscow Region – Moscow 12285208 6659750 525298 income tax Reportable segmentprofit before Moscow Region – 49075787 42163172 Moscow 18944958 amortisation Reportable depreciation and Moscow Region 91238959 Moscow Inter-segment revenue Moscow Region Moscow External revenues aia xedtr 992002170722079067 2147047 34 574 13339559 19932020 1121391 34574 12218168 – Impairment lossesonproperty, plantandequipment Capital expenditure Depreciation andamortisation ocwRgo 3 5 131855 3003969 3003969 131855 3135824 – 46881492 – 38438929 3135824 797669 92946 85320421 – – – 6854282 890615 2671342 – 39229541 35674641 9525624 amortisation Reportable depreciation and Moscow Region 74904182 Moscow Inter-segment revenue Moscow Region Moscow External revenues Thousand, RUBIncome Thousand, RUBIncome Thousand, RUB Electric power transmission transmission Electricity 071451 7 9 8 0 25411736 12218168 182105 54271 14478196 10 751435 30 12 163867 10298–5 1 11112205 59217 – 11 052988 Revenues Revenues segment totals Connection Connection Reportable services services APPENDIXES Adjustments tesTotal Others tesTotal Others Consolidated totals 209

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Moscow 6 301 275 – 47 418 6 348 693

Moscow Region 4 751 713 – 11 799 4 763 512 Reportable segment profit before 11 725 759 3 931 860 217 070 15 874 689 income tax Moscow 8 620 568 2 250 469 220 557 11 091 594

Moscow Region 3 105 191 1 681 391 (3 487) 4 783 095

OTHER MATERIAL ITEMS ARE AS FOLLOWS: Reportable Consolidated Thousand, RUB segment totals Adjustments totals Depreciation and amortisation 11 112 204 (875 767) 10 236 437

Capital expenditure 23 302 066 (2 963 773) 20 338 293

Impairment losses on property, plant and equipment – 492 295 492 295

RECONCILIATION OF REPORTABLE SEGMENT PROFIT: Thousand, RUB 2010 2009 Reportable segments profit 25 229 631 15 657 619 210 Other profit or loss 182 105 217 070

Unallocated (3 919 436) (6 855 503) Total profit before income tax per Russian Accounting Standards 21 492 300 9 019 186 Borrowing costs 3 037 246 1 224 000

Expenses associated with leased property, plant and equipment 2 994 049 1 703 233

Allowance for impairment of bank deposits – 1 169 852

Gain on disposal of property, plant and equipment 23 319 675 169

Depreciation and amortisation (1 121 391) 875 768

Provision for legal claims (533 437) 336 299

Provision for unused vacations and bonuses (446 401) (107 245) Allowance for impairment of account receivable and advances for capital (74 574) (180 615) expenditure Effect of loan discounting (441 999) (384 929)

Impairment loss on property, plant and equipment (34 574) (492 295)

Accrued expenses for connection services (2 837 980) 230 921

Other items (466 175) (84 864) Consolidated profit before income tax per IFRS 21 590 383 13 984 480

Segment operating results that are reported to the Board of Directors are determined based on the income and expenses calculated in accordance with Russian Accounting Standards. Segment operating results represent the profit earned by each segment without allocation of finance income and expenses and other income and expenses which are included in «unallocated» component. SEGMENT ASSETS AREPRESENTED INTHETABLE BELOW: RECONCILIATION OFREPORTABLE SEGMENTSASSETS: ocw77579–1212–7857841 15444225 32090325 – 32090325 – 122102 – 68144847 2 162341622 23 302066 – 11712182 – 8219838 – – 1483787 – 14935932 7735739 – 13960436 – 485058 14935932 3272625 122104 – 26421485 9990103 32910 1483787 – 322 70772850 19932 020 132647512 21696175 172445712 57669686 Moscow Region Moscow – – – 367960 Capital expenditure – – Unallocated 11679272 7851556 Moscow Region 33232 2471689 499993 Moscow – 30173105 367960 10144474 139800918 19530828 60128383 Moscow Region Moscow Capital expenditure Unallocated Moscow Region Moscow lmntos( 6 4)(6843173) 227374 (4566043) (894550) (14545298) 3461225 (17380691) 32090325 3757683 2228728 14935932 (3275798) 2971682 (11516 632) (2239948) 226728786 (84711) 240246880 Eliminations 262576794 Other items expenditure 258154494 Allowance forimpairmentofaccountreceivable andadvances forcapital Property, plantandequipment Advances given Accrued expensesforconnectionservices Net-off tradeandotherreceivables andpayables Total assetsperRussianAccountingStandards Unallocated Other assets Reportable segmentsassets osldtdast e FS238851228929815 233828571 Consolidated assetsperIFRS oa ses1037183 1 8 5 8 20035262576794 32090325 3757683 36 411588 190317198 Total assets oa ses1999314 1 7 7 8 49592258154494 14935932 2971682 40317579 199929301 Total assets Thousand, RUB maretlse npoet,patadeupet(2 6)(492 295) (526869) Impairment lossesonproperty, plantandequipment huad U 002009 2010 Thousand, RUB transmission Electricity December 31,2009 December 31,2010 Connection services APPENDIXES te nloae Total Unallocated Other 8189 (662380) (861 839) 211

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Segment assets that are reported to the Board of Directors are determined in accordance with Russian Accounting Standards. Segment assets represent the assets of each segment without allocation of VAT, cash and cash equivalents, inventory and investments held-to-maturity, which are included in «unallocated» component

SEGMENT LIABILITIES ARE PRESENTED IN THE TABLE BELOW:

Electricity Connection Thousand, RUB transmission services Other Unallocated Total

December 31, 2010 Total liabilities 42 102 710 64 502 267 2 153 761 9 992 719 118 751 457

Moscow 38 833 434 42 501 832 2 055 527 – 83 390 793

Moscow Region 3 269 276 22 000 435 98 234 – 25 367 945

Unallocated – – – 9 992 719 9 992 719

December 31, 2009 Total liabilities 40 759 733 65 760 888 1 532 160 30 387 206 138 439 987

Moscow 40 759 733 42 752 725 1 452 173 – 84 964 631

Moscow Region – 23 008 163 79 987 – 23 088 150

Unallocated – – – 30 387 206 30 387 206 212

RECONCILIATION OF REPORTABLE SEGMENTS LIABILITIES: Thousand, RUB 2010 2009

Reportable segments liabilities 106 604 977 106 520 621

Other liabilities 2 153 761 1 532 160

Unallocated 9 992 719 30 387 206

Total liabilities per Russian Accounting Standards 118 751 457 138 439 987

Financial lease liabilities 5 743 195 9 874 020

Deferred tax liabilities 4 123 539 5 735 063

Employee benefit 1 649 274 1 289 372

Provision for unused vacations 773 126 326 725

Reserve for legal claims 641 084 107 646

Unearned income (3 169 107) (2 450 668)

Net-off trade and other receivables and payables (84 711) (11 516 632)

Other items (205 828) (554 089)

Eliminations (464 132) (1 678 820)

Consolidated liabilities per IFRS 127 757 897 139 572 602 and rental income. to theelectricitynetwork oftheGroup. VAT, deferred taxliabilitiesanddeferred income,whichare includedin«unallocated»component. Accounting Standards. Segmentliabilitiesrepresent theliabilities ofeachsegmentwithoutallocation te xess( 6 1)(2291812) 336298 (1865412) (326365) (533437) (381956) (395267) (489864) (502864) (576621) (1202909) (324070) (2004804) (1801661) (492 295) (180616) (4950115) (1888223) (10224577) (34574) (273 960) Other expenses (12762263) Provision forlegalclaims (29016545) Allowance forimpairmentoftradeandotherreceivables, non-current assets (2695 321) (1717031) (10236437) Security services (44019577) Taxes otherthanincometax (2791505) (1129250) (13339559) Telecommunication services Impairment lossesonproperty, plantandequipment Insurance Electricity countservices 890615 Consulting, legal,auditservicesincludingprofessional training Raw materialsandsupplies 526000 Connection services Repairs, maintenanceandinstallationservices 74904182 Rent 10036013 Personnel costs 91238959 Depreciation andamortization 19966619 Electric transmission Other revenue Revenue from connectionservices Electricity transmission Other revenue iscomprisedofinstallation servicesandtechnicalmaintenanceofelectricalequipment Revenue from connectionservicesrepresents servicesrelated toconnectionofcustomers’power receivers Segment liabilitiesthatare reported totheBoard ofDirectors are determinedinaccordance withRussian

7. OPERATING EXPENSES 6. EARNINGS APPENDIXES Thousand, RUB Thousand, RUB 8 5 6)(66438994) (89 358961) 1 3 7 85830810 111 731578 33380 (3054343) (3 353860) 6175 (645445) (631 715) 2010 2010 Thousand, RUB Thousand, RUB 2009 2009 213

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

8. PERSONNEL COSTS 2010 2009 Thousand, RUB Thousand, RUB Salaries and wages (11 548 490) (8 481 187)

Contributions to State pension fund (184 646) (854 246)

Financial aid to employees and pensioners (481 146) (390 234)

Expenses in respect of post employment benefits – defined benefit plan (200 144) (136 413)

Expenses in respect of post employment benefits – defined contribution plan (86 148) (122 740)

Expense in respect of long-term service benefits provided (261 689) (239 757) (12 762 263) (10 224 577)

The average number of employees during the year was 16 266 (in 2009: 15 559). A provision for unused vacation has been included in salaries and wages in the amount of RUB 75 792 thousand for the year ended at 31 December 2009 to conform with the current period’s presentation.

