FSK Fin En 02072012.Pdf

CONTENT

2011 RAS FINANCIAL STATEMENTS 3

2011 MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITIONS 29

AUDIT COMMISSION CONCLUSIONS ON THE VERACITY OF INFORMATION 38 IN THE ANNUAL REPORT OF FEDERAL GRID COMPANY FOR 2011

CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE 39 WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS FOR THE YEAR ENDED 31 DECEMBER 2011

2011 ANNUAL FINANCIAL REPORT 85

2011 INTERESTED PARTY AND MAJOR TRANSACTIONS 95

DETAILS ON FEDERAL GRID COMPANY'S PARTICIPATION IN SUBSIDIARIES, DEPENDENT AND OTHER COMPANIES 99

2012 INVESTOR CALENDAR 110

2011 RAS FINANCIAL STATEMENTS AUDITOR’S REPORT ON FINANCIAL STATEMENTS 2011

To the Shareholders of Open Joint Stock Company “Federal Auditor’s Report Grid Company of Unified Energy System”: To the Shareholders of Open Joint Stock Company “Federal Client Grid Company of Unified Energy System”:

Open Joint Stock Company “Federal Grid Company of Unified We have audited the attached financial statements of Open Joint Energy System”. Stock Company “Federal Grid Company of Unified Energy Sys- tem” (hereinafter – the Company) which comprise the balance State registration certificate and certificate of inclusion in the sheet as of 31 December 2011, and the profit and loss state- register #00/03124 issued by Leningrad region Registration ment, statement of changes in equity and statement of cash Bureau on 25 June 2002. flows for the year ended 31 December 2011 and other supple- ments to the balance sheet and profit and loss statement and Certificate of inclusion in the Unified State Register of Legal Enti- explanatory notes (hereinafter all the reports together are ties regarding the legal entity registered before 1 July 2002 No. referred to as the “financial statements”). 1024701893336 issued by the Inspectorate of the Russian Min- istry of Taxes and Levies for the Tosno district of Leningrad The Company’s responsibility for the financial state- region on 20 August 2002. ments

117630, Moscow, Akademika Chelomeya str., 5a. The Company’s management is responsible for the preparation and fair presentation of these financial statements in accor- Auditor dance with the reporting rules established in the Russian Fe- deration and for such internal control as management deter- ZAO PricewaterhouseCoopers Audit (ZAO PwC Audit) located mines is necessary to enable the preparation of financial at: 125047, Russian Federation, Moscow, Butyrsky Val, 10. statements that are free from material misstatement, whether due to fraud or error. State registration certificate No. 008.890, issued by Moscow Registration Bureau on 28 February 1992. The auditor’s responsibility

Certificate of inclusion in the Unified State Register of Legal Enti- Our responsibility is to express an opinion as to whether the ties regarding the legal entity registered before 1 July 2002 No. financial statements are fairly presented based on our audit. We 1027700148431 issued by Inter-regional Inspectorate of the conducted our audit in accordance with the Federal Auditing Russian Ministry of Taxes and Levies No. 39 for the Moscow Standards and International Standards on Auditing. Those Stan- City on 22 August 2002. dards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about Member of non-profit partnership “Audit Chamber of Russia” whether the financial statements are free from material (NP ACR) being a self-regulating organisation of auditors – reg- misstatement. istration number 870 in the register of NP ACR members. An audit involves performing procedures to obtain audit evi- Major registration record number (ORNZ) in the register of audi- dence about the amounts and disclosures in the financial state- tors and audit organisations – 10201003683. ments. The procedures selected depend on the auditor’s judgment including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the

ZAO PricewaterhouseCoopers Audit White Square Office Center 10 Butyrsky Val Moscow, Russia, 125047 T: +7 (495) 967-6000, F:+7 (495) 967-6001, www.pwc.ru

TRANSLATOR'S EXPLANATORY NOTE: This version of our report is a translation from the original, which was prepared in Russian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. This English translation does not contain the English 4 translation of the explanatory notes, which are part of the official Russian version of the accompanying financial statements appropriateness of accounting policies used and the reason- Opinion ableness of accounting estimates made by management of the Company, as well as evaluating the presentation of the financial In our opinion, the financial statements present fairly, in all mate - statements. rial respects, the financial position of the Company as of 31 December 2011 and the results of its operations and its cash We believe that the audit evidence we have obtained is sufficient flows for the year then ended in accordance with the reporting to provide a basis for our audit opinion on the financial rules established in the Russian Federation. statements.

Director of ZAO PricewaterhouseCoopers Audit

V. Y. Sokolov 19 March 2012

CODES Form №1 under OKUD 0710001 Date (year, month, day) 2011.12.31 Company Federal Frid Company of Unified Energy System Open Joint-Stock Company under OKPO 56947007 Tax ID number TIN 4716016979 Activities Electric power transmission under OKVED 40.10.2 Type of business entity/form of ownership open joint-stock company / mixed Russian property with a federal share under OKOPF/OKFS 47/ 41 Unit of measurement RUR thousand under OKEI 384 Location (address) 5A, Ak. Chelomeya Street, Moscow, 117630 Approval date Mailing (acceptance) date)

NOTES ASSETS LINE CODE AS OF AS OF AS OF 31 DECEMBER 2011 31 DECEMBER 2010 31 DECEMBER 2009 1 2 3 4 5 I. NONCURRENT ASSETS Р.1 Notes* Intangible assets 1110 805,353 917,625 1,396,257 Р.1 Notes* Research and development results 1120 187,016 255,247 73,805 Р.2 Notes* Fixed assets, including: 1130 446,893,366 276,063,461 242,994,947 land and natural resources 1131 908,541 827,221 156,495 buildings, machinery, equipment and constructions 1132 441,700,146 272,828,986 241,019,891 other fixed assets 1133 4,284,679 2,407,254 1,818,561 Investments in tangible assets 1140 - - - Р.3 Notes* Financial investments 1150 82,047,395 104,137,547 66,970,387 Deferred tax assets 1160 - - - Р.2 Notes* Other noncurrent assets, including: 1170 389,567,997 385,777,910 276,989,484 equipment under installation 1171 25,728,284 17,905,969 18,484,815 imvestments in noncurrent assets 1172 279,473,415 271,431,950 192,803,574 Р.5.1 Notes* advances for fixed assets 1173 83,665,006 95,800,659 64,359,812 other noncurrent assets 1174 701,292 639,332 1,341,283 Section I TOTAL 1100 919,501,127 767,151,790 588,424,880

II. CURRENT ASSETS Р.4 Notes* Inventories, including: 1210 9,103,234 4,437,478 2,292,148 raw materials and other inventories 1211 9,073,248 4,407,467 2,262,155 finished goods and goods for resale 1212 29,986 30,011 29,993 Value-added tax on goods purchased 1220 2,941,805 2,295,467 2,070,794 Р.5 Notes* Accounts receivable, including: 1230 61,727,036 70,543,204 73,303,898 Accounts receivable (payments are expected later than 12 months 1231 8,102,357 8,696,249 20,492,819 and after the reporting date), including: buyers and customers 1232 2,658 68,106 185,910 prepayments 1233 - - 36 other debtors 1234 8,099,699 8,628,143 20,306,873 Accounts receivable (payments are expected within 12 months 1235 53,624,679 61,846,955 52,811,079 after the reporting date), including: buyers and customers 1236 10,860,149 8,669,641 8,949,413 outstanding contributions to the charter capital 1237 - - - from members (founders) prepayments 1238 2,769,193 1,836,195 2,676,525 other debtors 1239 39,995,337 51,341,119 41,185,141 Р.3 Notes* Financial investments (excluding cash equivalents) 1240 26,556,873 46,244,024 69,127,725 Cash and cash equivalents 1250 17,247,710 11,243,302 11,312,141 Other current assets 1260 415,320 194,748 135,366 Section II TOTAL 1200 117,991,978 134,958,223 158,242,072

BALANCE 1600 1,037,493,105 902,110,013 746,666,952

6 LIABILITIES LINE CODE AS OF AS OF AS OF 31 DECEMBER 2011 31 DECEMBER 2010 31 DECEMBER 2009 1 2 3 4 5 III. CAPITAL AND RESERVES Charter capital 1310 627,974,064 616,780,667 576,757,098 Redeemed share caital 1320 - - - Revaluation of noncurrent assets 1340 199,878,174 147,094,223 115,883,558 Capital surplus 1350 31,867,163 31,867,163 31,712,809 Surplus reserves 1360 13,038,463 10,134,044 10,134,044 Undistributed profit (uncovered loss), including: 1370 (19,231,762) (11,684,468) (69,051,863) Uncovered loss of past years 1371 (16,763,403) (11,684,468) (69,051,863) Undistributed profit of last years 1372 - Undistributed profit of the reporting year 1373 - - Retained loss for the reporting year 1374 (2,468,359) - - Section III TOTAL 1300 853,526,102 794,191,629 665,435,646

IV. LONG-TERM LIABILITIES Borrowed funds 1410 130,000,000 50,000,000 6,000,000 Dereffed tax liabilities 1420 8,148,365 2,649,711 1,435,064 Provisions for contingent liabilities 1430 - - - Other liabilities 1450 17,424 18,179 5,098 Section IV TOTAL 1400 138,165,789 52,667,890 7,440,162

V. SHORT-TERM LIABILITIES Borrowed funds 1510 1,775,001 6,941,422 7,481,469 Р.5.3 Notes* Accounts payable, including: 1520 43,345,565 47,774,515 65,849,518 suppliers and contractors 1521 21,322,659 14,017,237 11,018,708 wage arrears 1522 303,835 193,318 134,473 debts to state extra-budgetary funds 1523 66,958 36,486 18,906 taxes and duties payable 1524 1,180,141 865,113 653,884 advances received 1525 10,430,926 11,476,694 7,114,653 other creditors 1526 9,983,735 21,138,769 46,861,996 outstanding distribution to members (founders) 1527 57,311 46,898 46,898 deferred revenue 1530 275,041 278,316 278,319 Р.7 Notes* Expenses and provisions 1540 405,607 256,241 181,838 Other liabilities 1550 - - - Section V TOTAL 1500 45,801,214 55,250,494 73,791,144

BALANCE 1700 1,037,493,105 902,110,013 746,666,952

* Notes to the 2011 balance sheet and PL report.

Director O.M.Budargin Chief Accountant A.P.Noskov

(signature) (printed name) (signature) (printed name)

19 March 2012

7 Annex to Order of the Ministry of Finance PROFIT AND LOSS STATEMENT dated 02.07.2010 #66n (as revised in the Order of the Ministry of Finance dated FOR 2011 05.10.2011№124n)

CODES Form №1 under OKUD 0710002 Date (year, month, day) 2011.12.31 Company Federal Frid Company of Unified Energy System Open Joint-Stock Company under OKPO 56947007 Tax ID number TIN 4716016979 Activities Electric power transmission under OKVED 40.10.2 Type of business entity/form of ownership open joint-stock company / mixed Russian property with a federal share under OKOPF/OKFS 47/ 41 Unit of measurement RUR thousand under OKEI 384 Location (address) 5A, Ak. Chelomeya Street, Moscow, 117630 Approval date Mailing (acceptance) date)

NOTES ITEM REPORTING SIMILAR NAME CODE PERIOD PERIOD OF THE PREVIOUS YEAR 1 2 3 4 INCOME AND EXPENSES FROM ORDINARY ACTIVITIES Revenue (net) from sales of goods, works and services (less VAT, excises and similar 2110 138,136,617 111,084,675 compulsory payments), including: electric power transmission 2111 134,875,494 109,510,275 other activities 2112 3,261,123 1,574,400 Р.6 Notes* Cost of goods, works, services sold, including: 2120 (84,174,332) (75,680,039) electric power transmission 2121 (83,201,434) (74,856,212) other activities 2122 (972,898) (823,827) Gross profit ( 2110 + 2120) 2100 53,962,285 35,404,636 Selling expenses 2210 - - Р.6 Notes* Administrative expenses 2220 (8,726,033) (6,820,645) Income (loss) from sales (2100 + 2210 + 2220) 2200 45,236,252 28,583,991 Income from investments in other companies 2310 264,857 422,310 Interest receivable 2320 3,971,451 5,436,238 Interest payable 2330 - (273,751) Other incomes 2340 171,434,386 144,906,886 Other expenses 2350 (209,462,532) (111,763,225) Income (loss) before tax (2200 +2310 + 2320 + 2330 + 2340 + 2350) 2300 11,444,414 67,312,449 Current income tax, including 2410 (8,389,536) (9,264,306) constant tax liabilities 2411 (11,599,306) 2,983,537 Change in deferred tax liabilities 2430 (5,544,814) (1,181,205) Change in deferred tax assets 2450 46,160 (33,442) Other, including: 2460 (24,583) 248,818 Other similar mandatory payments 2461 (3,370) 43,226 Adjustment of income tax for previous periods 2462 (21,213) 205,592 Net income (loss) of the reporting period 2400 (2,468,359) 57,082,314

8 NOTES ITEM FOR 12 MONTHS FOR 12 MONTHS 2011. 2010 REFERENCE Gain or loss on revaluation of noncurrent assets not included in the net income (loss) of the period 53,187,099 31,495,746 Gain or loss from other operations not included in the net income (loss) of the period Total gain or loss of the period (2,468,359) 57,082,314 Basic earnings (loss) per share (0.0019) 0.0461 Diluted earnings (loss) per share

* Notes to the 2011 balance sheet and PL report

Director O.M.Budargin Chief Accountant A.P.Noskov

(signature) (printed name) (signature) (printed name)

19 March 2012

9 Annex to Order of the Ministry of Finance FLOW OF EQUITY AND FUNDS dated 02.07.2010 #66n (as revised in the Order of the Ministry of Finance dated FOR 2011 05.10.2011№124n)

CODES Form №1 under OKUD 0710003 Date (year, month, day) 2011.12.31 Company Federal Frid Company of Unified Energy System Open Joint-Stock Company under OKPO 56947007 Tax ID number TIN 4716016979 Activities Electric power transmission under OKVED 40.10.2 Type of business entity/form of ownership open joint-stock company / mixed Russian property with a federal share under OKOPF/OKFS 47/ 41 Unit of measurement RUR thousand under OKEI 384 Location (address) 5A, Ak. Chelomeya Street, Moscow, 117630

I. CHANGES IN EQUITY NARRATIVE LINE CHARTER OWN SHARES ADDITIONAL RESERVE ACCUMULATED TOTAL CODE CAPITAL REPURCHASED CAPITAL CAPITAL PROFIT (LOSS) FROM THE SHAREHOLDERS Equity as of 31 December 2009 3100 576,757,098 – 147,596,367 10,134,044 (69,051,863) 665,435,646 FOR 2010 Increase of capital – total: 3210 40,023,569 – 31,650,100 – 57,082,314 128,755,983 due to: net profit 3211 х х х х 57,082,314 57,082,314 results of property evaluation 3212 х х 31,495,746 х – 31,495,746 allocations to reserves 3213 х х – х – – additional share issue 3214 40,023,569 – – х х 40,023,569 increase of share par value 3215 – – – х – х reorganization of legal entity 3216 – – – – – – other 3217 – – 154,354 – – 154,354

NARRATIVE LINE CHARTER OWN SHARES ADDITIONAL RESERVE ACCUMULATED TOTAL CODE CAPITAL REPURCHASED CAPITAL CAPITAL PROFIT (LOSS) FROM THE SHAREHOLDERS Decrease of capital – total: 3220 – – – – due to: loss 3221 х х х х – – results of property evaluation 3222 х х – х – – expenses lead to decrease in capital 3223 х х – х – – decrease of share par value 3224 – – – х – – reduction in number of shares 3225 – – – х – – reorganization of legal entity 3226 – – – – – – dividends 3227 х х х х – – Changes in additional capital 3230 х х (285,081) – 285,081 х Changes in reserve capital 3240 х х х – – х Balance as of 31 December 2010 г. 3200 616,780,667 – 178,961,386 10,134,044 (11,684,468) 794,191,629 FOR 2011 Increase of capital – total: 3310 11,193,397 – 53,187,099 – – 64,380,496 due to: net profit 3311 х х х х – – results of property evaluation 3312 х х 53,187,099 х – 53,187,099 allocations to reserves 3313 х х – х – – additional share issue 3314 11,193,397 – – х х 11,193,397 increase of share par value 3315 – – – х – х reorganization of legal entity 3316 – – – – – Decrease of capital – total: 3320 – – – – (5,046,023) (5,046,023) due to: loss 3321 х х х х (2,468,359) (2,468,359) results of property evaluation 3322 х х – х – – expenses lead to decrease in capital 3323 х х – х – – decrease of share par value 3324 – – – х – – reduction in number of shares 3325 – – – х – –

10 reorganization of legal entity 3326 – – – – – – dividends 3327 х х х х (2,577,664) (2,577,664) other 3328 – – – Changes in additional capital 3330 х х ( 403,148 ) - 403,148 х Changes in reserve capital 3340 х х х 2,904,419 (2,904,419) х Balance as of 31 December 2011 г. 3300 627,974,064 – 231,745,337 13,038,463 (19,231,762) 853,526,102

2. ADJUSTMENTS DUE TO CHANGES IN ACCOUNTING RULES AND MISTAKE CORRECTIONS NARRATIVE LINE AS OF EQUITY CHANGES FOR THE 2010 AS OF CODE 31 DECEMBER NET PROFIT OTHER 31 DECEMBER 2009 (LOSS) 2010 EQUITY – TOTAL 3400 579,467,403 58,088,388 126,328,004 763,883,795 prior adjustments adjusted due to: changes in accounting rules 3410 85,968,243 (1,006,074) (54,654,335) 30,307,834 mistake corrections 3420 – – – – after adjustments 3500 665,435,646 57,082,314 71,673,669 794,191,629 including: undistributed profit (loss): 3401 (66,810,391) 58,088,388 (1,774,553) (10,496,556) prior adjustments adjusted due to: changes in accounting rules 3411 (2,241,472) (1,006,074) 2,059,634 (1,187,912) mistake corrections 3421 – – – – after adjustments 3501 (69,051,863) 57,082,314 285,081 (11,684,468) Other equity items adjusted: (по статьям) prior adjustments 3402 646,277,794 128,102,557 774,380,351 adjusted due to: changes in accounting rules 3412 88,209,715 (56,713,969) 31,495,746 mistake corrections 3422 – – – – after adjustments 3502 734,487,509 71,388,588 805,876,097

3. NET ASSETS NARRATIVE LINE AS OF AS OF AS OF CODE 31 DECEMBER 31 DECEMBER 31 DECEMBER 2011 2010 2009 Net assets 3600 853,801,143 794,469,945 665,713,965

Director O.M.Budargin Chief Accountant A.P.Noskov

(signature) (printed name) (signature) (printed name)

19 March 2012

11 Annex to Order of the Ministry of Finance CASH FLOW STATEMENT dated 02.07.2010 #66n (as revised in the Order of the Ministry of Finance dated FOR 2011 05.10.2011№124n)

CODES Form №1 under OKUD 0710004 Date (year, month, day) 2011.12.31 Company Federal Frid Company of Unified Energy System Open Joint-Stock Company under OKPO 56947007 Tax ID number TIN 4716016979 Activities Electric power transmission under OKVED 40.10.2 Type of business entity/form of ownership open joint-stock company / mixed Russian property with a federal share under OKOPF/OKFS 47/ 41 Unit of measurement RUR thousand under OKEI 384 Location (address) 5A, Ak. Chelomeya Street, Moscow, 117630

DESCRIPTION CODE FOR 2011 FOR 2010 1 2 3 4 CASH FLOW AS PER CURRENT ACTIVITY Cash receipts 4110 135,694,393 117,391,859 including: from the sales of goods, works and services 4111 131,111,281 112,440,630 rent, license royalty, royalty, fees and similar payments 4112 304,361 454,794 from resale of financial investments 4113 - - other revenues 4119 4,278,751 4,496,435 Cash paid for: 4120 (64,278,423) (65,472,226) suppliers and contractrors for the purshased raw stock, materilas, works, services 4121 (31,616,261) (32,013,558) labor compensation 4122 (13,587,032) (11,749,439) for payment of interest 4123 - - profit tax 4124 (9,721,211) (9,089,554) other expences 4129 (9,353,919) (12,619,675) Net cash generated from current activity 4100 71,415,970 51,919,633

CASH FLOW AS PER INVESTMENT ACTIVITY Cash receipts, 4210 485,901,498 183,297,445 including: revenues as per sales of noncurrent assets (exlc. financial investments) 4211 6,737 941,896 revenues as per sales of shares of other organizations 4212 100,332 101,985 revenues from repayments of loans, sales of debt securities (cash claims to the third parties) 4213 484,606,627 179,436,460 dividends received, interest on debt financial investments and similar revenues from participation in the third 4214 1,139,225 2,324,873 parties) other revenues 4219 48,577 492,231 Cash paid for: 4220 (625,066,060) (288,924,713) acquisition, creation, modernization, reconstruction, preparation for usage of the noncurrent assets) 4221 (156,575,609) (142,947,867) acquisition of shares of other organizations (participation) 4222 - - acquisition of debt securities (cash claims to the third parties, loans made to the third parties) 4223 (463,300,000) (145,192,282) interests included in investment assets 4224 (4,999,359) (724,760) other expences 4229 (191,092) (59,804) Net cash per investment activity 4200 (139,164,562) (105,627,268)

12 1 2 3 4 CASH FLOW AS PER FINANCIAL ACTIVITY Cash receipts, 4310 82,330,898 61,184,456 including: revenues from loans and borrowings 4311 25,000,000 - revenues from cash contribution of owners (participants) 4312 2,219,448 11,193,956 revenues from emission of shares and increase of share participation 4313 - - revenues from issue of bonds, notes and other debt securities etc 4314 54,989,550 49,990,500 Other revenues 4319 121,900 - Cash paid for: 4320 (8,577,900) (7,545,652) owners (participants) for the shares repurshased or secession from the organization 4321 - - dividends and other profit distribution payments to the shareholders (participants) 4322 (2,577,664) - repayments of promissory notes, other debt securities, loans and borrowins 4323 (6,000,000) (7,366,440) other expences 4329 (236) (179,212) Net cash as per financial activity 4300 73,752,998 53,638,804 Net increase (decrease) of cash flow for the reporting period 4400 6,004,406 (68,831) Cash and cash equivalents at the beginning of the period 4450 11,243,301 11,312,132 Cash and cash equivalents at the end of the period 4500 17,247,707 11,243,301 Effect of currency rate fluctuation in relation to ruble 4490

Director O.M.Budargin Chief Accountant A.P.Noskov

(signature) (printed name) (signature) (printed name)

19 March 2012

13 NOTES TO THE BALANCE SHEET Annex to Order of the Ministry of Finance dated 02.07.2010 #66n (as revised in the FOR 2011 Order of the Ministry of Finance dated 05.10.2011№124n)

CODES Form №5 under OKUD 0710005 Date (year, month, day) 2011.12.31 Federal Frid Company of Unified Energy System Open Joint-Stock Company under OKPO 56947007 TIN 4716016979 Electric power transmission under OKVED 40.10.2 open joint-stock company / mixed Russian property with a federal share under OKOPF/OKFS 47/ 41 RUR thousand under OKEI 384

1. INTANGIBLE ASSETS AND R&D

1.1. Intangible assets

INDEX AS OF THE BEGINNING CHANGES FOR THE PERIOD AS OF THE END OF REPORTING YEAR RECEIVED WITHDRAWN ACCRUED IMPAIRMENT, RE-EVALUATION OF REPORTING YEAR DESCRIPTION LINE PERIOD INITIAL/CURRENT DEPRECIATION INITIAL/ DEPRECIATION DEPRECIATION LOSS INITIAL/ DEPRECIATION INITIAL/ ACCUMULATED CODE MARKET VALUE CURRENT CURRENT CURRENT DEPRECIATION MARKET VALUE MARKET VALUE MARKET VALUE 1 2 3 4 5 6 7 8 9 10 11 12 13 14 5100 2011 2,410,313 (1,492,688) 428,762 – – (541,034) – – – 2,839,075 (2,033,722) Intangible assets – total 5110 2010 2,342,861 (946,604) 67,452 – – (546,084) – – – 2,410,313 (1,492,688) including: 5101 2011 40,490 (2,050) – – – (4,180) – – – 40,490 (6,230) patent holder for invention, industrial prototype, useful model 5111 2010 9,715 (104) 30,775 – – (1,946) – – – 40,490 (2,050) 5102 2011 1,293,552 (636,034) 428,762 – – (328,947) – – – 1,722,314 (964,981) right holder for PC software, data bases 5112 2010 1,278,281 (310,982) 15,271 – – (325,052) – – – 1,293,552 (636,034) 5103 2011 246 (160) – – – (25) – – – 246 (185) owner of trade mark and service mark, place description of goods origin 5113 2010 246 (135) – – – (25) – – – 246 (160) 5104 2011 1,076,025 (854,444) – – – (207,882) – – – 1,076,025 (1,062,326) Other 5114 2010 1,054,619 (635,383) 21,406 – – (219,061) – – – 1,076,025 (854,444)