9. OTHER OPERATING INCOME 2010 2009 Thousand, RUB Thousand, RUB Gain on disposal of property, plant and equipment – 549 244 214 Other income 1 454 203 544 701 1 454 203 1 093 945

10. FINANCIAL INCOME AND COSTS 2010 2009 Thousand, RUB Thousand, RUB Financial income Interest income 253 957 348 400 253 957 348 400 Finance costs Interest on employee benefits obligation (147 575) (112 156)

Interest expense (123 460) (3 288 661)

Interest on finance lease (2 219 359) (3 448 828)

Other – (36) (2 490 394) (6 849 681)

11. INCOME TAX EXPENSE 2010 2009 Thousand, RUB Thousand, RUB Current tax expense (5 072 151) (3 349 812)

Deferred tax benefit/(expense) 645 228 (126 409)

(4 426 923) (3 476 221) the calculationofdeferred taxassetsandliabilities. (restated) At 31December2009 (31289474) (492295) (8324010) (5342347) (14272099) Net bookvalue (2858723) At 31December2009 Depreciation (restated) At 31December2009 ipsl 700 1381 1 6)(326 1315 (306816) 22079067 (133165) 20460442 (43256) 794961 (19464) 357013 212992964 (103851) 450087 52 535693 (7080) 28663403 16564 26808285 85567834 Disposals 19417749 Additions At 1January2010 – (761070) 20338293 (68720) (24395910) 17002366 6166449 (22556) 344215 3695463 (159567) 205761 13053116 (495155) 480882 1 2703497 (15072) 82454 Transfers 100 Disposals Additions (20) (restated) (5) 13984480 At 1January2009 accounting policy (2796896) Impact ofchangein 100 previously reported) (679325) At 1January2009(as (20) 21590383 (1) (4318077) (108846) Other non-deductibleandnon-taxableitems,net Income taxatapplicabletariff Profit before incometax ipsl 8 9132 5 5 112471 (492295) (492295) – – 5051 26758 – (10161538) 79173 (20748112) (restated) At 1January2009 – – accounting policy 1489 Impact ofchangein – previously reported) (3310488) At 1January2009(as (1794300) – (5018573) (4217565) (3574805) Disposals (10133707) (839185) Impairment losses (2021027) Depreciation charge At 1January, 2009 Reconciliation ofeffective taxtariff: The Group’s applicabletaxtariffistheincomeof20%(2009:20%).Thishasbeenusedin Thousand, RUB 947798 6 3 688252 6 0 25563212992964 52535693 28663403 26808285 85567834 19 417749 659067 9 3 145982 3 9 20338181703490 52043398 20339393 21465938 71295735 16 559026 12. PROPERTY, PLANTANDEQUIPMENT 12. PROPERTY, buildings Land and 789457 0 7 306682 7 9 99797193415741 59997957 22175295 183438067 50020283 23066628 22175295 70306376 23066628 17 869485 70306376 17 869485 588486 7 6 941831 5 2 99797172667629 59997957 17156722 162689955 50020283 19491823 17156722 60172669 19491823 15 848458 60172669 15 848458 7 7 9977674 9977674 – – – – 7 7 9977674 9977674 – – – – Transmis- networks sion 44693 2)( 7 2)(25) (3476221) (21) (4 426923) Thousand, RUB transformer transformer Transform- substation ers and 002009 2010 APPENDIXES % Other Thousand, in progress Construc- RUB tion Total % 215

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Transfers 3 132 869 10 679 363 7 738 669 8 746 111 (30 297 012) –

At 31 December 2010 22 560 102 96 593 433 34 884 503 38 161 219 42 565 958 234 765 215

Depreciation

At 1 January 2010 (2 858 723) (14 272 099) (5 342 347) (8 324 010) (492 295) (31 289 474)

Depreciation charge (815 782) (5 119 446) (2 113 127) (5 237 159) – (13 285 514)

Impairment losses – – – – (34 574) (34 574)

Disposals 3 833 28 683 11 573 25 829 68 69 986

At 31 December 2010 (3 670 672) (19 362 862) (7 443 901) (13 535 340) (526 801) (44 539 576)

Net book value

At 1 January 2010 16 559 026 71 295 735 21 465 938 20 339 393 52 043 398 181 703 490

At 31 December 2010 18 889 430 77 230 571 27 440 602 24 625 879 42 039 157 190 225 639

(A) Impairment testing in respect of property, plant and equipment was performed as IMPAIRMENT OF at 31 December 2010. The majority of the Group’s property, plant and equipment is PROPERTY, PLANT specialised in nature and is rarely sold on the open market. The market for similar AND EQUIPMENT property, plant and equipment is not active and does not provide a sufficient number of sales transactions for use of a market-based approach for determination of the fair value. Therefore the value in use for property, plant and equipment as at 31 216 December 2010 was determined using projected cash flows. This method considers the future net cash flows expected to be generated through the usage of property, plant and equipment in the process of operating activities up to its ultimate disposal to determine the recoverable amount of the assets.

As a result of impairment testing no impairment loss has been recognized.

During the year the management identified and wrote-off items of construction in progress in the amount of RUB 34 574 thousand (2009: RUB 492 295 thousand) which will not be used in operating activities.

(B) The Group leases production equipment under a number of finance lease LEASED PLANT AND agreements. At the end of each of the leases the Group has the option to purchase MACHINERY the equipment at a beneficial price. At 31 December 2010 the net book value of leased plant and machinery was RUB 17 249 961 thousand (31 December 2009: RUB 18 680 541 thousand). The leased equipment secures lease obligations.

(C) Borrowing costs totalling RUB 3 363 166 thousand as at 31 December 2010 with a CAPITALIZED capitalisation tariff of 9.63% (2009: RUB 1 839 075 thousand with a capitalisation INTEREST tariff of 14.9%) were included in the cost of property, plant and equipment and represent interest on loans. AND EQUIPMENT PLANT PROPERTY, PAYMENTS FOR ADVANCE (D) Non-current Net bookvalue Amortisation Net bookvalue Amortisation t3 eebr21 85535 (78809) 164344 95514 At 31December2010 (110806) At 31December2010 206320 At 31December2010 Disposals Additions At 1January2010 At 31December2009 At 31December2009 At 31December2009 Additions At 1January2009 te netet1500– – 125000 499800 Other investment Promissory notes At 1January2010 Disposals Amortisation At 1January2010 At 1January2009 Amortisation At 1January2009 592 266thousand;31December2008:RUB9977674thousand). property, planandequipmentofRUB3802930thousand(31December2009:4 As at31December2010constructioninprogress includesadvance payments for otaeThousand,RUB Software 13. INTANGIBLE ASSETS 14. INVESTMENTS APPENDIXES Thousand, RUB December 31, December 31, 2 0 – 624 800 2010 2010 (110 806) (91 529) (59 531) (74 899) (35 907) 206 320 188 483 152 576 49 553 17 837 95 514 91 529 Thousand, RUB December 31, December 31, 2009 2009 217

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Current Promissory notes 1 187 2 500 000 1 187 2 500 000

15. OTHER NON-CURRENT ASSETS December 31, December 31, 2010 2009 Thousand, RUB Thousand, RUB Long-term advances for connection services 11 768 621 15 501 842

VAT on advances from customers 1 389 385 4 923 093

Financial assets available for sale 522 634 1 101 836 13 680 640 21 526 771

Financial assets available-for-sale relate to the Group contributions accumulated in solidary and employees’ individual pension accounts with the Non-State Pension Fund of Electric Power Industry. Subject to certain restrictions contributions to the employee benefit fund can be withdrawn at the discretion of the Group.

16. DEFERRED TAX ASSETS AND LIABILITIES 218 (A) Deferred tax assets and liabilities are attributable to the following: RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES Thousand, RUB Assets Liabilities Net 2010 2009 2010 2009 2010 2009 Property, plant and equipment – – (12 095 525) (12 424 178) (12 095 525) (12 424 178)

Intangible assets – 3 002 (2 145) – (2 145) 3 002

Inventories 519 – – (7 787) 519 (7 787)

Trade and other receivables 1 581 727 864 730 – – 1 581 727 864 730

Finance lease liability 2 673 596 3 273 732 – – 2 673 596 3 273 732

Loans and borrowings – – (221 256) (63 644) (221 256) (63 644)

Employee benefits 225 328 37 507 – – 225 328 37 507

Trade and other payables – – (255) (730) (255) (730)

Provisions 282 435 86 526 – – 282 435 86 526

Deferred expenses 498 053 635 694 – – 498 053 635 694

Other 114 385 6 782 – – 114 385 6 782 Tax assets/(liabilities) 5 376 043 4 907 973 (12 319 181) (12 496 339) (6 943 138) (7 588 366) (B) MOVEMENT INTEMPORARYDIFFERENCESDURINGTHEYEAR te 8 6782 6782 86526 635694 – 36340 (730) 37507 (51890) (63644) 50186 (7787) (5666) 383 687584 3273732 3002 76305 864730 (13755) 43173 63706 (1113) (139949) 146143 33517 5968 3210026 114385 (12424178) 718587 (30515) Other 107603 282435 Deferred expenses (418274) Provisions 498053 Trade andotherpayables (255) 6782 (12005904) 195909 Employee benefits 225328 (137641) Loans andborrowings Finance leaseliability 519 86526 475 (221256) Trade andotherreceivables 187821 635694 Inventories 2673596 (2145) Intangible assets (157612) 1581727 8306 Property, plantandequipment 37507 (730) (600136) (5147) (63644) 716997 (7787) 3273732 (12095525) 3002 864730 Other Deferred expenses 328653 Provisions Trade andotherpayables (12424178) Employee benefits Loans andborrowings Finance leaseliability Trade andotherreceivables Inventories Intangible assets Property, plantandequipment Thousand, RUB Thousand, RUB 75836 4 2 (6943138) 645228 (7 588366) 74197 1649 (7588 366) (126409) (7 461957) January, January, 1, 2009 1, 2010 APPENDIXES Carried through profit andloss Recognised in for theperiod profit orloss December, December, 31, 2009 31, 2010 219

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

17. INVENTORIES December 31, December 31, 2010 2009 Thousand, RUB Thousand, RUB Raw materials and consumables 1 255 133 1 727 242

Other 421 799 478 833

Allowance for impairment of inventories (2 268) (6 541) 1 674 664 2 199 534

18. TRADE AND OTHER RECEIVABLES December 31, December 31, 2010 2009 Thousand, RUB Thousand, RUB Trade receivables 9 472 943 6 285 732

Advances given 4 864 598 1 618 529

VAT on advances from customers 7 741 933 4 333 640

VAT receivable 2 206 439 592

Other receivables 601 471 793 654

VAT recoverable 2 122 127 2 308 847 220 Allowance for impairment of accounts receivable (832 250) (662 379) 23 973 028 15 117 615

The Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables are disclosed in Note 27.

19. CASH AND CASH EQUIVALENTS December 31, December 31, 2010 2009 Thousand, RUB Thousand, RUB Petty cash 444 558

Current accounts 1 830 153 4 963 825

Cash equivalents 1 100 640 130 000 Cash and cash equivalents in the statement of financial position and statement of cash flows 2 931 237 5 094 383

The Group’s exposure to interest tariff risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 27.