1.2. Initial value of intangible assets created by the organizationй DESCRIPTION LINE AS OF THE AS OF THE AS OF THE CODE DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 1 2 3 4 5 Total 5120 – – –

1.3. Intangible assets repayed in full DESCRIPTION LINE AS OF THE AS OF THE AS OF THE CODE DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2009 1 2 3 4 5 Total 5130 904,088 14,817 13,172 including Other 5131 904,088 14,817 13,172

14 INDEX AS OF THE BEGINNING CHANGES FOR THE PERIOD AS OF THE END OF REPORTING YEAR RECEIVED WITHDRAWN ACCRUED IMPAIRMENT, RE-EVALUATION OF REPORTING YEAR DESCRIPTION LINE PERIOD INITIAL/CURRENT DEPRECIATION INITIAL/ DEPRECIATION DEPRECIATION LOSS INITIAL/ DEPRECIATION INITIAL/ ACCUMULATED CODE MARKET VALUE CURRENT CURRENT CURRENT DEPRECIATION MARKET VALUE MARKET VALUE MARKET VALUE 1 2 3 4 5 6 7 8 9 10 11 12 13 14 5100 2011 2,410,313 (1,492,688) 428,762 – – (541,034) – – – 2,839,075 (2,033,722) Intangible assets – total 5110 2010 2,342,861 (946,604) 67,452 – – (546,084) – – – 2,410,313 (1,492,688) including: 5101 2011 40,490 (2,050) – – – (4,180) – – – 40,490 (6,230) patent holder for invention, industrial prototype, useful model 5111 2010 9,715 (104) 30,775 – – (1,946) – – – 40,490 (2,050) 5102 2011 1,293,552 (636,034) 428,762 – – (328,947) – – – 1,722,314 (964,981) right holder for PC software, data bases 5112 2010 1,278,281 (310,982) 15,271 – – (325,052) – – – 1,293,552 (636,034) 5103 2011 246 (160) – – – (25) – – – 246 (185) owner of trade mark and service mark, place description of goods origin 5113 2010 246 (135) – – – (25) – – – 246 (160) 5104 2011 1,076,025 (854,444) – – – (207,882) – – – 1,076,025 (1,062,326) Other 5114 2010 1,054,619 (635,383) 21,406 – – (219,061) – – – 1,076,025 (854,444)

15 1.4. R&D DESCRIPTION LINE PERIOD AS OF THE BEGINNING CHANGES FOR THE PERIOD AS OF THE END OF REPORTING YEAR CODE OF REPORTING YEAR RECEIVED WITHDRAWN PART OF VALUE INITIAL/CURRENT PART OF VALUE INITIAL/CURRENT PART OF VALUE INCURRED AS INITIAL/CURRENT PART OF VALUE MARKET VALUE INCURRED AS MARKET VALUE INCURRED AS EXPENSE MARKET VALUE INCURRED AS EXPENSE EXPENSE EXPENSE 1 2 3 4 5 6 7 8 9 10 11 5140 2011 356,515 (101,268) 133,637 (73,695) 73,695 (201,868) 416,457 (229,441) R&D – total 5150 2010 238,182 (164,377) 353,315 (234,982) 234,982 (171,873) 356,515 (101,268) including: – 5141 2011 70,370 (8,796) – – – (35,185) 70,370 (43,981) Development of steel power for HV lines 330-500kV 5151 2010 – 70,370 – – (8,796) 70,370 (8,796) Works on development of power electric line for distribution networks based on VTSP 5142 2011 139,000 (11,583) – – – (46,334) 139,000 (57,917) technologies 5152 2010 – – 139,000 – – (11,583) 139,000 (11,583) 5143 2011 – – – – – – – – Development of mobile testing complex based on bursting magnet generators 5153 2010 12,900 (2,150) – (12,900) 12,900 (10,750) – – 5144 2011 147,145 (80,889) 133,637 (73,695) 73,695 (120,349) 207,087 (127,543) Other 5154 2010 225,282 (162,227) 143,945 (222,082) 222,082 (140,744) 147,145 (80,889)

1.5. Unfinished R&D and unfinished transactions on intangible assets acquisition DESCRIPTION LINE PERIOD AS OF THE CHANGES FOR THE PERIOD AS OF THE END OF CODE BEGINNING OF EXPENSES FOR EXPENSES ACCEPTED REPORTING YEAR REPORTING YEAR THE PERIOD WRITTEN OFF AS AS IA OR R&D WITH NO POSITIVE RESULT 1 2 3 4 5 6 7 8 5160 2011 956,714 1,595,772 – (153,637) 2,398,849 Expenses on unfinished R&D – total 5170 2010 677,196 677,808 – (398,290) 956,714 including: 5161 2011 32,152 – – (32,152) – lightning arrester development for HV line 220 kV based on IRMK 5171 2010 32,152 – – – 32,152 5162 2011 201,800 – – – 201,800 Pilot operation of IRMK at HV line 220 kV with inctrumental control 5172 2010 – 201,800 – – 201,800 5163 2011 – 51,500 – – 51,500 Development of Innovative development program till 2020 5173 2010 – – – – – 5164 2011 722,762 1,544,272 – (121,485) 2,145,549 Other 5174 2010 645,044 476,008 – (398,290) 722,762 5180 2011 4,861,225 472,422 – (428,762) 4,904,885 Unfinished operations on intangible assets acquisition – total 5190 2010 4,151,602 777,076 – (67,453) 4,861,225 including: 5181 2011 1,549,282 41,099 – – 1,590,381 FGC UES' asset management system 5191 2010 1,520,939 28,343 – – 1,549,282 5182 2011 311,012 – – – 311,012 KSUPR for automatization of assessment processes of transmission lines technical conditions 5192 2010 311,012 – – – 311,012 5183 2011 466,175 – – – 466,175 Formation of aerial photography DB of power transmission lines 5193 2010 218,342 247,833 – – 466,175 5184 2011 325,784 15,927 – – 341,711 ACS "Property" 5194 2010 305,420 20,364 – – 325,784 5185 2011 2,208,972 415,396 – (428,762) 2,195,606 Other 5195 2010 1,795,889 480,536 – (67,453) 2,208,972

16 1.4. R&D DESCRIPTION LINE PERIOD AS OF THE BEGINNING CHANGES FOR THE PERIOD AS OF THE END OF REPORTING YEAR CODE OF REPORTING YEAR RECEIVED WITHDRAWN PART OF VALUE INITIAL/CURRENT PART OF VALUE INITIAL/CURRENT PART OF VALUE INCURRED AS INITIAL/CURRENT PART OF VALUE MARKET VALUE INCURRED AS MARKET VALUE INCURRED AS EXPENSE MARKET VALUE INCURRED AS EXPENSE EXPENSE EXPENSE 1 2 3 4 5 6 7 8 9 10 11 5140 2011 356,515 (101,268) 133,637 (73,695) 73,695 (201,868) 416,457 (229,441) R&D – total 5150 2010 238,182 (164,377) 353,315 (234,982) 234,982 (171,873) 356,515 (101,268) including: – 5141 2011 70,370 (8,796) – – – (35,185) 70,370 (43,981) Development of steel power for HV lines 330-500kV 5151 2010 – 70,370 – – (8,796) 70,370 (8,796) Works on development of power electric line for distribution networks based on VTSP 5142 2011 139,000 (11,583) – – – (46,334) 139,000 (57,917) technologies 5152 2010 – – 139,000 – – (11,583) 139,000 (11,583) 5143 2011 – – – – – – – – Development of mobile testing complex based on bursting magnet generators 5153 2010 12,900 (2,150) – (12,900) 12,900 (10,750) – – 5144 2011 147,145 (80,889) 133,637 (73,695) 73,695 (120,349) 207,087 (127,543) Other 5154 2010 225,282 (162,227) 143,945 (222,082) 222,082 (140,744) 147,145 (80,889)

17 2. FIXED CAPITAL ASSETS

2.1. Availability and changes of FA DESCRIPTION LINE PERIOD AS OF THE BEGINNING CHANGES FOR THE PERIOD AS OF THE END CODE OF REPORTING YEAR RECEIVED WITHDRAWN RE-EVALUATION OF REPORTING YEAR INITIAL VALUE ACCUMULATED INITIAL VALUE ACCUMULATED INITIAL VALUE ACCUMULATED ACCRUED INITIAL VALUE ACCUMULATED INITIAL VALUE ACCUMULATED DEPRECIATION DEPRECIATION DEPRECIATION DEPRECIATION DEPRECIATION DEPRECIATION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 5200 2011 513,904,561 (237,841,100) 161,185,410 (304,758) (2,856,145) 1,434,689 (40,248,806) 127,862,316 (76,242,801) 800,096,142 (353,202,776) Fixed assets (excluding Income-bearing investments into material valuables) – total 5210 2010 413,988,248 (170,993,301) 35,703,452 (42,411) (1,990,356) 974,578 (32,140,824) 66,203,217 (35,639,142) 513,904,561 (237,841,100) including: 5201 2011 20,298,429 (5,645,783) 16,013,597 (9,321) (182,486) 26,608 (983,842) 3,724,927 (1,186,513) 39,854,467 (7,798,851) Buildings 5211 2010 17,687,316 (4,304,113) 1,703,432 (984) (366,067) 189,693 (761,729) 1,273,748 (768,650) 20,298,429 (5,645,783) 5202 2011 362,195,120 (178,949,096) 70,500,853 (136,228) (770,688) 376,662 (24,504,596) 66,993,243 (40,152,690) 498,918,528 (243,365,948) Structures and transport gears 5212 2010 300,415,276 (131,469,998) 12,391,164 (21,686) (372,672) 130,075 (21,095,586) 49,761,352 (26,491,901) 362,195,120 (178,949,096) 5203 2011 125,988,961 (51,058,645) 71,899,485 (148,414) (1,776,606) 940,712 (13,895,246) 56,902,359 (34,760,656) 253,014,199 (98,922,249) Machines and equipment 5213 2010 92,238,177 (33,546,767) 19,634,914 (6,614) (1,052,239) 546,716 (9,673,390) 15,168,109 (8,378,590) 125,988,961 (51,058,645) 5204 2011 2,921,609 (1,117,525) 2,192,519 (4,931) (67,871) 41,564 (524,027) – – 5,046,257 (1,604,919) Transport vehicles 5214 2010 2,065,864 (833,164) 967,877 (11,791) (112,132) 76,451 (349,021) – – 2,921,609 (1,117,525) 5205 2011 1,328,301 (910,375) 456,181 (5,543) (40,754) 40,273 (296,272) 1,234 (728) 1,744,962 (1,172,645) Production and auxiliary equipment 5215 2010 1,133,307 (719,041) 222,246 (1,336) (27,252) 23,203 (213,201) – – 1,328,301 (910,375) 5206 2011 344,920 (159,676) 41,455 (321) (17,740) 8,870 (44,823) 240,553 (142,214) 609,188 (338,164) Other fixed assets 5216 2010 291,813 (120,218) 107,252 – (54,153) 8,440 (47,897) 8 (1) 344,920 (159,676) 5207 2011 827,221 – 81,320 – – – – – – 908,541 – Land plots and nature management facilities 5217 2010 156,495 – 676,567 – (5,841) – – – – 827,221 – 5220 2011 – – – – – – – – – – – Included Income-bearing investments into material valuables – total 5230 2010 – – – – – – – – – – – including: 5221 2011 – – – – – – – – – – – Property to be leased out 5231 2010 – – – – – – – – – – – 5222 2011 – – – – – – – – – – – Property received under lease agreement 5232 2010 – – – – – – – – – – –

18 2. FIXED CAPITAL ASSETS

19 2.2. Uncompleted capital expenditures DESCRIPTION LINE PERIOD AS OF THE CHANGES FOR THE PERIOD AS OF THE END OF CODE BEGINNING OF EXPENSES FOR WRITTEN OFF ACCEPTED AS FA REPORTING YEAR REPORTING YEAR THE PERIOD OR INCREASED VALUE 1 2 3 4 5 6 7 8 5250 2011 289 337 919 195 120 423 (19 066 351) (160 190 292) 305 201 699 Unfinished construction and uncompleted transactions on acquisition, modernization etc of FA – total 5240 2010 211 288 389 131 946 141 (18 533 208) (35 363 403) 289 337 919 including: 5251 2011 136 344 140 94 710 430 (527 096) (96 942 559) 133 584 915 new construction 5241 2010 96 323 123 61 422 886 (2 124 935) (19 276 934) 136 344 140 5252 2011 123 628 814 60 151 785 (145 779) (50 347 158) 133 287 662 modernization and reconstruction 5242 2010 86 598 734 50 042 941 (1 006 758) (12 006 103) 123 628 814 5253 2011 555 502 13 182 208 (296 236) (12 900 575) 540 899 acquisition of fixed assets 5243 2010 381 261 4 363 210 (108 778) (4 080 191) 555 502 5254 2011 956 714 1 595 772 (153 637) – 2 398 849 R&D facilities 5244 2010 677 196 677 808 (398 115) (175) 956 714 5255 2011 4 861 225 472 422 (428 762) – 4 904 885 intangible assets creation 5245 2010 4 151 602 777 076 (67 453) – 4 861 225 5256 2011 3 808 140 1 704 810 (2 191 192) – 3 321 758 unfinished design and survey works 5246 2010 4 173 520 901 344 (1 266 724) – 3 808 140 5257 2011 1 277 415 157 032 – – 1 434 447 other 5247 2010 498 138 779 277 – – 1 277 415 5257 2011 17 905 969 23 145 964 (15 323 649) – 25 728 284 equipment for installation 5247 2010 18 484 815 12 981 599 (13 560 445) – 17 905 969

2.3. Changes of fixed assets as a result of extention, reconstruction of partial liquidation DESCRIPTION LINE FOR 2011 FOR 2010 CODE 1 2 Increase of FA facilities value as a result of extention, reconstruction – total 5260 9,556,902 7,048,278 including: Buildings 5261 410,107 499,139 Structures and transport gears 5262 7,634,594 5,916,604 Machines and equipment 5263 1,475,354 603,584 Transport vehicles 5264 148 74 Production and auxiliary equipment 5265 601 1,152 Other 5266 36,098 27,725 Decrease of FA facilities value as a result of partial liquidation: 5270 (93,160) (162,670) including: Buildings 5271 (272) (525) Structures and transport gears 5272 (81,004) (161,738) Machines and equipment 5273 (11,864) (407) Production and auxiliary equipment 5274 (20) –

20 2.2. Uncompleted capital expenditures DESCRIPTION LINE PERIOD AS OF THE CHANGES FOR THE PERIOD AS OF THE END OF CODE BEGINNING OF EXPENSES FOR WRITTEN OFF ACCEPTED AS FA REPORTING YEAR REPORTING YEAR THE PERIOD OR INCREASED VALUE 1 2 3 4 5 6 7 8 5250 2011 289 337 919 195 120 423 (19 066 351) (160 190 292) 305 201 699 Unfinished construction and uncompleted transactions on acquisition, modernization etc of FA – total 5240 2010 211 288 389 131 946 141 (18 533 208) (35 363 403) 289 337 919 including: 5251 2011 136 344 140 94 710 430 (527 096) (96 942 559) 133 584 915 new construction 5241 2010 96 323 123 61 422 886 (2 124 935) (19 276 934) 136 344 140 5252 2011 123 628 814 60 151 785 (145 779) (50 347 158) 133 287 662 modernization and reconstruction 5242 2010 86 598 734 50 042 941 (1 006 758) (12 006 103) 123 628 814 5253 2011 555 502 13 182 208 (296 236) (12 900 575) 540 899 acquisition of fixed assets 5243 2010 381 261 4 363 210 (108 778) (4 080 191) 555 502 5254 2011 956 714 1 595 772 (153 637) – 2 398 849 R&D facilities 5244 2010 677 196 677 808 (398 115) (175) 956 714 5255 2011 4 861 225 472 422 (428 762) – 4 904 885 intangible assets creation 5245 2010 4 151 602 777 076 (67 453) – 4 861 225 5256 2011 3 808 140 1 704 810 (2 191 192) – 3 321 758 unfinished design and survey works 5246 2010 4 173 520 901 344 (1 266 724) – 3 808 140 5257 2011 1 277 415 157 032 – – 1 434 447 other 5247 2010 498 138 779 277 – – 1 277 415 5257 2011 17 905 969 23 145 964 (15 323 649) – 25 728 284 equipment for installation 5247 2010 18 484 815 12 981 599 (13 560 445) – 17 905 969

2.4. Other usage of fixed assets DESCRIPTION LINE AS OF AS OF AS OF CODE 31 DECEMBER 31 DECEMBER 31 DECEMBER 2011 2010 2009 1 2 3 4 5 Leased out fixed asset items 5280 2,872,615 2,781,167 3,858,326 Leased out fixed asset items (off-balance items) 5281 – – – Leased in fixed asset items 5282 – – – Leased in fixed asset items (off-balance items) 5283 16,090,717 13,693,765 6,189,371 FA facilities put into operation and actually used, under the process of state registration 5284 44,754,580 9,835,614 5,564,051 FA on conservation 5285 17,158 62 8,354 Other usage of fixed assets (pledge etc) 5286 – – –

21 3. FINANCIAL INVESTMENTS

3.1. Availability and changes in financial investments DESCRIPTION LINE PERIOD AS OF THE BEGINNING CHANGES FOR THE PERIOD AS OF THE END OF REPORTING YEAR CODE F REPORTING YEAR RECEIVED WITHDRAWN (REPAYED) INITIAL VALUE ACCRUED INITIAL VALUE ACCRUED INITIAL VALUE ACCRUED ACCRUAL OF CURRENT INITIAL VALUE ACCRUED ADJUSTMENT ADJUSTMENT ADJUSTMENT INTERESTS MARKET VALUE ADJUSTMENT (INCLUDING (IMPAIRMENT ADJUSTMENT OF LOSSES) INITIAL VALUE TO NOMINAL) 1 2 3 4 5 6 7 8 9 10 11 12 13 5301 2011 141,589,555 (37,452,008) 81,416,788 – (101,433,117) 24,266,182 73,743 (26,413,748) 121,646,969 (39,599,574) Long-term-total 5321 2010 155,042,311 (88,071,924) 12,028,483 – (25,544,173) 12,182,989 62,934 38,436,927 141,589,555 (37,452,008) Including: contributions to charter capitals of other 5302 2011 20,945,086 (11,884,040) 78,613,929 – (20,941,864) 11,884,039 – (24,822,899) 78,617,151 (24,822,900) organizations 5322 2010 20,939,755 (13,648,268) 5,621 – (290) 499 – 1,763,729 20,945,086 (11,884,040) 5303 2011 107,784,803 (21,949,316) – – (79,677,764) 12,382,143 – (1,590,849) 28,107,039 (11,158,022) contributions to charter capitals of DSCs 5323 2010 133,326,973 (74,423,656) 763 – (25,542,933) 12,182,490 – 40,291,850 107,784,803 (21,949,316) 5304 2011 12,554,334 (3,618,652) 2,802,859 – (516,078) – 73,743 – 14,914,858 (3,618,652) Securities (promissory notes) 5324 2010 469,301 – 12,022,099 – – – 62,934 (3,618,652) 12,554,334 (3,618,652) 5305 2011 302,163 – – – (297,411) – – – 4,752 – Loans granted 5325 2010 303,113 – – – (950) – – – 302,163 – 5306 2011 – – – – – – – – – – Deposits 5326 2010 – – – – – – – – – – 5307 2011 3,169 – – – – – – – 3,169 – Other 5327 2010 3,169 – – – – – – – 3,169 – 5308 2011 46,805,324 (561,300) 464,065,761 – (484,363,599) – 1,068,030 – 27,118,173 (561,300) Short-term- total 5328 2010 69,629,025 (501,300) 145,120,000 – (169,949,952) – 2,976,292 (60,000) 46,805,324 (561,300) Including: contributions to charter capitals of other 5309 2011 – – – – – – – – – – organizations 5329 2010 – – – – – – – – – – 5310 2011 – – – – – – – – – – contributions to charter capitals of DSCs 5330 2010 – – – – – – – – – – 5311 2011 42,416,353 (60,000) 52,769,300 – (75,213,598) – 610,686 – 20,582,741 (60,000) Securities (promissory notes) 5331 2010 44,190,554 – 61,000,000 – (64,780,452) – 2,006,251 (60,000) 42,416,353 (60,000) 5312 2011 1,388,971 (501,300) 296,461 – (150,000) – – – 1,535,432 (501,300) Loans granted 5332 2010 1,388,971 (501,300) – – – – – – 1,388,971 (501,300) 5313 2011 3,000,000 – 411,000,000 – (409,000,000) – 457,344 – 5,000,000 – Deposits 5333 2010 24,049,500 – 84,120,000 – (105,169,500) – 970,040 – 3,000,000 – 5314 2011 – – – – – – – – – – Other 5334 2010 – – – – – – – – – – 5300 2011 188,394,879 (38,013,308) 545,482,549 – (585,796,716) 24,266,182 1,141,773 (26,413,748) 148,765,142 (40,160,874) Financial investments- total 5320 2010 224,671,336 (88,573,224) 157,148,483 – (195,494,125) 12,182,989 3,039,226 38,376,927 188,394,879 (38,013,308)

* Interests on deposits are not included in "Short-term financial investments" item.

DESCRIPTION LINE AS OF AS OF AS OF CODE 31 DECEMBER 2011 31 DECEMBER 2010 31 DECEMBER 2009 1 2 3 4 5 Pledged financial investments 53200 – – – Financial investments transferred to the third parties (except for sale) – total 53205 – – – other usage of financial investments 53209 – – –

22 3. FINANCIAL INVESTMENTS

* Interests on deposits are not included in "Short-term financial investments" item.

23 4. STOCK

4.1. Availability and changes in stock DESCRIPTION LINE PERIOD AS OF THE BEGINNING CHANGES FOR THE PERIOD AS OF THE END CODE OF REPORTING YEAR WITHDRAWN (REPAYED) OF REPORTING YEAR COSTS PROVISION FOR REVENUES AND COSTS PROVISION FOR LOSSES FROM STOCK TURNOVER COSTS PROVISION FOR COSTS DECREASE COSTS COSTS DECREASE COSTS DECREASE AMONG GROUPS COSTS DECREASE (TYPES) OF STOCK 1 2 3 4 5 6 7 8 9 10 11 12 5400 2011 4,437,478 – 9,622,444 (4,956,688) – – – 9,103,234 – Stock - total 5420 2010 2,292,148 – 5,133,205 (2,987,875) – – – 4,437,478 – 5401 2011 4,407,467 – 9,621,697 (4,955,916) – – – 9,073,248 – Raw materials and other material values 5421 2010 2,262,155 – 5,132,385 (2,987,073) – – – 4,407,467 – 5402 2011 30,011 – 747 (772) – – – 29,986 – finished goods and goods for resale 5422 2010 29,993 – 820 (802) – – – 30,011 –

4.2. Pledged inventory DESCRIPTION LINE AS OF AS OF AS OF CODE 31 DECEMBER 2011 31 DECEMBER 2010 31 DECEMBER 2009 1 2 3 4 5 Inventory not paid on reporting date – total 5440 – – – Pledged inventory by contracts – total 5445 – – –