20. EQUITY (A) SHARE CAPITAL Ordinary shares Ordinary shares Share capital December 31, December 31, 2010 2009 Issued shares, fully paid 48 707 091 574 48 707 091 574

Par value (in RUB) 0.50 0.50 foreign currency risk,seeNote27. are measured atamortisedcost.For more informationabouttheGroup’s exposure tointerest tariffand potential ordinary shares. ordinary calculatedasshownbelow.TheCompanyhasnodilutive shares outstandingduringtheyear, DIVIDENDS (C) TREASURY SHARES (B) entitled toonevote pershare atmeetingsoftheshareholders. rmsoynts136605994163 – 3362388 17967256 1386680 2356507 2971320 2837362 745300 10213 6511632 5651766 2286358 – 2905833 9150000 1141848 25424735 Current portion offinanceleaseliabilities Current portion ofunsecured bankfacility Current portionofunsecured bondissues 0.2208 Promissory notes Unsecured bankfacility Current 0.3525 Finance leaseliabilities 48707091574 Unsecured bonds 48707091574 Promissory notes Unsecured bankfacility Non-current 10755676 17170787 Earnings pershare (RUB) Profit fortheyear attributabletotheshareholders of JSC «MOESK»(‘000RUB) Number ofoutstandingshares This noteprovides informationaboutthe contractualtermsoftheGroup’s loansandborrowings, which The calculationofearningspershare isbasedupontheprofit fortheyear andtheaverage numberof The holdersofordinary shares are entitledtoreceive dividendsas declared from timetoandare thousand (2009:nil). financial statementsprepared inaccordance withRussianAccountingPrinciples. limited tothebalanceofretained earningsasrecorded intheCompany’sstatutory December 2009. in equity. TheGroup didnotholdanyownshares asat31December2010and from saleoftreasury shares intheamountofRUB2610thousandwasrecognized In 2010theCompanydeclared andpaiddividendsintheamountofRUB450000 In accordance withRussianlegislationtheCompany’sdistributablereserves are In 2009theGroup sold5576625treasury shares atRUB5755thousand.Theloss 22. LOANS ANDBORROWINGS

21. EARNINGPERSHARE APPENDIXES Thousand, RUB December 31, December 31, December 31, 0613130 295127 10 631321 20304497 29 472416 2010 2010 2010 Thousand, RUB December 31, December 31, December 31, December 31, 2009 2009 2009 2009 221

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

TERMS AND DEBT REPAYMENT SCHEDULE

Terms and conditions of outstanding loans were as follows: 2010 2009

Cur- Nominal tariff Year of Thousand, RUB matu- Face value Carrying Face value Carrying rency of interest rity amount amount

Unsecured bonds RUB 8.05% 2011 2 416 277 2 416 277 2 415 758 2 415 758

Unsecured bonds RUB 9.3–25% 2010 3 235 489 3 235 489 2 912 069 2 912 069

Unsecured bank RUB 7.76% 2015 1 494 526 1 494 526 - - facility Unsecured bank RUB 7.80% 2015 2 988 844 2 988 844 - - facility Unsecured bank RUB 7.80% 2015 2 988 661 2 988 661 - - facility Unsecured bank RUB 7.87% 2017 2 988 197 2 988 197 - - facility Unsecured bank RUB 7.87% 2017 2 988 046 2 988 046 - - facility Unsecured bank RUB 7.87% 2017 620 452 620 452 - - facility Unsecured bank RUB 8.08% 2013 2 990 932 2 990 932 - - 222 facility Unsecured bank RUB 7.82% 2013 2 990 864 2 990 864 - - facility Unsecured bank RUB 7.83% 2013 2 990 784 2 990 784 - - facility Unsecured bank 2010– RUB 7.80% 993 204 993 204 - - facility 2013 Unsecured bank 2010– RUB 7.80% 1 400 438 1 400 438 - - facility 2013 Unsecured bank 2010– RUB 4.90% 745 300 745 300 - - facility 2011 Unsecured bank RUB 9.58% 2010 - - 3 676 982 3 676 982 facility Unsecured bank 2010– RUB 12.75% - - 9 620 121 9 620 121 facility 2011 Unsecured bank RUB 9.04% 2010 - - 5 100 346 5 100 346 facility Unsecured bank RUB 13.85–10.00% 2010 - - 8 719 807 8 719 807 facility 2009– Promissory notes RUB 9% 2 641 659 2 528 528 4 021 402 3 807 650 2012

Promissory notes RUB 0% 2010 - - 4 750 047 4 472 871

Finance lease liabilities RUB - - - 5 743 195 - 9 874 020

34 473 673 40 103 737 41 216 532 50 599 624 Energocentr’s debt. to restructure bondholders’claimsbyenteringintosettlementagreements ontherepayment ofOJSC RUB 2478172thousand,duetoliquidityproblems. ThemanagementofJSC«MOESK»willmakeanoffer on itsbondsintheamountofRUB757317thousandandfailedtorepurchase bonds intheamountof 12). iii) Expenserecognised inprofit orloss ii) Movementsinthepresent valueofthedefinedbenefitobligations (A) POSTEMPLOYMENT BENEFITS FINANCE LEASE LIABILITIES AREPAYABLE AS FOLLOWS: i ) atsriecs 98629816 90000 338 29816 106261 101480 472 169855 90000 (107515) 106261 101480 508006 (107692) 169855 1127554 (232676) 1146500 1674219 Past servicecost Recognised actuarialgains Interest cost 1127554 Current service costs (417347) 1127554 777 207 (387531) Defined benefitobligationsat31December 1674219 Actuarial losses/(gains) 846155 Interest cost Current servicecost Benefits paidbytheplan Defined benefitobligationsat1January 67000 (440533) Net liabilitiesinthestatementoffinancialposition Net actuarial(gains)/lossesnotrecognised inthestatementoffinancialposition Unrecognised pastservicecost Total present value ofobligations years More thanfive and five years Between one year Less thanone )

M By July2010OJSCEnergocentr failedtopay thefifth,sixthandpartoffourthsemi-annualcoupons All bankloansare unsecured. Thefinanceleaseliabilitiesare secured bytheleasedassets(seeNote Thousand,

E o x v RUB p e e m n s e e n

r t e s

c i o n g

t 5 8 1 8 4 9 46126477269874020 4737246 14611266 5743195 2012188 7 755383 Minimum payments n 7 1 6 9 0 2 3 7 9 8 6338997 3362388 2295881 2326410 8634878 5688798 2807821 2837362 768097 1211343 3 575918 4 048705 h 3 6 2789 1 8 9 1 5 172635 114955 287590 98012 32748 130 760 i e lease s

e p d r

e i n s e

p n r t o

v f a i t l

u neetPrincipal Interest o e 002009 2010 r 23. EMPLOYEE BENEFITS

l o o f s

t s h e

d e f i n e d

b e n e f i APPENDIXES t

o b Minimum payments l i g lease a t i o n Thousand, RUB Thousand, RUB Thousand, RUB s 0 2 226415 301 623 2010 2010 2010 2010 neetPrincipal Interest Thousand, RUB Thousand, RUB Thousand, RUB 2009 2009 2009 2009 2009 223

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

(B) OTHER LONG-TERM EMPLOYEE BENEFITS 2010 2009 Thousand, RUB Thousand, RUB Present value of obligations 803 120 512 165

The Group provides long-service jubilee benefits and funeral benefits for its employees. The whole amount of these obligations is unfunded.

ii)) MMovementsovements iinn tthehe ppresentresent vvaluealue ooff ootherther llong-termong-term eemployeemployee bbenefitenefit oobligationsbligations 2010 2009 Thousand, RUB Thousand, RUB Defined benefit obligations at 1 January 512 165 282 232

Contribution received (16 830) (31 977)

Current service costs 29 450 20 000

Interest costs 46 095 22 156

Actuarial losses recognised in the statement of comprehensive income 232 240 219 754

Defined benefit obligations at 31 December 803 120 512 165

224 iii)i) EExpensexpense rrecognisedecognised inin thethe statementstatement ofof ccomprehensiveomprehensive iincomencome 2010 2009 Thousand, RUB Thousand, RUB Current service costs 29 450 20 000

Interest on obligation 46 095 22 156

Recognised actuarial losses 232 240 219 754

307 785 261 910

(C) ACTUARIAL ASSUMPTIONS Principal actuarial assumptions for both post employment benefits and other long-term employee benefits: 2010 2009

Discount tariff at 31 December 7 % 9 %

Future salary increases 5.4 % 8.6 %

Mortality table Russian 2005 Russian 2005

The expenses of both post employment benefits and other long-term employee benefits are recognised in the following line items in the statement of comprehensive income: 2010 2009 Thousand, RUB Thousand, RUB Operating Expenses 461 833 376 170

Finance costs 147 575 112 156

609 408 488 326 Note 27. additional agreements withrevised termsofexecution. (31 December2009:RUB8580274thousand).TheGroup’s approach tomanagingliquidityisenteringinto not give risetoanysignificantlossbeyond theaccruedamounts. management believes, aftertakingappropriate legaladvice,thattheoutcomeofcurrent legalclaimswill of business.Thebalancetheprovision at31December2010isexpectedtobeutilisedin2011.The Current dacsrcie 3257832126262 366240 53235708 11203568 842961 Property Tax 12273820 1254621 35157174 1299267 9593865 Other payables andaccruedexpenses Advances received Accounts payable –trade 641084 (84125) 617562 Other payables Advances received 107646 (427733) 91434 Balance at31December2010 Provisions usedduringtheyear Provisions raisedduringtheyear Balance at31December2009 Provisions usedduringtheyear Provisions raisedduringtheyear Non-current 443945 Balance at31December2008 The Group’s exposure tocurrency andliquidity risk related totradeandother payables isdisclosedin As at31December2010overdue advances received forconnectionserviceswere RUB11652488thousand Provision forlegalclaimsrelates totheclaimsbrought againsttheGroup withintheordinary course huad U LegalClaims Thousand, RUB 25. TRADEANDOTHERPAYABLES 26. OTHERTAXES PAYABLE

24. PROVISIONS APPENDIXES Thousand, RUB Thousand, RUB December 31, December 31, December 31, December 31, 6741943696070 66 764149 36000135 10 893132 89774951 48 957 2010 2010 2010 2010 Thousand, RUB Thousand, RUB December 31, December 31, December 31, December 31, 2009 2009 2009 2009 225

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Other Taxes 12 917 11 220

Employee taxes 6 006 897

Value added tax 695 502 200 288

763 382 287 356

27. FINANCIAL RISK MANAGEMENT

(A) The Group has exposure to the following risks from its use of financial instruments: OVERVIEW • credit risk • liquidity risk • market risk. This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed 226 regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

(B) Credit risk is the risk of financial loss to the Group if a customer or counterparty to CREDIT RISK a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers, investment securities and bank deposits.

ii)) TTraderade andand ootherther rreceivableseceivables The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.

Approximately 74% (2009: 78%) of the Group’s revenue is attributable to sales transactions with a single customer transacting with the Group for over four years, and, consequently, losses have incurred infrequently. For the purpose of monitoring customer credit risk, the remaining customers are grouped according to their credit characteristics, including aging profile, maturity and existence of previous financial difficulties. The Group management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Based on the analysis performed, individual risk limits are set for each group of customers and these limits are reviewed on a regular basis.

The Group does not require collateral in respect of trade and other receivables.

The Group establishes an allowance for impairment that represents its estimate of anticipated losses in respect of trade and other receivables that relates to individually significant exposures. IMPAIRMENT LOSSES carrying amountat31December2010(2009:RUB3988882thousand). customers towhichthese balances relate have agoodcredit history. that noimpairmentallowanceisnecessaryinrespect ofaccountsreceivable notpastduebecausethe relates todisputableaccountsreceivable withnopayment. was asfollows: to credit riskatthereporting datewas: EXPOSURE TO CREDITRISK vial-o-aefnnilast 2 3 1101836 5094383 2500000 6431310 522634 2931237 625987 9288053 Available-for-sale financialassets Short-term/long-term investments Cash andcashequivalents Trade andotherreceivables eraedet eesl(279 (47542) 648076 563590 132028 752821 (32759) 648076 137504 514186 - 133890 514186 6431310 133890 Balance at31December Decrease duetoreversal 728356 4993 Increase duringtheperiod 19472 Balance at1January 775223 8692327 573324 More thanoneyear Past duelessthanyear Not pastdue The agingoftradeandotherreceivables atthereporting datewas: The Group’s mostsignificantcustomeraccountsforRUB7043080thousandofthetradereceivables Based onpastexperienceandanalysisperformedby thecredit department,Group managementbelieves The impairmentlossat31December2010ofRUB 752 821thousand(2009:RUB648076thousand) The movement intheallowanceforimpairmentrespect oftradeandotherreceivables duringtheyear The carryingamountoffinancialassetsrepresents themaximumcredit exposure. Themaximumexposure Thousand, RUB huad U eebr3,21 December31,2009 December31,2010 Thousand, RUB Gross Amount 00084728170936648076 7079386 752821 10 040874 0021 092009 2009 2010 2010 Impairment Loss From APPENDIXES 3379115127529 13 367911 Thousand, RUB December 31, December 31, Gross Amount Carrying amount 2010 2010 Thousand, RUB December 31, December 31, Impairment Loss From 2009 2009 227

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

iii)i) BankBank deposits,deposits, cashcash andand cashcash eequivalentsquivalents Bank deposits, cash and cash equivalents are now deposited only with financial institutions that at the time of deposit the management considers to have minimal risk of default. Bank deposits, cash and cash equivalents are mainly held at OJSC Bank Moscow, OJSC Sberbank, OJSC Bank VTB, OJSC ATB bank, OJSC Uralsib.