5. ACCOUNTS PAYABLE AND RECEIVABLE

5.1. Availability and changes in accounts receivable DESCRIPTION LINE PERIOD AS OF THE BEGINNING CHANGES FOR THE PERIOD AS OF THE END CODE OF REPORTING YEAR RECEIVED WITHDRAWN OF REPORTING YEAR BY CONTRACTS BAD DEBT AS A RESULT INTERESTS, REPAYMENT WRITING-OFF ALLOWANCE TRANSFER FROM BY CONTRACTS BAD DEBT TERM PROVISION OF ACTIVITIES FINES AND OTHER RECOVERY LONG- TO SHORT- TERM PROVISION (TRANSACTION ACCRUALS DUE TERM DEBT) 1 2 3 4 5 6 7 8 9 10 11 12 13 5501 2011 8,794,923 (98,674) 5,117,709 1,328 (5,602,411) – 98,586 (209,104) 8,102,445 (88) Long-term accounts receivable – total 5521 2010 20,492,907 (88) 3,855,410 – (15,527,349) – (98,586) (26,045) 8,794,923 (98,674) including: 5502 2011 68,106 – 20,763 – (86,211) – – – 2,658 – Buyers and customers 5522 2010 185,910 – 3,084 – (120,888) – – – 68,106 – 5503 2011 88 (88) 94 – (94) – – – 88 (88) Advance payments 5523 2010 124 (88) 9,828 – (9,864) – – – 88 (88) 5504 2011 8,726,729 (98,586) 5,096,852 1,328 (5,516,106) – 98,586 (209,104) 8,099,699 – Other debtors 5524 2010 20,306,873 – 3,842,498 – (15,396,597) – (98,586) (26,045) 8,726,729 (98,586) 5510 2011 72,242,334 (10,395,379) 373,472,680 2,044,535 (369,531,913) (612) (14,416,070) 209,104 78,436,128 (24,811,449) Short-term accounts receivable – total 5530 2010 72,485,761 (19,674,682) 272,611,993 39 (272,739,018) (142,486) 9,279,303 26,045 72,242,334 (10,395,379) including: 5511 2011 12,476,253 (3,806,612) 158,184,712 – (154,509,563) (594) (1,484,047) – 16,150,808 (5,290,659) Buyers and customers 5531 2010 11,452,529 (2,503,116) 125,157,571 – (124,133,841) (6) (1,303,496) – 12,476,253 (3,806,612) 5512 2011 – – – – – – – – – – Founders (participants) debts (contributions to charter capital) 5532 2010 – – – – – – – – – – 5513 2011 3,821,092 (1,984,897) 33,609,381 – (32,673,047) (18) (3,318) – 4,757,408 (1,988,215) Advance payments 5533 2010 4,595,675 (1,919,150) 43,281,841 – (44,056,333) (91) (65,747) – 3,821,092 (1,984,897) 5514 2011 55,944,989 (4,603,870) 181,678,587 2,044,535 (182,349,303) – (12,928,705) 209,104 57,527,912 (17,532,575) Other debtors 5534 2010 56,437,557 (15,252,416) 104,172,581 39 (104,548,844) (142,389) 10,648,546 26,045 55,944,989 (4,603,870) 5515 2011 99,752,133 (3,951,474) 145,998,857 7,492 (160,768,893) – 2,626,891 – 84,989,589 (1,324,583) Advance payments under noncurrent assets (line 1173, balance) 5535 2010 65,991,697 (1,631,885) 135,860,981 5,617 (102,106,162) – (2,319,589) – 99,752,133 (3,951,474) 5500 2011 180,789,390 (14,445,527) 524,589,246 2,053,355 (535,1903,217) (612) (11,690,593) – 171,528,162 (26,136,120) Total 5520 2010 158,970,365 (21,306,655) 412,328,884 5,656 (390,372,529) (142,486) 6,861,128 – 180,789,390 (14,445,527)

24 4. STOCK

5. ACCOUNTS PAYABLE AND RECEIVABLE

25 5.2. Overdue accounts receivable DESCRIPTION LINE AS OF 31 DECEMBER 2011 AS OF 31 DECEMBER 2010 AS OF 31 DECEMBER 2009 CODE BY CONTRACTS BOOK VALUE BY CONTRACTS BOOK VALUE BY CONTRACTS BOOK VALUE TERMS (EXCLUDING BAD TERMS (EXCLUDING BAD TERMS (EXCLUDING BAD DEBT PROVISION) DEBT PROVISION) DEBT PROVISION) 1 2 3 4 5 6 Total 5540 7,936,665 632,893 7,052,302 1,248,806 6,679,789 2,241,820 including: Buyers and customers 5541 5,813,561 522,902 4,610,585 803,973 4,480,810 1,977,695 Advance payments 5542 2,098,198 109,991 2,429,722 444,833 2,183,267 264,125 Other debtors 5543 24,906 – 11,995 – 15,712 –

5.3. Availability and changes in accounts payable DESCRIPTION LINE PERIOD AS OF THE CHANGES FOR THE PERIOD AS OF THE END OF CODE BEGINNING OF RECEIVED WITHDRAWN REPORTING YEAR REPORTING YEAR AS A RESULT INTERESTS, REPAYMENT WRITING-OFF TRANSFER FROM OF ACTIVITIES FINES AND OTHER LONG- TO (TRANSACTION ACCRUALS DUE SHORT-TERM DEBT) 1 2 3 4 5 6 7 8 9 10 5551 2011 18,179 13,184 – (13,939) – – 17,424 Long-term accounts payable – total 5571 2010 5,098 13,583 – (502) – – 18,179 5560 2011 47,774,515 532,281,341 2,485 (536,712,121) (655) – 43,345,565 Short-term accounts payable – total 5580 2010 65,849,518 366,557,384 – (384,489,901) (142,486) – 47,774,515 including: 5561 2011 14,017,237 185,439,570 2,335 (178,135,889) (594) – 21,322,659 suppliers and contractors 5581 2010 11,018,708 104,537,578 – (101,539,043) (6) – 14,017,237 5562 2011 193,318 10,827,613 – (10,717,096) – – 303,835 payables to employees 5582 2010 134,473 9,686,434 – (9,627,589) – – 193,318 5563 2011 36,486 2,259,371 – (2,228,899) – – 66,958 payables to state non-budgetatry funds 5583 2010 18,906 1,661,311 – (1,643,731) – – 36,486 5564 2011 865,113 21,589,308 – (21,274,280) – – 1,180,141 taxes and fees payables 5584 2010 653,884 8,683,233 – (8,472,004) – – 865,113 5565 2011 11,476,694 213,820,136 – (214,865,843) (61) – 10,430,926 Advance payments 5585 2010 7,114,653 171,228,296 – (166,866,164) (91) – 11,476,694 5566 2011 21,138,769 97,766,307 150 (108,921,491) – – 9,983,735 Other creditors 5586 2010 46,861,996 70,760,532 – (96,341,370) (142,389) – 21,138,769 5567 2011 46,898 579,036 – (568,623) – – 57,311 Payables to participants (founders) 5587 2010 46,898 – – – – – 46,898 5550 2011 47,792,694 532,294,525 2,485 (536,726,060) (655) – 43,362,989 Total 5570 2010 65,854,616 366,570,967 – (384,490,403) (142,486) – 47,792,694

5.4. Overdue accounts payable DESCRIPTION LINE AS OF AS OF AS OF CODE 31 DECEMBER 2011 31 DECEMBER 2010 31 DECEMBER 2009 1 2 3 4 5 Total 5590 690 1,047 13,710 including: Buyers and customers 5591 190 547 13,210 Advance payments 5592 – – – Other debtors 5593 500 500 500

26 5.3. Availability and changes in accounts payable DESCRIPTION LINE PERIOD AS OF THE CHANGES FOR THE PERIOD AS OF THE END OF CODE BEGINNING OF RECEIVED WITHDRAWN REPORTING YEAR REPORTING YEAR AS A RESULT INTERESTS, REPAYMENT WRITING-OFF TRANSFER FROM OF ACTIVITIES FINES AND OTHER LONG- TO (TRANSACTION ACCRUALS DUE SHORT-TERM DEBT) 1 2 3 4 5 6 7 8 9 10 5551 2011 18,179 13,184 – (13,939) – – 17,424 Long-term accounts payable – total 5571 2010 5,098 13,583 – (502) – – 18,179 5560 2011 47,774,515 532,281,341 2,485 (536,712,121) (655) – 43,345,565 Short-term accounts payable – total 5580 2010 65,849,518 366,557,384 – (384,489,901) (142,486) – 47,774,515 including: 5561 2011 14,017,237 185,439,570 2,335 (178,135,889) (594) – 21,322,659 suppliers and contractors 5581 2010 11,018,708 104,537,578 – (101,539,043) (6) – 14,017,237 5562 2011 193,318 10,827,613 – (10,717,096) – – 303,835 payables to employees 5582 2010 134,473 9,686,434 – (9,627,589) – – 193,318 5563 2011 36,486 2,259,371 – (2,228,899) – – 66,958 payables to state non-budgetatry funds 5583 2010 18,906 1,661,311 – (1,643,731) – – 36,486 5564 2011 865,113 21,589,308 – (21,274,280) – – 1,180,141 taxes and fees payables 5584 2010 653,884 8,683,233 – (8,472,004) – – 865,113 5565 2011 11,476,694 213,820,136 – (214,865,843) (61) – 10,430,926 Advance payments 5585 2010 7,114,653 171,228,296 – (166,866,164) (91) – 11,476,694 5566 2011 21,138,769 97,766,307 150 (108,921,491) – – 9,983,735 Other creditors 5586 2010 46,861,996 70,760,532 – (96,341,370) (142,389) – 21,138,769 5567 2011 46,898 579,036 – (568,623) – – 57,311 Payables to participants (founders) 5587 2010 46,898 – – – – – 46,898 5550 2011 47,792,694 532,294,525 2,485 (536,726,060) (655) – 43,362,989 Total 5570 2010 65,854,616 366,570,967 – (384,490,403) (142,486) – 47,792,694

27 6. PRODUCTION COSTS DESCRIPTION LINE 2011 2010 CODE 1 2 3 4 Material costs 5610 22,077,446 24,309,927 Labor costs 5620 14,972,760 13,331,116 Social costs allocations 5630 3,314,254 2,249,899 Depreciation 5640 40,777,958 32,681,907 Other costs 5650 11,757,922 9,927,853 Total by cost category 5660 92,900,340 82,500,702 Changein balances (increase [-], decrease [+]): unfinished production, goods etc (increase [-]) 5670 – (18) unfinished production, goods etc (decreaseе [+]) 5680 25 – Total costs for common activities 5600 92,900,365 82,500,684

7. ESTIMATED LIABILITIES INDEX AS OF THE ACCRUED USED RESTORED AS OF THE END OF DESCRIPTION LINE PERIOD BEGINNING OF REPORTING YEAR CODE REPORTING YEAR 1 2 3 4 5 6 7 8 5700 за 2011 г. 256,241 149,366 – – 405,607 Estimated liabilities за 2010 г. 181,838 74,403 256,241 including: Estimated liabilities on 5701 за 2011 г. 256,241 149,366 – – 405,607 unutilized vacation за 2010 г. 181,838 74,403 256,241

8. COLLATERAL DESCRIPTION LINE AS OF AS OF AS OF CODE 31 DECEMBER 31 DECEMBER 2010 31 DECEMBER 2011 2009 1 2 3 4 5 Received – total 5800 128,780,259 115,203,743 70,943,984 including: Banking guarantees 5801 127,763,423 114,200,496 69,940,737 Property pledge contract 5802 1,016,836 1,003,247 1,003,247 Granted under own pledge – total 5810 67,570 30,815 30,815 including: Surety 5811 67,570 30,815 30,815

9. STATE SUPPORT DESCRIPTION LINE FOR 20 ____ FOR 20 ____ CODE 1 2 3 4 Budget funds received in the reporting period – total 5900 – – ITEM LINE AF OF THE RECEIVED RETURNED AF OF THE END OF CODE BEGINNING OF REPORTING YEAR REPORTING YEAR Budget credits – total 5910 ( )

Director O.M.Budargin Chief Accountant A.P.Noskov

(signature) (printed name) (signature) (printed name)

19 March 2012

28 2011 MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITIONS (MD&A) OVERVIEW OF OPERATIONS AND THE FINANCIAL CONDITION OF FEDERAL GRID COMPANY AS OF 31 DECEMBER 2011

This Report contains an overview of the operations and the finan- The Company makes considerable investments into fixed assets cial performance of Federal Grid Company (hereinafter referred to provide for the development and reliable operation of the to as the “Company”). The Report should be reviewed in conjunc- UNEG. In 2011, expenditures on the construction, reconstruction tion with the Company’s 2011 financial statements prepared in and renovation of the Company’s fixed assets amounted to accordance with corresponding Russian legislation (Russian RUR184.716 million (compared with RUR167.031 million in Accounting Standards (RAS), including a corresponding explan- 2010). atory note. The Company financed its investments in 2011 from the following sources: 1. GENERAL OVERVIEW OF THE COMPANY’S OPERA- • Revenues generated by power transmission services – 35%; TIONS • Borrowed funds – 40%; • Funds generated by VAT returns – 15%; On 31 December 2011, the Company consisted of 50 regional • Other sources (including payments for technological branches, including 8 Main Energy (Power) Systems (MES), 41 connections) – 10%. Backbone Electric Grid Transmission Line Companies (PMES) and one Bely Rast Specialized Production Base PMES. 1.1. Main factors influencing the performance of Federal Grid Company On 31 December 2011, the Company’s head count stood at 24,603 employees. The increased number of employees com- In 2011, the principal factors influencing the Company’s perfor- pared to 2010 was due to the improved quality of equipment mance include the following: maintenance and repair, as well as due to new employment 1. Losses related to the revaluation of investments in listed opportunities at new power grid facilities commissioned within shares and the revaluation of fixed assets; the framework of the investment program. 2. The net effect from creating and recovering provisions for bad loans; Beginning in July 2008, the Company’s shares have been listed 3. Higher revenues generated by power transmission services on the Russian Trading System (RTS) and the Moscow Inter- rendered by the Company; bank Currency Exchange (MICEX). Trading of the Company’s 4. Successful implementation of the cost management program, depository receipts (DRs) on the London Stock Exchange (LSE) which reduced the Company’s operating costs; commenced 28 March 2011. 5. Modification of RAB-regulation parameters approved for the Company for the period from 2011 to 2014. Beginning April Compared with 2009, the volume of power transmission ser- 1st, 2011, the Federal Tariff Service updated the growth rate vices rendered by the Company grew 68% to stand at for the average tariff charged for power transmission services RUR134,875 million in 2011. rendered by the Company. The resulting figures were as follows: 32.8% for Q1 2011, 26.4% for QII-IV 2011, 26.4% for Beginning from 2010, tariffs for the transmission of electricity 2012, 26.3% for 2013 and 26.3% for 2014; over the UNEG by Federal Grid Company are set using the RAB- 6. In 2011, the Company attracted long-term credits and loans regulation method, to upgrade the investment attractiveness of amounting to RUR84 billion. The majority of credits and the energy sector. loans, RUR74 billion, was used to finance the investment program. The number of corporate customers continues to grow due to new technological connections to the UNEG the execution of court rulings on concluding direct contracts with consumers and the staged termination of the “last mile” mechanism. In 2011, the Company connected 158 organizations to the UNEG.

30 OVERVIEW OF OPERATIONS AND THE FINANCIAL CONDITION OF FEDERAL GRID COMPANY AS OF 31 DECEMBER 2011

2. THE COMPANY’S FINANCIAL RESULTS

2.1. Key financial results RUR million CHANGE, 2011 2010 RUR MILLION CHANGE, % REVENUES AND EXPENSES RELATED TO USUAL BUSINESS OPERATIONS Revenues from core operations, 138,136.62 111,084.67 27,051.95 24.35% Including: Power transmission services 134,875.49 109,510.28 25,365.22 23.16% Other operations 3,261.12 1,574.40 1,686.72 107.13%

Prime cost of core operations, -84,174.33 -75,680.04 -8,494.29 11.22% Including: Power transmission services -83,201.43 -74,856.21 -8,345.22 11.15% Other operations -972.90 -823.83 -149.07 18.09%

Administrative costs -8,726.03 -6,820.65 -1,905.39 27.94%

Sales profit 45,236.25 28,583.99 16,652.26 58.26%

OTHER INCOME AND EXPENSES Interest receivable 3,971.45 5,436.24 -1,464.79 -26.94% Interest payable -273.75 273.75 -100.00% Income from participation in other organizations 264.86 422.31 -157.45 -37.28% Other income 171,434.39 144,906.89 26,527.50 18.31% Other expenses -209,462.53 -111,763.23 -97,699.31 87.42%

PROFIT (LOSS) BEFORE TAXATION 11,444.41 67,312.45 -55,868.04 -83.00% Postponed tax assets 46.16 -33.44 79.60 2.4 times Postponed tax liabilities -5 544.81 -1 181.21 -4 363.61 3.6 times Current profit tax -8 389.54 -9 264.31 874.77 -9.44% Other similar mandatory payments -3.37 43.226 -46.60 -107.80% Adjusted profit tax for the preceding periods -21.21 205.592 -226.81 -110.32% Net profit (loss) for the period -2,468.36 57,082.31 -59,550.67 -104.32%

Adjusted net profit 33,686.63 25,702 7,985 30.5%

2.2. Revenues generated by power transmission services RUR million

2011 2010 CHANGE, CHANGE, % RUR MILLION Revenues generated by power transmission services 134,875.5 109,510.3 25,365.2 23.16% Including: Payments for the maintenance of UNEG power facilities 120,993.7 94,949.4 26,044.3 27.43% Payments for normative in-process losses in the UNEG 13,881.8 14,560.8 -679.0 -4.66%

An analysis of the 2010-2011 period demonstrates an increase In 2011, revenues generated by the Company’s core regulated in revenues generated by power transmission services. Com- operations (excluding revenues from technological connections) pared to the similar period in 2010, revenues grew RUR25.365 made up 97.6% of the Company’s total revenues. million (or 23%).

In 2011, revenues generated by power transmission services and related to power grid facility maintenance increased mainly due to growth of production facilities connected with the UNEG development and tariff growth for the year.

31 2.4. The prime cost of core operations RUR million COST ELEMENT 2011 % OF THE TOTAL 2010 % OF THE TOTAL CHANGE, %. Depreciation of fixed assets 39,784 47% 31,727 42% 25% Purchase of energy and capacity 12,183 14% 14,183 19% -14% Labor compensation costs and social expenses 15,836 19% 13,926 18% 14% Repair and maintenance 5,291 6% 5,984 8% -12% Costs related to the purchase of raw stuff and materials 2,424 3% 2,246 3% 8% Costs related to property insurance 848 1% 849 1% -0.1% Lease costs 1,092 1% 926 1% 18% Costs related to security provisions 1,527 2% 1,105 1% 38% Other costs 5,188 6% 4,734 6% 10% Total prime cost 84,174 100% 75,680 100% 11%

2.4.1. Depreciation of fixed assets 2.4.5. Cost of raw stuff and materials Compared to 2010, depreciation costs grew 25% in 2011. An increase in costs related to the purchase of raw stuff and materials occurred due to increased stock (emergency reserve) The 2011 growth in depreciation costs occurred due to accrued and a rise in the volume of running maintenance and the repair depreciation from new power grid facilities commissioned within of fixed assets the framework of implementing the Company’s investment program and the revaluation of fixed assets. 2.4.6. Property insurance costs 2011 property insurance costs were equal to actual property 2.4.2. Purchase of energy and capacity insurance costs in 2010. In 2011, costs related to the purchase of energy and capacity fell 14% compared with the similar period in the preceding year. This 2.4.7. Lease costs happened due to a decrease in capacity purchased on the In 2011, lease costs grew 18% compared with 2010. The increase wholesale market, in order to compensate for losses caused by was caused by a greater number of leased premises to accom- a change in the Company’s purchasing policy due to the launch modate additional employees. Lease costs also grew due to uti- of the new capacity market. lity bills, which increased at least 15%. In 2011, costs related to the lease of transportation vehicles and special equipment and 2.4.3. Labor compensation costs and social expenses machinery used to maintain and repair UNEG facilities also The 14% growth in labor compensation costs and social expenses grew. occurred due to structural changes (an increase in the number of employees due to terminating a portion of outsourced work related 2.4.8. Costs related to security provisions to UNEG maintenance and repair) and the quarterly indexation of The growth of costs related to security provisions during the production employees’ salary performed in accordance with reporting year was caused by upgrading the physical security of actual growth in the consumer price index. The indexation is a growing number of facilities under security, and by implement- based on the Tariff Agreement adopted by the Company and the ing a program to protect UNEG facilities against terrorism. policy of maintaining employees’ real income level. 2.4.9. Other costs 2.4.4. Repair and maintenance In 2011, other costs increased due to an increase in costs related The 11% decrease in 2011 repair and maintenance costs to certification and licensing. occurred due to a drop in the price of repair work performed by third-party contractors and savings coming from the purchase of materials used for repairs.

32 2.5. Administrative costs RUR million COST ELEMENT 2011 % OF TOTAL 2010 % OF TOTAL CHANGE, %. Labor compensation costs and social expenses 2,451.0 28% 1,656.9 24% 48% Information services and software-related costs 1,199.9 14% 1,026.4 15% 17% Depreciation of fixed and non-tangible assets 993.7 11% 955.3 14% 4% Property tax 795.4 9% 611.5 9% 30% General production services 667.4 8% 455.8 7% 46% Tangible costs 335.8 4% 491.6 7% -32% Lease costs 543.8 6% 350.9 5% 55% Insurance costs 6.3 0% 6.9 0% -8% Costs related to security provisions 40.9 0% 25.4 0% 61% Telecommunications services 303.3 3% 259.6 4% 17% Consultancy services 302.5 3% 186.1 3% 63% R&D costs 201.9 2% 171.9 3% 17% Other costs 883.9 10% 622.3 9% 42% Total administrative costs 8,726.0 100% 6,820.6 100% 28%

2.5.1. Labor compensation costs and social expenses 2.5.3. Depreciation of fixed and non-tangible assets The 48% increase in labor compensation costs and social The 4% increase in depreciation costs was caused by fixed expenses in 2011 (compared with 2010) was caused by the fol- asset revaluation. lowing factors: • An increase in the number of executive body employees 2.5.4. Property tax resulting from the formation of structural divisions within the The 30% increase in property tax (compared with 2010) was executive body, which were intended to perform new functions. caused by commissioning new UNEG facilities and revaluing The divisions were formed to implement the policy on upgrading fixed assets (in accordance with accounting policy, the cost item grid reliability, as well as to accomplish the large-scale in question fully reflects the property tax, including the tax investment program. In particular, a Situation and Analytical imposed on the Company’s production assets). Center was formed within the executive body to upgrade the visibility of UNEG facilities, together with other specialized 2.5.5. Production services structural divisions engaged in implementing federal-scale The 46% increase in costs related to production services was projects, namely the Sochi Division and the Skolkovo Energy caused by measures to provide for corporate openness and Supply Division, etc.; transparency, for example, the Company’s participation in inter- • The indexation of the salary of certain employee categories to national forums and investor and shareholder meetings to dis- make salary competitive and to attract highly qualified close information on corporate activities and to upgrade the employees to engage in new activities, such as developing and Company’s rating to attract financing for the large-scale invest- implementing the smart grid concept, functioning under RAB ment program and to minimize the cost of borrowed funds and to regulation conditions and active operations on the financial multiply the Company’s presence at specialized fairs (exhibiting market to attract funds to finance the Company’s large-scale electric equipment and metering systems, etc). investment program; • Structural changes, for example, the transfer of salary funds 2.5.6. Tangible costs used to compensate the work of top managers in the Company’s The 32% decrease in tangible costs in 2011 (compared with branches to the Company’s executive body (beginning from the 2010) was due to implementing the Cost Management Program, middle of 2010), and compensation to the top managers who which was intended to decrease and optimize corporate costs.. left the Company in 2011; • Legislative changes concerning the payment of insurance 2.5.7. Lease costs contributions (with insurance rates increasing from 26% to The 55% increase in lease costs in 2011 compared with 2010 was 34%). caused by the inclusion in this cost item of costs related to lease payments (the financial lease of transportation vehicles operated 2.5.2. Information services and software-related costs by the Company in April 2011), and by an increase in the number The 17% increase in costs related to information services and of leased premises to accommodate additional employees. Other software was due to commissioning new software products to factors behind the increase include: at least a 15% increase in uti- develop the corporate information network and to increase the lity payments, an increase in lease payments paid for the lease of number of software users. communication systems used to provide the required reliability of dispatch communications at newly commissioned power grid facilities.

33 2.5.8. Property insurance costs ated with holding an extraordinary shareholders meeting (which Insurance costs include general liability insurance costs (which was held to approve the transaction involving the exchange of are similar to last year) and property insurance costs, which shares of generating facilities for shares of JSC INTER RAO UES) declined RUR0.6 million compared with the previous year. The and other costs related to personnel (including costs for providing decrease in property insurance costs was the result of concluding normal labor and safety conditions, civil defense costs and sick a more favorable insurance agreement via a tender. leave payments in accordance with regulatory norms).