(C) Liquidity risk is the risk that the Group will not be able to meet its financial LIQUIDITY RISK obligations as they fall due. The Group’s objective of liquidity management is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, except circumstances described in Note 23. The Group monitors and manages liquidity risk by maintaining bank credit lines, obtaining loans (Note 22) and sufficient cash balances on its settlement accounts (see Note 19). By July 2010 OJSC Energocentr failed to pay the fifth, sixth and part of the fourth semi-annual coupons on its bonds in the amount of RUB 757 317 thousand and failed to repurchase bonds in the amount of RUB 2 478 172 thousand, due to liquidity problems. Included in this consolidated financial statements carrying amount of the total assets of OJSC Energocentr were RUB 6 943 073 thousand as at 31 December 2010. Subsequently, bankruptcy proceedings were initiated by OJSC Bank Petrocommerce due to failure to meet the repayment schedule. 228 According to a court decision, a monitoring procedure was introduced at OJSC Energocentr in August 2010 in accordance with the Russian law on bankruptcy, and this procedure is currently underway. Further decisions as to the course of the bankruptcy process are expected to be taken in the first half of June 2011 at a general creditors’ meeting. The management of JSC «MOESK» has an intention to finalize uncompleted construction items of OJSC Energocentr, and currently is in the process of assessing the resources required. The management has an intention to conclude settlement agreements in relation to the repayment of the OJSC Energocentr’s debt which will facilitate the postponement of the payment for three to five years and subsequent repayment by instalments. This, in turn, will allow OJSC Energocentr to retain its production assets and complete the items under construction. The management will propose to the board of directors of JSC «MOESK» to consider participation in the financial recovery of OJSC Energocentr including debt restructuring if the mentioned above terms of the amicable settlement agreement are reached. If the settlement agreements are not concluded with creditors of OJCS Energocentr on the above terms, or if the board of directors of JSC «MOESK» does not approve the participation of JSC «MOESK» in the financial recovery of OJSC Energocentr including debt restructuring, bankruptcy procedures will follow in accordance with the legislation of the Russian Federation. The following are the contractual maturities of financial liabilities, including estimated interest payments and the impact of netting agreements: rd aals––1 0 6 – 11203568 – – – 11203568 – – Trade payables rmsoynts–90%–47007––4750047 – – 4444342 5260356 4750047 – – – 2823859 – 10779852 790224 9.00% 830 259 – – 9.00% – – 4977113 5260356 5235603 9.00% 10.57% 567136 Finance leaseliabilities Promissory notes 12.75% 9.04% Promissory notes 12.75% Unsecured bankfacility Unsecured bankfacility neue akfclt .8 10%37986––3789816 3238295 2655870 – – – – 2406920 – 95629 2791606 3789816 446689 153321 11.01% 9.3–25% 8.05% 9.3–25% 9.58% Unsecured bankfacility 8.05% Unsecured bankfacility Unsecured bonds Unsecured bonds liabilities Non-derivative financial rmsoynts90%90%7899747313017–2823859 – 3235489 2545688 1340137 – 13882683 – 724773 758949 – – 20295671 – 9.00% 7463928 10022749 11726113 – 353885 – 2451618 9.00% 557359 3506049 94070 3235489 7.82–8.08% 548271 7.82–8.08% Finance leaseliabilities 9.3–25% 7.76–7.87% 8.05% 7.76–7.87% Promissory notes 9.3–25% 8.05% Unsecured facility Unsecured facility Unsecured bonds Unsecured bonds liabilities Non-derivative financial rd aals––1 7 2 12273820 – – – 12273820 – – Trade payables Thousand, RUB Thousand, RUB 2010 2009 Contract Acc. to agree- 13.85% 18.70– ment Average interest Average interest tariff tariff Effective Effective interest interest 25.02% 62%52484739644192–9798336 – 4491932 4 753906 552498 16.24% 25.02% 12.24– 12.24– tariff tariff 571292 3 6 33472275070531748 287590 23334702 21138167 25 771289 20245640432 6 1 9 8 62812593 7594688 26664917 6480493 22 072495 6 4 2 5 3 7 8 9 14611266 287590 8634878 2721152 2 967646 5 4 9 5 7 1 3 6 7755383 130760 3575918 2392858 1 655847 months months 0-6 0-6 APPENDIXES months months 6-12 6-12 Between Between 1 and5 1 and5 years years More than More than 5 years 5 years Total Total 229

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

(D) Market risk is the risk that changes in market prices, such as foreign exchange MARKET RISK tariffs, interest tariffs and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

ii)) IInterestnterest ttariffariff rriskisk

Changes in interest tariffs impact primarily loans and borrowings by changing either their fair value (fixed tariff debt) or their future cash flows (variable tariff debt). Management does not have a formal policy of determining how much of the Group’s exposure should be to fixed or variable tariffs. However, at the time of raising new loans or borrowings management uses its judgment to decide whether it believes that a fixed or variable tariff would be more favourable to the Group over the expected period until maturity.

PROFILE AAtt tthehe rreportingeporting ddateate tthehe iinterestnterest ttariffariff pprofilerofile ooff tthehe GGroup’sroup’s iinterest-bearingnterest-bearing ffinancialinancial iinstrumentsnstruments was:was: Carrying amount Thousand, RUB 2010 2009

230 Fixed tariff instruments Financial assets 3 557 224 7 594 383

Financial liabilities (40 103 737) (32 259 696)

(36 546 513) (24 665 313) Variable tariff instruments Financial Liabilities – (18 339 928)

FFairair vvaluealue sensitivitysensitivity aanalysisnalysis fforor ffixedixed ttariffariff iinstrumentsnstruments The Group does not account for any fixed tariff financial assets and liabilities at fair value through profit or loss, and the Group does not designate derivatives (interest tariff swaps) as hedging instruments under a fair value hedge accounting model. Therefore a change in interest tariffs at the reporting date would not affect profit or loss.

CCashash fflowlow ssensitivityensitivity aanalysisnalysis fforor vvariableariable ttariffariff iinstrumentsnstruments A change of 100 basis points in interest tariffs at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency tariffs, remain constant. There were no variable tariff instruments at 31 December 2010. interest tariffsonloansextendedtononfinancialorganizations, andwere asfollows: reporting date. AMOUNTS VERSUS CARRYING FAIR VALUES (E) 2009 iaca ses1%13.8% 12.26% 13% 11.20% (11203568) (11203568) (9874020) (7849394) 12273820 Financial Liabilities (9874020) (8280521) (3482 551) Financial assets 12273820 5743195 2543813 (26864 636) 2423420 (5327827) 25 (27117256) 5743195 2528 5612262 2500000 5094 383 23983851 22 22 5651766 625987 26180248 5094383 6431 310 22 22 625987 2931237 6431310 Trade payables 938 386 Finance leaseliability 2931 237 14 9288053 Promissory notes Unsecured bondissues 19 1101836 9 288 053 Unsecured bankloan 522634 18 Cash andcashequivalents 522634 Investments Trade andotherreceivables 15 Available-for-sale financialassets ahfo estvt nt 1339 8 9 1339 183399 13.41% (183399) 15.41% 183399 13.41% (183399) 15.41% Cash flowsensitivity(net) Variable tariffinstruments Liabilities carriedatamortisedcost Assets carriedatamortisedcost Assets carriedatfairvalue The interest tariffsusedtodiscountestimatedcashflows,where applicable,are basedonaverage weighted In relation toissuedbondsthefairvalue isdeterminedbyreference totheirquotedclosingpriceatthe The basisfordeterminingfairvalues isdisclosedin Note4. Thousand, RUB Thousand, RUB amounts showninthestatementoffinancialposition,are asfollows: iii) Foreign currency risks i ) Thousand, RUB The fairvalues offinancialassetsandliabilities,togetherwiththecarrying The Group isnotexposedtoforeign currency risks.

F o r e i g n

c u r Note r e n c y

r i s 285271 4 7 4056313949113 14025693 12845277 12 845277 237575 5 4 6 0 9)(59274169) (61803192) 50156941 52 377557 k Carrying 2 3 2 3 0 3 938386 1101836 522634 522 634 amount s 0021 092009 2009 2010 2010 Increase for 100 b.p. rfto osCapital Profit orLoss APPENDIXES Fair Value Decrease for 100 b.p. 002009 2010 Increase for Carrying amount 100 b.p. Decrease for Fair Value 100 b.p. 231

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

(F) Fair value is the amount at which a financial instrument could be exchanged in a FAIR VALUE HIER- current transaction between willing parties, other than in a forced sale or liquidation, ARCHY and is best evidenced by an active quoted market price.

The estimated fair values of financial instruments have been determined by the Group using available market information, where it exists, and appropriate valuation methodologies. However, judgement is necessarily required to interpret market data to determine the estimated fair value. The Russian Federation continues to display some characteristics of an emerging market and economic conditions continue to limit the volume of activity in the financial markets. Market quotations may be outdated or reflect distress sale transactions and therefore not represent fair values of financial instruments. Management has used all available market information in estimating the fair value of financial instruments.

Available-for-sale financial assets are recognised in the statement of financial position at their fair value. Fair values were determined based on quoted market prices.

(G) The Board’s policy is to maintain a strong capital base so as to maintain investor, CAPITAL creditor and market confidence and to sustain future development of the business. MANAGEMENT The Board of Directors monitors the return on capital, which the Group defines as net operating income divided by total shareholders’ equity, excluding minority interests. The Board of Directors also monitors the level of dividends to ordinary shareholders.

232 The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings, as shown in the statement of financial position, less cash. Total capital is calculated as equity, as shown in the statement of financial position.