2.5.9. Communication services 2.6. Profits from core operations The 17% increase in communication costs in 2011 compared with 2010 was caused by an indexation of communication operators’ In 2011, profits from core operations grew 58.3% compared with tariffs and an increase in the number of users of the corporate 2010. The growth occurred due to the fact that the growth rate of communication systems, as well as by an increase in applications receipts outstripped changes in prime cost, as the Company’s to send correspondence, due to an increasing amount of corre- receipts grew 24.4%, whereas the growth rate in prime cost was spondence with contractors – consumers (resulting from the modi- 11.2%. fication of tariffs and the necessity of concluding additional agreements) and with Company shareholders regarding the payment of 2.7. Interest receivable and interest payable dividends, etc. The amount of interest receivable is composed of income gener- 2.5.10. Consulting services ated by debt financing and revenues generated by depositing free The 63% increase in the scope of consulting services occurred cash in bank accounts and deposits. A considerable share of due to a growing number of consultancies associated with corpo- income-bearing investments was received by the Company as a rate governance procedures (rating, the registration of a resolu- result of the re-organization of JSC RAO UES of Russia 1 July tion on the issue of securities and the publication of the resulting 2008. prospectus and report, etc.). In 2011, interest-generated income fell 27% year-on-year, as the 2.5.11. Research and development (R & D) costs implementation of the Company’s investment program decreased The 17% increase in R&D costs in 2011 (compared with 2010) the amount of remaining free cash. was caused by implementing a lightning protection program for overhead lines and sub-station equipment. Due to changes in the Company’s accounting policy, interest costs have been capitalized and included in the cost of construc- 2.5.12. Other administrative costs tion titles since 2010. This explains why interest payable in 2011 is The 42% increase in other administrative costs in 2011 (compared not reflected in the corresponding line of the report. with 2010) was primarily caused by an increase in costs associ-

2.8. Other income sources RUR million DESCRIPTION 2011 2010 CHANGE, RUR CHANGE, % MILLION Discharge of bills 77,486.0 87,286.8 -9,800.8 -11.2% Income from the revaluation of shares based on mark-to market value - 30,024.9 -30,024.9 -100% Income from bad debt reserve recovery 8,424.1 20,897.4 -12,473.3 -59.7% Income from financial investment reserve recovery 2,892.4 0.5 2,891.9 Reserve recovery from a decrease in software licensing costs 661.2 - 661.2 100% Income from the withdrawal of financial investments 78,669.8 1,841.2 76,828.6 by 42 times Extraordinary income from insured events 986.5 731,7 254.8 34.8% Income from the revaluation of fixed assets 679.7 2,372.7 -1,693.0 -71.4% Other sources of income 1,634.7 4,124.4 - 1,751.7 - 42.5% Total other sources of income 171,434.4 144,906.9 26,527.5 18.3%

In 2011, the Company’s income from other sources grew RUR26,527.5 million compared with 2010. The growth was mainly due to the inclusion in the report of operations involving the sale/ exchange of shares of generating facilities for shares of JSC INTER RAO UES.

34 2.9. Other expenses RUR million DESCRIPTION 2011 2010 CHANGE, RUR MILLION CHANGE, % Discharge of bills 77,501.5 85,940.6 -8,439.1 -10% Bad debt reserves 20,151.3 14,036.4 6,114.9 44% Reserve for the devaluation of financial investments 1,590.8 3,913.4 -2,322.6 -59% Costs associated with the withdrawal of financial investments 79,186.7 985.4 78,201.3 80 times Depreciated cost of write-offs and construction in progress and the cost of 1359.3 654.0 44.1 6.3% writing-off Depreciated cost of written off software licenses 661.0 - 661.0 - Reserve for decreasing the cost of material assets - 661.0 -661.0 -100% Costs associated with the revaluation of fixed assets 2,247.3 3,304.4 -1,057.1 -32% Negative difference from mark-to-market revaluation of shares 24,822.9 109.0 24,713.9 227 times Other costs 2,602.7 1,547.9 443.7 20.5% Total other costs 209,462.5 111,763.2 97,699.3 87%

In 2011, the Company’s other costs grew RUR97,699.3 million 2.12. Bad debt reserve (for the devaluation compared with 2010. The growth was due to the inclusion in the of accounts receivable and advances paid out) report of operations involving the sale/exchange of shares of generating facilities for shares of JSC INTER RAO UES, as well In 2011, based on an evaluation of accounts receivable and the as the revaluation of the Company’s financial investments. probability that these accounts will be re-paid, the Company established a bad debt reserve in the amount of RUR20,151.3 2.10. Income/expense associated with the withdrawal million. The Company also recovered a reserve in the amount of of financial investments RUR11,977.6 million, which had been established in 2010. A positive financial result from the above-mentioned operations In 2011, the financial result from the discharge of third party bills amounted to RUR8,173.8 million. amounted to RUR15.5 million (compared with RUR1,346.2 million in 2010). In 2010, the financial result from the recovery and establishment of a bad debt reserve amounted to RUR6.862 million (recovered In 2011, the Company suffered a loss in the amount of RUR516.9 reserves were RUR20.898 million, whereas the established million from the withdrawal of financial investments. The loss reserve totaled RUR14.036 million). was caused by the inclusion in the report of the operation involving the sale/exchange of shares of generating facilities for shares 2.13. Current property tax of JSC INTER RAO UES by including a portion of income in the line “Recovery of the reserve for financial investments.” Compared to the previous year, in 2011, total property tax fell 9.4% to amount to RUR8,389.5 million. The change in property 2.11. Revaluation of financial investments tax occurred due to a decrease in the taxable base for calculating tax. The decrease was caused by increased tax depreciation in In 2011, the Company reflected a negative difference from the 2011. mark-to-market revaluation of shares. The negative difference amounted to RUR24,822.9 million. 2.14. Net profit (loss) in the reporting period

In 2010, income from the revaluation of shares was RUR30.025 The Company’s FY 2011 loss amounted to RUR2.468 million million. In 2010, profit resulting from the revaluation of shares at (whereas 2010 profit was RUR57.082 million). The Company’s their market value stood at RUR29.916 million. Furthermore, in loss occurred due to the following factors: 2010, the Company established a reserve for financial invest- • A revaluation of financial investments (securities) at market ment devaluation, not subject to revaluation at market value. The value resulted in a decrease in the Company’s net profit; reserve amounted to RUR3.913 million. • A negative difference resulting from the revaluation of fixed assets; • A negative balance of operations involving the establishment and recovery of bad debt reserves. The negative balance resulted from the revaluation of bills owned by Index of Energy of FGC UES. The revaluation was performed within the framework of the revaluation of shares of energy companies on the Company’s balance.

35 3. THE COMPANY’S NET ASSETS

According to accounting report data, in 2011, the value of JSC Federal Grid Company’s net assets increased RUR59,320.8 million compared with the similar period in 2010 and by RUR50,345.9 million according to the evaluation based on assumptions.

RUR million INDEX 2010 2011 NOMINAL* TAKING INTO NOMINAL* TAKING INTO ACCOUNT ACCOUNT CONTRIBUTIONS CONTRIBUTIONS TO AUTHORIZED TO AUTHORIZED CAPITAL** CAPITAL** The value of net assets, RUR million 794,469.94 805,664,05 853,801.14 856,020.39

*Evaluation based on data from the accounting reports; ** In 2010 and 2011, the authorized capital of JSC Federal Grid Company increased via the issue of additional shares. This led to the inclusion of running debts to founding members in regard to contributions to the authorized capital into accounts payable reflected in accounting reports among other short-term liabilities. Once the report on the issue of additional shares is registered with the Russian Federal Financial Markets Services, the debt in question will be included in the Company’s authorized capital. Evaluation of the value of net assets is specified taking into account the inclusion of debt in regard to contributions to authorized capital into the Company’s own capital. Debt amounted to RUR11.194 million in 2010 and RUR2.219 million in 2011.

4. CASH FLOW 2010. Compared with 2010, actual payments effected by the 4.1. General information on the Company’s cash flow Company grew RUR24.182 million to amount to RUR328.036 generated by core, investment and financial opera- million. tions In 2011, the Company’s investment program was financed via On 31 December 2011, the Company’s total cash was the following sources: RUR17,247.7 million (compared with RUR11,243.3 million on • Cash received from running operations; 31 December 2010). • The discharge of bills; • The implementation of financial investments resulting from the The receipts and expenses analysis below was based on man- re-organization of JSC RAO UES of Russia; agement accounting of corporate cash flow, except for mutually • The attraction of borrowed funds (bonded loans). exclusive deposit turnover. The table below contains information on the Company’s cash In 2011, the Company physically received cash in the amount of flows associated with core, investment and financial operations RUR334.040 million, which is RUR30.255 million more than during the corresponding periods.

RUR million ПОКАЗАТЕЛИ TOTAL FOR TYPE OF ACTIVITY BUSINESS OPERATIONS INVESTMENTS FINANCING 2011 2010 2011 2010 2011 2010 2011 2010 Receipts 334,040 303,785 169,738 147,228 82,752 72,131 81,551 84,426 Payments 328,036 303,854 70,544 68,805 246,493 228,049 10,999 7,000 Balance 6,004 -69 99,194 78,423 -163,741 -155,918 70,552 77,426

36 Compared with 2010, the payments of cash resulting from invest- ning operations increased RUR1.739 million (2.5%). The ments grew RUR18.444 million, including a RUR17.685 million increase was due to higher property tax payments. Excluding ruble increase in financing for the investment program. Year-on- this factor, the growth rate in costs for financing running opera- year, the net outflow of cash used to finance the Company’s tions corresponds to the growth rate for expenses from factors investments increased due to investment program growth and the considered in the Section entitled “Prime cost.” inclusion in the report of operations involving the sales and purchase of securities used to further finance the investment pro- 4.3. Cash used in investment operations gram. In 2011, the total amount of cash used to finance JSC Fed- eral Grid Company’s investment program amounted to Compared with 2010, cash payments associated with invest- RUR184.716 million (compared with RUR167.031 million in 2010), ment operations grew RUR18.444 million, including RUR17.685 with the main financing priorities enumerated in the “Investments” million to finance the investment program. Year-on-year, net Section. In addition, the financing of investment programs of other cash outflow used to finance the Company’s investments grew power grid facility owners (based on contractor agreements) and due to investment program growth and the inclusion in the report expenses for the purchase of fixed assets for production needs of operations involving the sales and purchase of securities to amounted to RUR4.324 million, whereas expenses for the pur- further finance the investment program. chase of short-term financial investments to deposit temporarily free cash amounted to RUR54.300 million, with RUR2.578 million 4.4. Net cash from financial operations paid out as dividends. In 2010, cash receipts from financial operations fell RUR2.875 4.2. Net cash from running operations million to amount to RUR81.551 million. This occurred due to a decrease in interest receivable on investments and cash remain- During FY 2011, net cash received from running operations ing on accounts, because the Company spent all free cash increased RUR22.510 million (15%) compared with the preced- financing its investment program. In 2011, the Company dis- ing year. The growth was due to an increase in amounts paid by charged a bonded loan in the amount of RUR6.000 million. The consumers for Company services and factors presented in the Company also discharged interest on credits and loans used to Section entitled “Receipts from power transmission services.” finance the corporate investment program. Interest paid Compared with 2010, the amount of cash spent to finance run- amounted to RUR4.999 million.

* стр. 32

37 AUDIT COMMISSION CONCLUSIONS ON THE VERACITY OF INFORMATION in the Annual Report of Federal Grid Company for 2011

Moscow 2012April 20

In compliance with Federal Law No.208-FZ "On Joint Stock Companies" dated 24 November 1995, the Articles of Association of Federal Grid Company, and the Plan of Work for the Audit Commission of Federal Grid Company (Minutes of Meeting No.1 dated 12 March 2012 and Minutes of Meeting No.2 dated 26 March 2012), an audit has been conducted of the 2011 annual report by the Company.

Based on this audit, and taking into account the findings of the audit of Federal Grid Company’s financial (bookkeeping) accounts by PricewaterhouseCoopers Audit (unnumbered, dated 19 March 2012) for 2011, the following conclusions were reached: • Based on selective checks of documents submitted to the Audit Commission, the information contained in Federal Grid Company's Annual Report and annual financial accounts for 2011 can be considered accurate in every significant respect; • No evidence has been found of any violations of accounting procedures or financial reporting regulations, as stipulated by Russian laws.

The Annual Report of Federal Grid Company, submitted for approval to the Annual General Shareholders Meeting, contains informa - tion specified: • in Paragraph 3.6 of the Provision on Additional Requirements on the procedure for preparing, convening and holding the Annual General Shareholders Meeting, as approved by Resolution No.17/ps (as of 31 May 2002) of the Russian Federal Commission for the Securities Market (FCSM) updated in FCSM Resolution No.03-6 p/s (as of 7 February 2003); • Decree of the Government of the Russian Federation No. 1214 of 31 December 2010 “On Improving the Management Procedure for Open Joint Stock Companies Which Shares are Held by the Russian Federation and Federal State Unitary Enterprises.”