Balance Sheet Value Thousand, RUB 2010 2009 Total borrowings (Note 22) 40 103 737 50 599 624

Less: Cash and cash equivalents (Note 19) (2 931 237) (5 094 383)

Net debt 37 172 500 45 505 241

Equity 106 070 674 89 357 213 Debt to equity ratio 35.05% 50.9%

There were no changes in the Group’s approach to capital management during the year. The Company is subject to external capital requirements that require that its net assets as determined in accordance with Russian Accounting Principles must exceed its charter capital at all times. thousand (31 December 2009: RUB 2 735 795 thousand). thousand (31December2009:RUB2735795thousand). for current financeleaseagreements fortheitemsofproperty, plantandequipmentamounttoRUB2735795 entered intonewfinanceleaseagreements fortheitemsofproperty, plantandequipment.Capitalcommitments 2010 amounttoRUB37038128thousand(31December2009:52290520thousand).TheGroup hasnot in 2010(2009:RUB6905800thousand). for RUB1994821thousand(2009:2274929thousand)andtoothercompanies9580549 OJSC «Mosenergosbyt» forRUB101116147thousand(200978230382thousand),toLLC «Rusenergosbyt» substations andotherassetsare located.Leasepayments are reviewed regularly toreflect marketrentals. payments are determinedbyleaseagreements. INSURANCE (A) oeta ieyas386733662142 2210650 500490 826703 3 2219409 536541 More thanfive years Between oneandfive years Less thanoneyear Capital commitments. Sales commitments. The plotsoflandleasedbytheGroup are theareas where theGroup’s electricitynetwork, transformer The Group leasesanumberofplotslandownedbylocalgovernments under operatinglease.Landlease Non-cancellable operatingleaserentals are payable asfollows: operations andfinancialposition. or destructionofcertainassetscouldhave amaterialadverse effectontheGroup’s Until theGroup obtainsadequateinsurancecoverage, there isariskthattheloss damage arisingfrom accidentsonGroup property orrelating toGroup operations. business interruption,orthird partyliabilityinrespect of property orenvironmental generally available. TheGroup doesnothave fullcoverage foritsplantfacilities, many formsofinsuranceprotection common inotherpartsoftheworld are notyet The Group hasentered intocontractstocarryoutelectricitytransmissionservices to The insuranceindustryintheRussianFederation isinadeveloping stateand Future capitalexpenditures forwhichcontractshave beensignedasat31December 28. OPERATING LEASES 30. CONTINGENCIES 29. COMMITMENTS APPENDIXES Thousand, RUB December 31, December 31, 8 5 6373282 6 582653 2010 2010 Thousand, RUB December 31, December 31, 2009 2009 233

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

(B) The Group is party to certain legal proceedings arising in the ordinary course of LITIGATION business. The management does not believe that these matters will have a material adverse effect on the Group’s operating results.

(C) The taxation system in the Russian Federation continues to evolve and is characterised TAXATION by frequent changes in legislation, official pronouncements and court decisions, which are CONTINGENCIES sometimes contradictory and subject to varying interpretation by different tax authorities. IN THE RUSSIAN Taxes are subject to review and investigation by a number of authorities, which have the FEDERATION authority to impose severe fines, penalties and interest charges. A tax year remains open for review by the tax authorities during the three subsequent calendar years; however, under certain circumstances a tax year may remain open longer. Recent events within the Russian Federation suggest that the tax authorities are taking a more assertive and substance-based position in their interpretation and enforcement of tax legislation.

These circumstances may create tax risks in the Russian Federation that are substantially more significant than in other countries. Management believes that it has provided adequately for tax liabilities based on its interpretations of applicable Russian tax legislation, official pronouncements and court decisions. However, the interpretations of the relevant authorities could differ and the effect on these consolidated financial statements, if the authorities were successful in enforcing their interpretations, could be significant.

234

(D) The Company and its predecessors have operated in the electric transmission industry in ENVIRONMENTAL the Russian Federation for many years. The enforcement of environmental regulations in MATTERS the Russian Federation is evolving and the enforcement posture of Government authorities is continually being reconsidered. Management periodically evaluates its obligations under environmental regulations.

Potential liabilities might arise as a result of changes in legislation and regulation or civil litigation. The impact of these potential changes cannot be estimated, but could be material. In the current enforcement climate under existing legislation, management believes that there are no significant liabilities for environmental damage.

31. RELATED PARTY TRANSACTIONS (A) As at 31 December 2010 the Parent of the Group was JSC «IDGC Holding», a state CONTROL controlled entity. The party with ultimate control over the Group is the Government RELATIONSHIPS of the Russian Federation, which held the majority of the voting rights of JSC «IDGC Holding».

(B) There are no transactions or balances with key management and close family TRANSACTIONS members except their remuneration in the form of salary and bonuses. WITH MANAGEMENT ((i)i) ManagementManagement remunerationremuneration AND CLOSE FAMILY Total remuneration in the form of salary and bonuses paid to the key management MEMBERS and the members of the Board of Directors during the year ended 31 December 2010 was RUB 278 243 thousand (2009: RUB 228 246 thousand). for thefirsthalfofJune2011. parent companyintheamountofRUB4750047thousandMay 2008and repaid in2010. RELATED PARTIES WITH OTHER TRANSACTIONS (C) dacsgvn––9.6 96.20% 24.03% 98.86% – 23.92% 38.09% – – 88.30% 33.34% – – 93.03% – – – 47.52% – and otherstatecontrolled entities – 86.92% Entities undercommoncontrol oftheparent Loans received: 55.94% – 86.14% – Advances given Advances received Trade andotherpayables Trade andotherreceivables Expenses Revenue The preliminary dateforthecreditors’ meetinginrelation tobankruptcyofOJSCEnergocentr isscheduled Loans are received underthemarketinterest tariffexceptforinterest free loansreceived from the Thousand, RUB 32. EVENTSSUBSEQUENTTO THEREPORTINGDATE a percentage ofthetotalamount. is thesame,regardless ofwhetherthecustomerisastateentityornot. has adifferent tariffforeachregion oftheRussianFederation. Withineachregion thetariff Federal ServiceonTariffs andtheRegionalEnergy Commissionineachregion. TheGroup of regional tariffs.Inaccordance withlegislationtheGroup’s tariffsare controlled bythe represents entitiesundercommoncontrol oftheparent andotherstatecontrolled entities. The transactionswithotherrelated partiesandtherelated balancesare shownbelowas The RussianGovernment directly affects theGroup’s operationsthrough thesystem The Group’s otherrelated partytransactionsare disclosedbelow.Otherrelated party Transaction 97550–1 4 5 17900641 14640051 – 19 775570 97550–1 4 5 17900641 14640051 – 19 775570 value 002009 2010 002009 2010 Percentage ofthetotalamount (%) APPENDIXES Transaction value December 31, December 31, December 31, December 31, Outstanding Balance 2010 2010 December 31, December 31, December 31, December 31, Outstanding Balance 2009 2009 235

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

APPENDIX 5. INFORMATION ABOUT COMPLIANCE WITH THE CODE OF CORPORATE CONDUCT Prepared in accordance with the Instruction of the Federal Committee for Securities Market dated 30.04.2003 No.03-849/r «On methodological recommendations for structure and form of representing information about compliance with the Code of Corporate Conduct in annual reports of joint-stock companies.»

Complied № Provision of the Code of Corporate Conduct or not com- Note plied with

General meeting of shareholders 1. The shareholders shall be notified about a scheduled general Complied with Specified in the p. 11.5. Art. 11 of the Company’s meeting of shareholders not later than 30 days before the Articles of Association. date of the meeting irrespective of the items on the agenda, if a longer period is not legally provided. 2. The shareholders shall have an opportunity to get acquainted Complied with Specified in the p. 6.2. Art. 6 of the Company’s Articles with the list of persons entitled to participate in annual of Association. general meeting of shareholders, starting from the day, on which the meeting is announced until the closing date of an on-site general meeting of shareholders, and if the shareholders meeting is in absentia, until the last date of filing the voting bulletins. 236 3. The shareholders shall have an opportunity to get acquainted Complied with Specified in the Provision of the Company on preparing with information (materials) to be submitted during and holding a General Meeting of shareholders. The preparations to a general meeting of shareholders through Company’s website: http://www.moesk.ru. electronic means of communication, including Internet. 4. The shareholders shall have an opportunity to propose an Complied with Specified in the p. 6.2. Art. 6, p. 14.2. Art. 14 of the item to the agenda for a general meeting of shareholders Company’s Articles of Association. or demand to convene a general meeting of shareholders without submission of an extract from the shareholders register if his rights to shares are accounted for through the system of shareholders register, and if his rights to shares are accounted for on a depository account, an extract form this depository account is sufficient to exercise the above mentioned rights. 5. The articles of association or internal documents of the Partially According to the p. 5.2.2. of the Corporate Governance joint-stock company shall require the obligatory presence complied with Code of the JSC «MOESK», wherever possible, the of the general director, members of the management board, Company ensures the presence of shareholders, members of the board of directors, members of the Check-up members of the Board of Directors, executive bodies, Committee and the auditor of the joint-stock company at a the Check-up Committee and the Auditor of the general meeting of shareholders. Company at the General Meeting of shareholders and authorizes them to answer questions of shareholders. The Company’s Articles of Association and internal documents contain no provisions on their obligatory presence at the General Meeting of shareholders. However, according to the existing practices, the General Director of the Company, the Chairman of the Board of Directors and members of the Board of Directors are present at General Meetings of the Company.According to the p. 10.10 Art. 10 of the Company’s Articles of Association, functions of the Chairman at the General Meeting of shareholders are performed by the Chairman of the Board of Directors. In case of absence of the Chairman of the Board of Directors and his/her deputy, the Chairman's functions at the General Meeting of shareholders may be performed by any member of the Board of Directors pursuant to a resolution of the Company’s Board of Directors, or a resolution of the members of the Board of Directors present at the General Meeting of shareholders. The Board ofDirectors 15. 14. 13. 0 Thearticlesofassociationthejoint-stockcompanyshall 10. 1 Thearticlesofassociationthejoint-stockcompanyshall 11. 2 Thearticlesofassociationthejoint-stockcompanyshall 12. Provision oftheCodeCorporateConduct № .Candidatesshallbepresent whenageneral meetingof 6. 7. 8. .Thejoint-stockcompanyshallhave ariskmanagementprocedure 9. the area offinance,taxesanddues,securitiesmarket. infringements oflawinthearea ofentrepreneurial businessorin persons againstwhomadministrative penaltieswere appliedfor service interests, andinterests ofserviceinlocalauthorities,or economic crimesoragainststate authorities,state include personswhohave beenfound guiltyofcommitting The board ofdirectors ofthejoint-stockcompanyshallnot requirements oftheCodeCorporateConduct. include minimumthree independent directors whomeetthe The board ofdirectors ofthejoint-stockcompanyshall the managementboard. general director (managingcompany, manager)andmembersof approval ofthetermsandconditionsagreements withthe and membersofthemanagementboard, benotcountedfor members oftheboard ofdirectors, whoare thegeneraldirector stock companyshallcontainarequirement thatthevotes ofthe The articlesofassociationorinternaldocumentsthejoint- financial andeconomicplanofthecompany. include theboard ofdirectors' authoritytoapprove anannual The articlesofassociationthejoint-stockcompanyshall general meetingofshareholders. prescribe theprocedure forregistration ofparticipantsthe The internaldocumentsofthejoint-stockcompanyshall appointment oftheauditorjoint-stockcompany. management board, andmembersoftheauditcommission of theboard ofdirectors, membersofthe generaldirector, shareholders discussesquestionsaboutelectionofmembers approved bytheboard ofdirectors. general meetingofshareholders. on suspensionofauthoritythegeneraldirector appointedbya prescribe therightofboard ofdirectors topassaresolution the mainstructuraldivisionsofjoint-stockcompany. membersofthemanagementboard,the generaldirector, headsof requirements forthequalificationandsizeofremuneration of prescribe therightofboard ofdirectors toestablish of themanagementboard. conditions ofagreements withthegeneraldirector andmembers prescribe therightofboard ofdirectors toapprove termsand not complied Complied or opidwt TheCompany’sBoard ofDirectors doesnot Complied with TheCompany’sBoard ofDirectors includes Complied with Sp.18p.15.1art.15oftheCompany’s Complied with P. 5.1.oftheProvision onpreparing and Complied with Complied with opidwt Sp.31p.15.1Art.15oftheCompany’s Complied with opidwt Specifiedinthep.20.5Art.20of Complied with complied with complied with APPENDIXES Not complied Partially Partially with with include suchpersons. no lessthan3(three) independent directors. documents. Company’s ArticlesofAssociationorinternal There isnosuch arequirement inthe Articles ofAssociation. holding aGeneralMeetingofshareholders. shareholders. receive invitationstotheGeneralMeetingof Meeting ofshareholders, thecandidates Committee are tobediscussedattheGeneral of theManagementBoard, theCheck-up of Directors, member theGeneralDirector, about electionofmemberstheBoard As amatterofpractice,whenanyquestions the generalmeetingofshareholders. that thesaidcandidatesshallbepresent at The legislationoftheRFdoesnotprescribe 110). of Directors dated10.06.2010(MinuteNo. was approved bytheresolution oftheBoard Risk managementpolicyintheJSC«MOESK» Board ofDirectors. Managing Company(themanager)bythe possibility ofsuspendingpowers ofthe Articles ofAssociationspecifiesthe and topmanagersoftheCompany. financial stimulationoftheGeneralDirector of Directors hasapproved provisions on main structuralsubdivisions.TheBoard management board, andheadsofthe membersofthe the GeneralDirector, of andtheamountremuneration for to setrequirements astothequalification specify anyrightoftheBoard ofDirectors The Company’sArticlesofAssociationdonot Company’s ArticlesofAssociation. Note 237

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Complied or № Provision of the Code of Corporate Conduct not complied Note with

16. The board of directors of the joint-stock company shall not include Complied with The Company’s Board of Directors does not persons who are members, general directors (managers), members include such persons. of management bodies, or workers of a legal entity competing with the joint-stock company.

17. The articles of association of the joint-stock company shall require Complied with Specified in the p. 10.8. Art. 10. of the the election of the board of directors by cumulative voting. Company’s Articles of Association.

18. The internal documents of the joint-stock company shall prescribe Partially com- According to the p. 6.1.6 of the Corporate that the members of the board of directors refrain from actions plied with Governance Code, the members of the Board which will or potentially may result in a conflict between their of Directors shall refrain from actions which interests and those of the joint-stock company, and if such conflict may result in a conflict between their occurs, they shall disclose information about the conflict to the interests and those of the Company. In case board of directors. of such conflict, the member of the Board of Directors shall inform other members of the Board of Directors about that, and refrain from voting on the relevant questions. Besides, according to the sense of p. 3.5. of the Provision on the order of convening and holding meetings of the Board of Directors, the members of the Board of Directors, when exercising their rights and discharging their duties, shall act for the benefit of the Com- pany, and exercise their rights and discharge their duties reasonably and in good faith in respect of the Company. 238 The internal documents of the joint-stock company shall prescribe Complied with Provision on information policy. Provision on the obligation of members of the board of directors to notify the insider information. board of directors in writing of their intent to make transactions with securities of the joint-stock company of whose board of direc- 19. tors (or its subsidiaries/dependant companies) they are members, or with those of affiliated (associated) companies, as well as to disclose information about transactions made by them with such securities.

The internal documents of the joint-stock company shall require Complied with Specified in the p. 18.2 Art. 18 of the Com- 20. that meetings of the board of directors be held at least once every pany’s Articles of Association. six weeks.

Meetings of the board of directors of the joint-stock company shall Complied with There were 24 meetings of the Board of be held during the reporting year for which the annual report of Directors held in 2010, with regularity of no 21. the joint-stock company is prepared, at least once every six weeks. less than once a month.

The internal documents of the joint-stock company shall prescribe Complied with Art. 7. of the Provision on the order of con- 22. the procedure for the board of directors' meetings. vening and holding meetings of the Board of Directors.

The internal documents of the joint-stock company shall include Complied with Sp. 23 p. 15.1 Art. 15 of the Company’s a provision indicating that the board of directors shall approve Articles of Association specify an approval 23. transactions of the joint-stock company in the amount of 10% and of transactions with the value of 5 to 25% of more of the value of the company's assets except for transactions the book value of the assets. made in the course of ordinary activities. The internal documents of the joint-stock company shall include Complied with Specified in the p. 3.1. of the Provision on the right of the board of directors to obtain information from the order of convening and holding meetings executive bodies and heads of the main structural subdivisions of of the Board of Directors. 24. the joint-stock company as may be necessary to fulfill their duties, as well as provision about responsibility for failure to submit such information.

The board of directors shall have a strategic planning committee, or Complied with The resolution of the Board of Directors dat- the functions of the above committee shall be assigned to another ed 26.09.2007 (minute No. 49) established 25. committee (except for the audit committee, and the personnel and the Strategy and Development Committee remuneration committee). under the Board of Directors. 34. 33. 32. 31. 30. 29. 28. 27. 26. 37. 36. 35. Provision oftheCodeCorporateConduct № and work ofthecommitteesunderboard ofdirectors. by theboard ofdirectors, whichregulate theprocedure forcreation The joint-stockcompanyshallhave internaldocumentsapproved by anindependentdirector. The corporateconflictsmanagementcommitteeshallbemanaged officers ofthejoint-stockcompany. The corporateconflictsmanagementcommitteeshallnotinclude the personnelandremuneration committee). signed toanothercommittee(exceptfortheauditcommittee,and committee, orthefunctionsofabove committeeshallbeas- The board ofdirectors shallhave acorporateconflictsmanagement tion committee). (except fortheauditcommittee,andpersonnelremunera- of theabove committeeshallbeassignedtoanother The board ofdirectors shallhave ariskcommittee,orthefunctions ficers ofthejoint-stockcompany. The personnelandremuneration committeeshallnotincludeof- independent director. The personnelandremuneration committeeshallbemanagedbyan remuneration policyofthejoint-stockcompany. selection ofcandidatestotheboard ofdirectors anddevelop the remuneration committee)withthefunctiontospecifycriteriafor The board ofdirectors shallhave acommittee(personneland that theydonotdiscloseconfidentialinformation. document andinformationofthejoint-stockcompanyprovided that allmembersoftheauditcommitteeshallhave accesstoany TheAuditCommitteeismanagedbyan The internaldocumentsofthejoint-stockcompanyshallprescribe Compliedwith The auditcommitteeshallbemanagedbyanindependentdirector. executive directors. The auditcommitteeshallconsistonlyofindependentandnon- the company. stock companyandinteractswithhimtheauditcommissionof which recommends anauditortotheboard ofdirectors ofthejoint- The board ofdirectors shallhave a committee (auditcommittee) APPENDIXES not complied Complied or opidwt Provision ontheReliability Commit- Complied with ThePersonnel andRemunerationCom- Complied with ThePersonnel andRemunerationCom- Complied with Theresolution oftheBoard ofDirectors Complied with Provision ontheAuditCommitteeunder Complied with TheAuditCommitteeincludesonlyinde- Complied with Theresolution oftheBoard ofDirectors Complied with Not complied Not complied Not complied Not complied with with with with with Company. There isnosuchaCommitteeinthe Company. There isnosuchaCommitteeinthe Company. There isnosuchaCommitteeinthe Company. There isnosuchaCommitteeinthe independent director. dated 11.02.2009(minuteNo.79). the Board ofDirectors oftheJSC«MOESK» ical ConnectiontoElectricNetworks under Provision ontheCommitteeforTechnolog- edition dated28.12.2007(minuteNo. 54); Directors oftheJSC«MOESK»innew velopment CommitteeundertheBoard of 110); Provision onthe Strategy andDe- new editiondated10.06.2010(minuteNo. of Directors oftheJSC«MOESK» inthe Remuneration CommitteeundertheBoard 110); Provision onthePersonnel and of Directors on10.06.2010 (minuteNo. in thenewedition,approved bytheBoard the Board ofDirectors oftheJSC«MOESK» Provision ontheAuditCommittee under Directors on10.12.2009(minute No.98); JSC «MOESK»,approved by theBoard of tee undertheBoard ofDirectors ofthe Company. mittee doesnotincludeofficersofthe director. mittee ismanagedbyanindependent Committee undertheBoard ofDirectors. lished thePersonnel andRemuneration dated 26.09.2007(minuteNo.49)estab- the Board ofDirectors. pendent directors. Board ofDirectors. lished theAuditCommitteeunder dated 13.12.2006(minuteNo.37)estab- Note 239

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Complied or № Provision of the Code of Corporate Conduct not complied Note with

38. The articles of association of the joint-stock company shall pre- Not complied The Company’s Articles of Association contain scribe the procedure for defining quorum of the board of directors with no requirements as to the procedure for that enables ensuring of the obligatory participation of indepen- defining quorum of the Board of Directors dent directors in any meetings of the board of directors. to ensure the obligatory participation of independent directors in meetings of the board of directors of the Company. The Company’s Articles of Association were prepared based on the legislation of the RF, pursuant to which the quorum for holding a meeting of the company’s board of directors shall be defined by the company’s articles of association; however it shall not be less than a half of the elected members of the company’s board of directors. According to the p. 18.12. of the Company’s Articles of Association, resolutions of the Board of Directors are legally qualified if no less than a half of the members of the Company’s Board of Directors were participating in discussion over them.

Executive bodies

39. The joint-stock company shall have a collegial executive body Complied with According to the p. 9.1 Art. 9.1. of the (management board). Company’s Articles of Association, there is a 240 collegial executive body—the Management Board—established in the Company.

40. The articles of association or internal documents of the joint- Complied with According to the p. 21.2. Art. 21 of the stock company shall prescribe that the management board shall Articles of Association of the JSC «MOESK» approve real estate transactions, borrowing loans by the joint-stock and p. 10-11 of the Provision on the company, if the said transactions are not falling into the category Management Board of the JSC «MOESK» of large transactions and not relating to ordinary activity of the Art. 5, p. 5.9., p. 14-16, there are provisions joint-stock company. specified about the necessity that questions about real estate transactions be discussed by the management board, and credits be received by the joint-stock Company, if the said transactions are not falling into the category of large transactions and not relating to ordinary activity of the joint-stock company. 41. The internal documents of the joint-stock company shall prescribe Complied with Provision on the credit policy of the the procedure for approval of transactions which are beyond the Company. scope of the financial and economic plan the joint-stock company.

42. The executive bodies shall not include persons who are members, Complied with general directors (managers), members of management bodies, or workers of a legal entity competing with the joint-stock company.

43. The executive bodies shall not include persons who have been Complied with The Company’s executive bodies do not found guilty of committing economic crimes or crimes against state include the said persons. authorities, state service interests, and interests of service in local authorities, or persons against whom administrative penalties were applied for infringements of law in the area of entrepreneurial business or in the area of finance, taxes and dues, and securities market. If the functions of the sole executive body are performed by a managing company or a manager, the general director and members of the management board of the managing company shall meet the requirements specified for the general director and members of the management board of the joint-stock company. Company’s Secretary 51. 50. 48. 47. 46. 45. 44. 49. Provision oftheCodeCorporateConduct № company (amanager). stock companyshallcontaincriteriaforselectingamanaging The articlesofassociationorinternaldocumentsthejoint- they shallinformtheboard ofdirectors aboutthat. and thoseofthejoint-stockcompany, andifsuchconflictoccurs, will orpotentiallymay result inaconflictbetween theirinterests prescribe thattheexecutive bodiesrefrain from actionswhich The internaldocumentsofthejoint-stockcompanyshall company (amanager). stock companyapartfrom rendering ofservicesamanaging as well astobeinanyotherproperty relations withthejoint- manager) toperformequalfunctionsincompetitive companies, stock companyshallprohibit themanagingcompany(the The articlesofassociationorinternaldocumentsthejoint- Secretary. contain requirements astothecandidatepositionof The articlesofassociationthejoint-stock companyshall company's secretary. (election) ofthecompany'ssecretary andliabilitiesofthe stock companyshallprescribe theprocedure forappointment The articlesofassociationorinternaldocumentsthejoint- exercised. interests oftheshareholders ofthejoint-stockcompanyare requirements whichguaranteethattherightsandlegitimate officers ofthejoint-stockcompanyfollowprocedural secretary) whosemission istomakesure thatthebodiesand The joint-stockcompanyshallhave aspecialofficer(company's information. violation ofprovisions ontheuseofconfidentialandinside of themanagementboard shallprescribe theresponsibility for the generaldirector (managingcompany, manager)andmembers Any agreements concludedbetween thejoint-stockcompanyand monthly reports ontheiractivitiestotheboard ofdirectors. The executive bodiesofthejoint-stockcompanyshallsubmit not complied Complied or opidwt Specifiedinthep.4.2.ofProvision onthe Complied with complied with complied with complied with complied with Not complied Not complied Not complied APPENDIXES Partially Partially Partially Partially with with with with of Directors. person soauthorizedbytheCompany’sBoard by theCompany’sBoard ofDirectors, orbya respect ofthetermpowers, shallbedefined and conditionsoftheagreement, includingin by theCompany’sBoard ofDirectors. Terms Board ofDirectors, orbyapersonsoauthorized be signedbytheChairmanofCompany’s The agreement onbehalfoftheCompanyshall company (themanager)withtheCompany. the agreement concludedbythemanaging legislation oftheRussianFederation andby operations oftheCompanyare definedbythe in respect ofmanagingtheday-to-day of themanagingcompany(themanager) Art. 20,specifythattherightsandduties The Company’sArticlesofAssociation,p.20.3 General Director isincludedinit). of theBoard ofDirectors (provided thatthe relevant questionsontheagendaofmeetings and refrain from discussingandvoting onthe the Company’sBoard ofDirectors aboutthat, conflict, theGeneralDirector shallinform and thoseoftheCompany. Incaseofsuch result inaconflictbetween his/herinterests Director shallrefrain from actionswhichmay Governance Code,theCompany’sGeneral According tothep.6.2.7.ofCorporate the Board ofDirectors order ofconvening andholdingmeetingsof of Directors. convening andholdingmeetingsoftheBoard by virtueoftheProvision onthe order of The Secretary oftheBoard ofDirectors acts frequency ofsubmittingreports isnotdefined. the Company’sArticlesofAssociation.The Specified inthesp.34p.15.1Art.15.of documents donotspecifysuchaprovision. The ArticlesofAssociationandinternal to thepositionofCompany’sSecretary. not containrequirements astothecandidate The articlesofassociationthecompany do inside information. of provisions ontheuseofconfidentialand do notspecifyaresponsibility forviolation stock CompanywiththeGeneralDirector The agreements concludedbythejoint- Note 241

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Complied or № Provision of the Code of Corporate Conduct not complied Note with

Material corporate actions

52. The articles of association or internal documents of the joint- Partially com- According to the Company’s Articles of Asso- stock company shall contain a requirement for approval of a plied with ciation, the competency of the general meet- major transaction before it is made. ing of shareholders (sp. 17 p. 10.2 Art. 10) and the Board of Directors (sp. 24 p. 15.1 Art. 15) includes an approval of large transactions in cases specified in the Chapter X of the Federal Law «On joint-stock companies".

53. An independent appraiser shall be involved to determine the Complied with Practically applied according to the require- market value of the property being the subject of a major ments of the Federal Law «On joint-stock transaction. companies».

54. In the event of an acquisition of large shareholdings in the Not complied These requirements are not defined by the joint-stock company (takeover), the articles of association of with articles of association. the joint-stock company shall prohibit any actions being aimed at protection of interests of the executive bodies (members of those bodies) and members of the board of directors of the joint- stock company, and worsening the standing of the shareholders in comparison with their current standing (in particular, any decisions on issue of additional shares, issue of securities convertible into shares, or securities which entitle to purchase the company's shares, made by the board of directors before expiration of the term presumed for acquisition of the securities 242 shall be prohibited, even if the board of directors is entitled to make such decisions pursuant to the articles of association). 55. The articles of association of the joint-stock company shall Not complied Practically applied according to the require- require that an independent appraiser be involved to determine with ments of the Federal Law «On joint-stock the current market value of the shares and possible changes in companies». There is no such a provision in their market value as a result of takeover. the Company’s articles of association.

56. The articles of association of the joint-stock company shall Complied with There is no such a requirement in the Articles not include a provision on release of the purchaser from the of Association. obligation to suggest that the shareholders sell the company's ordinary shares owned by them (equity securities convertible into ordinary shares) in the course of a takeover.

57. The articles of association or internal documents of the joint- Not complied There is no such a requirement in the Articles stock company shall require that an independent appraiser be with of Association. involved to determine the shares conversion ratio in the course of reorganization.

Disclosure of information

58. An internal document shall be approved by the board of Complied with Provision on information policy of the Com- directors, which specifies the rules and approaches of the joint- pany was approved by the resolution of the stock company as to disclosure of information (Provisions on Board of Directors on 30 April 2010 (Minute Information Policy). No. 107).

59. The internal documents of the joint-stock company shall contain Not complied The corresponding requirements will be ob- a requirement to disclose information about share placement with served, if the Company places shares. purposes, persons who intend to acquire the shares to be placed, including a large equity stake, as well as whether the top executives of the joint-stock company will participate in acquisition of the company's shares to be placed.

60. The internal documents of the joint-stock company shall contain Complied with Provision on information policy of the Com- a list of information, documents and materials which shall pany. be submitted to the shareholders for the purpose of solving questions proposed to the general meeting of shareholders. Control over financialandeconomicactivity 69. 68. 67. 66. 64. 63. 62. 61. 65. Provision oftheCodeCorporateConduct № entity competingwiththejoint-stock company. (managers), membersofmanagement bodies,orworkers ofalegal company, aswell aspersonswhoare members,generaldirectors who are membersoftheexecutive bodiesofthejoint-stock The supervisionandauditingservice shallnotincludepersons taxes anddues,securitiesmarket. in thearea ofentrepreneurial businessorinthearea offinance, administrative penaltieswere applied forinfringementsoflaw interests ofserviceinlocalauthorities, orpersonsagainstwhom or crimesagainststateauthorities,serviceinterests, and who have beenfoundguiltyofcommittingeconomiccrimes The supervisionandauditingserviceshallnotincludepersons stock company. and membersofthesupervisionauditingservicejoint- a requirement fortheboard ofdirectors tospecifythestructure The internaldocumentsofthejoint-stockcompanyshallcontain (supervision andauditingservice). to ensure compliancewiththeinternalcontrol procedures The joint-stockcompanyshallhave aspecialsubdivision company. control over financialandeconomicactivitiesofthejoint-stock The board ofdirectors shallapprove procedures forinternal of theshares andothersecuritiesofthejoint-stockcompany. disclosure ofwhichmay have materialeffectonthemarketvalue Company andtransactionswiththem,whichisnotpublic of thejoint-stockcompany, shares andothersecuritiesofthe to regulate theuseofessentialinformationaboutactivities An internaldocumentshallbeapproved bytheBoard ofDirectors stock company. which caninfluencethemarketvalue oftheshares ofthejoint- a requirement todiscloseinformationaboutall transactions The internaldocumentsofthejoint-stockcompanyshallcontain said personsotherwisemay have asignificantinfluence. authorized capitalofthejoint-stockcompany, oronwhichthe company directly orindirectly hold20percentandmore ofthe organizations inwhichthetopexecutives ofthejoint-stock and ontransactionsmadebythejoint-stockcompanywith the joint-stockcompanypursuanttoarticlesofassociation, joint-stock companywithpersonsbeingthetopexecutives of a requirement todiscloseinformationontransactionsofthe The internaldocumentsofthejoint-stockcompanyshallcontain regularly disclosed. where informationaboutthejoint-stockcompanyshallbe The joint-stockcompanyshallhave awebsite intheInternet not complied Complied or opidwt TheCompany’ssupervisionandauditing Complied with TheCompany’ssupervisionandauditing Complied with TheDepartmentofInternalControl beinga Complied with Provision oninternalcontrol procedures ofthe Complied with Provision oninsiderinformationofthe Complied with Provision oninformationpolicyofthe Complied with Provision oninformationpolicyofthe Complied with TheCompanyhasawebsite where itdiscloses Complied with Not complied APPENDIXES with with service doesnotincludethesaidpersons. service doesnotincludethesaidpersons. control procedures. and ensuringcompliancewiththeinternal special subdivisionofthejoint-stockcompany «MOESK». Company, InternalControl Policy oftheJSC Company. Company. Company. Company. the Provision oninformationpolicyofthe of theapplicablelegislationRFand information according totherequirements corporate website, includingdisclosure of Company ensures timelyupdateofthe is locatedat:http://www.moesk.ru.The information abouttheCompany. Thewebsite joint-stock company. of thesupervisionandauditingservice directors tospecifythestructure andmembers not containarequirement fortheboard of The internaldocumentsoftheCompanydo Note 243

MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

Complied or № Provision of the Code of Corporate Conduct not complied Note with

70. The internal documents of the joint-stock company shall specify Partially P. 6.1.2 of the Provision on internal control a term for submitting documents and materials to the supervision complied with procedures of the Company defines terms for and auditing service for the purpose of estimation of a closed submitting materials and documents to the financial and economic transaction, as well as a responsibility of supervision and auditing service. the officers and the workers of the joint-stock company for non- submission of them within the indicated period.

71. The internal documents of the joint-stock company shall specify Complied with P. 6.2. and p. 4.2. of the Provision on internal the obligation of the supervision and auditing service to inform control procedures of the Company. the audit committee of any violations identified, and if there is no such audit committee, to the board of directors of the joint- stock company.

72. The articles of association of the joint-stock company shall Not complied The said procedure is not specified in the contain a requirement for the supervision and auditing service to with Company’s Articles of Association. make a preliminary assessment of advisability of transactions not specified in the financial and economic plan of the joint-stock company (nonstandard operations).

73. The internal documents of the joint-stock company shall specify Not complied The said procedure is not specified in the a procedure for reconciliation of a nonstandard operation with with Company’s internal documents. the board of directors.

74. An internal document shall be approved by the board of Complied with The procedure for auditing the Company’s directors to specify the procedure for auditing the financial and financial and economic activities is defined economic activities of the joint-stock company by the Check-up in the Provision on the Check-up Committee 244 Committee. approved by the General Meeting of shareholders of the Company.

75. The audit committee shall assess the auditor's report before Complied with P. 3.1 of the Provision on the audit committee it is submitted to the shareholders at the general meeting of under the Company’s Board of Directors. shareholders.

Dividends

76. An internal document shall be approved by the board of directors, Complied with Provision on dividend policy was approved by which the board of directors shall follow when accepting the resolution of the Board of Directors dated recommendations concerning the dividend tariff (Provision on 02.09.2010 (Minute No. 114) Dividend Policy).

77. The Provision on Dividend Policy shall specify the procedure for Partially com- P. 3.5. of the Provision on dividend policy. determination of a minimum share of the net profit of the joint- plied with stock company, used for distribution of dividends, and conditions on which the dividends shall not be paid or shall be partially paid on preferred shares on which the amount of dividends is specified in the articles of association of the joint-stock company.

78. Information about the dividend policy of the joint-stock Partially com- The Provision on dividend policy is published company and amendments introduced into it shall be published plied with on the website of the Company http://www. in the periodical specified in the articles of association of the moesk.ru. joint-stock company for publication of notifications of general meetings of shareholders, and the said information shall be published on the web-site of the joint-stock company in the Internet. APPENDIX 6. MADE BY THECOMPANY IN2010 CHRONICLE OFTRANSACTIONS Board ofDirectors JSC«MOESK». «MOESK». 11 237Rublesonamonthlybasis(minuteNo.111of29.06.2010). (Moscow Enterprise«Long-DistanceElectricNetworks» asabranch)forthe overall amountof cow UnitedElectricGridCompany»(EasternNetworks asabranch)and the«FGCUES» the overall amountof100000Rublesonamonthlybasis(minuteNo.11129.06.2010). tween theJSC«MoscowUnitedElectricGridCompany»andKonovalov Andrey Pavlovich for the JSC«MOESK»;«IDGCHolding»asCompany'sshareholder. of 29.06.2010). the JSC«MoscowUnitedElectricGridCompany»and«IDGCHolding»(minuteNo.111 overall amountof2407200Rubles(minuteNo.10814.05.2010). the JSC«Energy InstitutenamedafterG.M.Krzhizhanovsky» (Branch«COTENERGO»)forthe branch) fortheoverall amountof435238.36Rubles(minuteNo.10814.05.2010). Grid CompanyoftheUnifiedEnergy SystemofRussia»(JSC«FGCUES»)(MoscowELDENasa ed ElectricGridCompany»(High-voltage CableNetworks asabranch)andtheJSC«Federal the JSC«MOESK»;«IDGCHolding»asCompany'sshareholder. Rubles (minuteNo.108of14.05.2010). United ElectricGridCompany»andtheJSC«IDGCofVolga» fortheoverall amountof834 age transmissionlinesofdistributiongridsJSC«IDGCHolding»between theJSC«Moscow with holdingthe«All-Russianprofessional skillscompetitionsofcrews servicinghigh-volt- and theJSC«ENIN»foroverall amountof424800Rubles(minuteNo.10501.04.2010). 105 of01.04.2010). Electric Networks asabranch)fortheoverall amountof20055617.17Rubles(minuteNo. Electric Networks asabranch)and«FGCUES»,JSC(MoscowEnterpriseoftheLong-Distance 500 kW«Ochakovo» SSbetween theJSC«MoscowUnitedElectricGridCompany»(Central BBoard ofDirectors oftheCompanyin2010: IInformation abouttransactionsthatwere amatterofinterest andapproved bythe the overall amount of335070.83Rubles(minuteNo.11302.09.2010). (High-voltage CableNetworks asabranch)andtheJSC«Mosenergo» (HPP-27asabranch)for 02.08.2010). ergo» fortheoverall amountof9092441.51Rublesonamonthlybasis (minuteNo.112of 12284-50/1711 between theJSC«MoscowUnitedElectricGridCompany» andtheJSC«Mosen- n o f a Interested parties: Interested parties: Interested parties: Interested parties: Interested parties: Interested parties: Interested parties: Interested parties: Interested parties: Interested parties: o r 88) 77) 66) 55) 44) 33) 22) 11) 110) 99) r d ) ) ) ) ) ) ) ) 0 ) m

Servicesagreement between theJSC«MoscowUnitedElectricGridCompany»and Agreement onleaseofdispatchingandtechnologicalcontrol between theJSC«Mos- Agreement onindemnificationofexpenditures onleaseofaresidential unitbe- Agreement onprotection ofinformationconstitutingcommercial secrets between Contractagreement onperformanceofmaintenancebetween theJSC«MoscowUnit- Agreement onpartnershipinfinancingmeasures forrendering servicesconnected Paid servicesagreement between theJSC«MoscowUnitedElectricGridCompany» Agreement onmaintenanceofelectrotechnical andtechnologicalequipmentof the Additionalagreement No.2totheleaseagreement dated21November 2007No. o ) a Paid servicesagreement between theJSC«MoscowUnited ElectricGridCompany» f t

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Ivanov S.N.asthememberof theBoard ofDirectors oftheJSC«MOESK». Ivanov S.N.asthememberofBoard ofDirectors oftheJSC«MOESK». Ivanov S.N.asthememberofBoard ofDirectors oftheJSC«MOESK». Tikhonova M.G., Ivanov S.N.asthemembersofBoard ofDirectors of Konovalov A.P. astheGeneralDirector oftheJSC «MOESK». theJSC«MOESK»asCompany'sshareholder. theJSC«IDGCHolding»asCompany'sshareholder. DemidovA.V., Shvets N.N.asthemembersofBoard ofDirectors of f GavrilenkoA.A.,Shulginov N.G., Sklyarov Ye.V. asthemembersof t

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MOESK ANNUAL REPORT 2010 MOSCOW UNITED ELECTRIC GRID COMPANY

111)1) Agreement on lease of copper core cable communication lines between the JSC «MOESK» (Central Electric Networks as a branch) and the «FGC UES» (Moscow Enterprise «Long-Distance Electric Networks» as a branch) for the overall amount of 50 585.42 Rubles on a monthly basis (minute No. 113 of 02.09.2010). Interested parties: the JSC «IDGC Holding» as the Company's shareholder. 112)2) Purchase agreement between the JSC «Moscow United Electric Grid Company» and the JSC «Moskabelsetmontazh» for the overall amount of 57 474.96 Rubles (minute No. 116 of 01.10.2010). Interested parties: the JSC «IDGC Holding» as the Company's shareholder. 113)3) Agreement on performance of works for the purpose of updating the Moscow Region electric networks development scheme between the JSC «Moscow United Electric Grid Com- pany» and the OJSC «Institute «ENERGOSETPROYEKT» for the overall amount of 41,300,000 Rubles (minute No. 117 of 30.10.2010). Interested parties: the JSC «IDGC Holding» as the Company's shareholder. 114)4) Agreement on rendering services for processing the transformer fluid between the JSC «Moscow United Electric Grid Company» (Central Electric Networks as a branch) and the OJSC «RETO Plant» for the overall amount of 536 226.46 Rubles (minute No. 117 of 30.10.2010). Interested parties: the JSC «IDGC Holding» as the Company's shareholder. 115)5) Agreement on rendering services for receipt and allocation of the transformer fluid between the JSC «Moscow United Electric Grid Company» (Central Electric Networks as a branch) and the JSC «RETO Plant» for the overall amount of 209 913.49 Rubles (minute No. 117 of 30.10.2010). Interested parties: the JSC «IDGC Holding» as the Company's shareholder. 116)6) Contract agreement on performance of design and survey works on the «Zubovs- kaya» substation between the JSC «Moscow United Electric Grid Company» (Central Electric 246 Networks as a branch) and the JSC «RETO Plant» for the overall amount of 4 720 000 Rubles (minute No. 119 of 26.11.2010). Interested parties: the JSC «IDGC Holding» as the Company's shareholder. 117)7) Contract agreement on performance of design and survey works on the «Nikitskaya» substation between the JSC «Moscow United Electric Grid Company» (Central Electric Net- works as a branch) and the JSC «RETO Plant» for the overall amount of 4 720 000 (minute No. 119 of 26.11.2010). Interested parties: the OJSC JSC «IDGC Holding» as the Company's shareholder. 118)8) Construction contract between the JSC «Moscow United Electric Grid Company» (Central Electric Networks as a branch) and the JSC «RETO Plant» for the overall amount of 2,786 700.28 Rubles (minute No. 119 of 26.11.2010). Interested parties: the JSC «IDGC Holding» as the Company's shareholder. 119)9) Residential lease agreements between the JSC «Moscow United Electric Grid Compa- ny» and the State Educational Institution of Higher Vocational Education «Energy Institute of Moscow (Technical University)» for the overall amount of 12 768.05 Rubles on a monthly basis (minute No. 119 of 26.11.2010). Interested parties: the JSC «IDGC Holding» as the Company's shareholder. 220)0) Agreement on technologic cooperation between the «SO UPS» and the JSC «Moscow United Electric Grid Company» for the purpose to secure reliability of functioning of the UES of Russia (minute No. 120 of 17.12.2010). Interested parties: Shulginov N.G. as the member of the Board of Directors of the JSC «MOESK»; the JSC «IDGC Holding» as the Company's shareholder. 221)1) Agreement on paid services for execution of an examination of materials substanti- ating the value of standard of the in-process electric loss in electric networks, between the JSC «Moscow United Electric Grid Company» and the JSC «Research and Testing Center of IDGC» for the overall amount of 1 670 550 Rubles (minute No. 123 of 31.12.2010). Interested parties: the JSC «IDGC Holding» as the Company's shareholder. APPENDIX 7. CONTACT DETAILS FORSHAREHOLDERSANDINVESTORS RRegistrar DDepartment forinteractionwithmassmedia IIR department SSecurities department R e e e

c g p d Web-site: (495)974-83-47 (shareholders support services) E-mail: (495)974-83-50 (generalquestions) Fax: (495) 678-71-10 Phones: 109544, Moscow,Novorogozhskaya St.32bldg.1 E-mail: Phone: (495)984-57-43 E-mail: Phone: (495)984-57-67 E-mail: Phones: (495)984-57-71,984-57-73 Inquiry service:(495)980-12-88 E-mail: Fax: (495)585-14-51 Phones: (495)982-35-74(inquiriesaboutlettersandmessages); 115114, Moscow,2-ndPaveletsky Proyezd 3bldg.2 u i a e s r r p t i t t r a m i a r e r t e s m n

[email protected] BarkovskayaEV@ moesk.ru [email protected] [email protected] [email protected] d t e e www.rostatus.ru n f p o t a r r

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