Considering the above, the Audit Commission of Federal Grid Company has sufficient grounds to confirm the veracity, in every signifi - cant respect, of data contained in the Annual Report of Federal Grid Company and the Company's 2010 annual significant accounts.

Chairman of the Audit Commission of Federal Grid Company V. Raspopov

Secretary of the Audit Commission of Federal Grid Company A. Kolyada

Members of the Audit Commission M. Tikhonova

A. Ganin

V. Lebedev

38 CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS FOR THE YEAR ENDED 31 DECEMBER 2011 INDEPENDENT AUDITOR’S REPORT

To the Shareholders and the Board of Directors of Open Joint misstatement of the financial statements, whether due to Stock Company «Federal Grid Company of Unified Energy Sys- fraud or error. In making those risk assessments, the auditor tem» (JSC FGC UES): considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to 1. We have audited the accompanying consolidated financial design audit procedures that are appropriate in the statements of JSC FGC UES and its subsidiaries (the circumstances, but not for the purpose of expressing an Group) which comprise the consolidated statement of opinion on the effectiveness of the entity’s internal control. An financial position as at 31 December 2011, consolidated audit also includes evaluating the appropriateness of statement of comprehensive income, changes in equity and accounting policies used and the reasonableness of cash flows for the year then ended and a summary of accounting estimates made by management, as well as significant accounting policies and other explanatory notes. evaluating the overall presentation of the financial statements.

5. 5 We believe that the audit evidence we have obtained is MANAGEMENT’S RESPONSIBILITY FOR THE FINAN- sufficient and appropriate to provide a basis for our audit CIAL STATEMENTS opinion.

2. Management is responsible for the preparation and fair presentation of these consolidated financial statements in OPINION accordance with International Financial Reporting Standarts, and for such internal control as management 6. In our opinion, the accompanying consolidated financial determines is necessary to enable the preparation of statements present fairly, in all material respects, the financial statements that are free from material misstatement, financial position of the Group as of 31 December 2011, and whether due to fraud or error. its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. AUDITOR’S RESPONSIBILITY

3. Our responsibility is to express an opinion on these PHASIS OF MATTER consolidated financial statements based on our audit. We conducted our audit in accordance with International 7. Without qualifying our opinion, we draw attention to Notes 1 Standarts on Auditing. Those standarts require that we and 5 to the accompanying consolidated financial comply with ethical requirements and plan and perform the statements. The Russian Federation has a controlling audit to obtain reasonable assurance about whether the interest in the Group and governmental economic and social consolidated financial statements are free from material policies affect the Group’s financial position, results of misstatement. operations and cash flows.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial ZAO PricewaterhouseCoopers Audit statements. The procedures selected depend on the auditor’s Moscow, Russian Federation judgment, including the assessment of the risks of material 19 April 2012

ZAO PricewaterhouseCoopers Audit, White Square Office Center, 10 Butyrsky Val, Moscow, Russia, 125047 T: +7 (495) 967 6000, F: +7 (495) 967 6000, www.pwc.ru

40 CONTENTS

Consolidated Statement of Financial Position 42 Consolidated Statement of Comprehensive Income 43 Consolidated Statement of Cash Flows 44 Consolidated Statement of Changes in Equity 46

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1. The Group and its operations 48 Note 2. Basis of preparation 48 Note 3. Summary of significant accounting policies 52 Note 4. Principal subsidiaries 58 Note 5. Balances and transactions with related parties 58 Note 6. Property, plant and equipment 60 Note 7. Intangible assets 62 Note 8. Investments in associated companies 63 Note 9. Available-for-sale investments 63 Note 10. Promissory notes 64 Note 11. Other non-current assets 65 Note 12. Cash and cash equivalents 65 Note 13. Bank deposits 65 Note 14. Accounts receivable and prepayments 66 Note 15. Inventories 67 Note 16. Non-current assets held for sale 67 Note 17. Equity 68 Note 18. Income tax 71 Note 19. Non-current debt 73 Note 20. Retirement benefit obligations 74 Note 21. Current debt and current portion of non-current debt 76 Note 22. Accounts payable and accrued charges 76 Note 23. Revenue 76 Note 24. Operating expenses 77 Note 25. Finance income 77 Note 26. Finance costs 78 Note 27. Earnings per ordinary share for profit attributable to the shareholders of JSC “FGC UES” 78 Note 28. Contingencies, commitments and operating risks 78 Note 29. Financial instruments and financial risks 79 Note 30. Capital risk management 81 Note 31. Segment information 82 Note 32. Events after the reporting period 84

41 FGC UES Group CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2011

(in millions of Russian Roubles)

NOTES 31 DECEMBER 31 DECEMBER 2011 2010 ASSETS Non-current assets Property, plant and equipment 6 980,677 851,228 Intangible assets 7 6,973 6,189 Investments in associated companies 8 910 348 Available-for-sale investments 9 69,979 9,531 Long-term promissory notes 10 14,928 11,046 Other non-current assets 11 1,039 2,507 Total non-current assets 1,074,506 880,849

Current assets Cash and cash equivalents 12 25,627 13,573 Bank deposits 13 1,184 4,606 Short-term promissory notes 10 20,737 43,156 Loans given 448 18 Accounts receivable and prepayments 14 32,944 32,654 Income tax prepayments 1,911 581 Inventories 15 6,320 5,602 89,171 100,190 Non-current assets heldforsale Total current assets 16 - 90,609 TOTAL ASSETS 89,171 190,799 TOTAL ASSETS 1,163,677 1,071,648

EQUITY AND LIABILITIES Equity Share capital: Ordinary shares 17 627,974 616,781 Treasury shares 17 (5,522) (6,864) Share premium 17 10,501 10,501 Reserves 17 314,323 361,267 Accumulated deficit (49,962) (108,525) Equity attributable to the shareholders of JSC “FGC UES” 897,314 873,160 Non-controlling interest 793 944 Total equity 898,107 874,104

Non-current liabilities Deferred income tax liabilities 18 80,572 83,657 Non-current debt 19 130,778 50,000 Retirement benefit obligations 20 4,686 4,318 Total non-current liabilities 216,036 137,975

Current liabilities Accounts payable to the shareholders of JSC “FGC UES” 17 2,275 11,240 Current debt and current portion of non-current debt 21 2,002 7,497 Accounts payable and accrued charges 22 44,974 40,552 Incometax payable 283 280 Total current liabilities 49,534 59,569 Total liabilities 265,570 197,544 TOTAL EQUITY AND LIABILITIES 1,163,677 1,071,648

Authorised for issue and signed on behalf of the Management Board: 19 April 2012

Deputy Chairman of the A.V. Kazachenkov Head of Accounting and Financial A.P. Noskov Management Board Reporting – Chief Accountant

42 The accompanying notes on pages 9 to 57 are an integral part of these Consolidated Financial Statements. FGC UES Group CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2011

(in millions of Russian Roubles)

NOTES YEAR ENDED YEAR ENDED 31 DECEMBER 31 DECEMBER 2011 2010 Revenue 23 139,571 113,330 Other operating income 23 7,793 4,484 Operating expenses 24 (100,750) (87,873) Gain on disposal of available-for-sale investments and investments in associates 16 31,115 606 Loss on re-measurement of assets held for sale 16 (4,718) (6,896) Impairment of property, plant and equipment and intangible assets 6, 7 (1,174) (846) Operating profit 71,837 22,805 Finance income 25 3,957 5,807 Finance costs 26 (278) (619) Impairment of available-for-sale investments 9 (12,661) (235) Share of result of associates 8 8 (833) Loss on dilution of share in associates 8 - (2,790) Profit before income tax 62,863 24,135 Income tax 18 (13,875) (5,752) Profit for the year 48,988 18,383

OTHER COMPREHENSIVE INCOME Change in fair value of available-for-sale investments 9, 17 (24,952) 18,800 Accumulated gain on available-for-sale investments recycled to profit or loss 16, 17 (31,115) - Impairment of available-for-sale investments reclassified to profit or loss 9, 17 12,661 - Foreign currency translation difference 8, 17 66 (22) Income tax recorded directly in other comprehensive income 18 8,372 (3,760) Other comprehensive (loss)/income for the year, net of income tax (34,968) 15,018 Total comprehensive income for the year 14,020 33,401

Profit / (loss) attributable to: Shareholders of JSC “FGC UES” 27 49,139 19,009 Non-controlling interest (151) (626) Total comprehensive income/(loss) attributable to: Shareholders of JSC “FGC UES” 14,171 34,027 Non-controlling interest (151) (626) Earning per ordinary share for profit attributable to the shareholders of JSC “FGC UES” – 27 0.039 0.015 basic and diluted (in Russian Roubles)

Authorised for issue and signed on behalf of the Management Board: 19 April 2012

Deputy Chairman of the A.V. Kazachenkov Head of Accounting and Financial A.P. Noskov Management Board Reporting – Chief Accountant

The accompanying notes on pages 9 to 57 are an integral part of these Consolidated Financial Statements. 43 FGC UES Group CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2011

(in millions of Russian Roubles)

NOTES YEAR ENDED YEAR ENDED 31 DECEMBER 31 DECEMBER 2011 2010 CASH FLOWS FROM OPERATING ACTIVITIES: Profit before income tax 62,863 24,135 Adjustments to reconcile profit before income tax to net cash provided by operations Depreciation of property, plant and equipment 24 33,187 30,185 (Gain) / loss on disposal of property, plant and equipment 24 (617) 910 Amortisation of intangible assets 24 865 869 Impairment of property, plant and equipment and intangible assets 6, 7 1,174 846 Impairment of available-for-sale investments 9 12,661 235 Gain on disposal of available-for-sale investments and investments in associates 16 (31,115) (606) Loss on re-measurement of assets held for sale 16 4,718 6,896 Share of result of associates 8 (8) 833 Loss on decrease of share in associates due to dilution of share capital 8 - 2,790 Accrual / (reversal) of allowance for doubtfuldebtors 24 4,305 (2,164) Write-off of accounts payable 23 (2,753) (1) Share-based compensation 17, 24 1,342 - Finance income 25 (3,957) (5,807) Finance costs 26 278 619 Other non-cash operating income 69 50 Operating cash flows before working capital changes and income tax paid 83,012 59,790 Working capital changes: Increase in accounts receivable and prepayments (6,828) (975) Increase in inventories (753) (2,329) Increase in other non-current assets (12) (1,548) Increase in accounts payable and accrued charges 2,281 7,935 Increase / (decrease) in taxes payable, other than income tax 381 (998) Increase in retirement benefit obligations 447 879 Income tax paid (9,883) (9,305) Net cash generated by operating activities 68,645 53,449

CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (153,471) (141,882) Proceeds from disposal of property, plant and equipment 1,431 943 Purchase of intangible assets (1,649) (861) Purchase of promissory notes (52,300) (56,932) Investment in bank deposits (6,386) (3,988) Redemption of promissory notes 75,098 55,963 Redemption of bank deposits 9,808 9,569 Dividends received 45 512 Interest received 2,681 9,633

44 The accompanying notes on pages 9 to 57 are an integral part of these Consolidated Financial Statements. FGC UES Group CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2011

(in millions of Russian Roubles)

Net cash used in investing activities (124,743) (127,043) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from share issuance 17 2,220 11,193 Proceeds from non-current debt 80,000 50,000 Proceeds from current debt 105 - Repayment of current debt (6,505) (7,000) Repayment of lease (126) - Dividends paid (2,543) - Interest paid (4,999) (725) Net cash generated byfinancing activities 68,152 53,468 Net increase / (decrease)in cash and cash equivalents 12,054 (20,126) Cash and cash equivalents as at the beginning of the year 12 13,573 33,699 Cash and cash equivalents as at the end of the year 12 25,627 13,573

Authorised for issue and signed on behalf of the Management Board: 19 April 2012

Deputy Chairman of the A.V. Kazachenkov Head of Accounting and Financial A.P. Noskov Management Board Reporting – Chief Accountant

The accompanying notes on pages 9 to 57 are an integral part of these Consolidated Financial Statements. 45 FGC UES Group CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011

(in millions of Russian Roubles)

NOTE ATTRIBUTABLE TO THE SHAREHOLDERS OF JSC “FGC UES” NON-CON- TOTAL SHARE SHARE TREASURY RESERVES ACCU- TOTAL TROLLING EQUITY CAPITAL PREMIUM SHARES (NOTE 17) MULATED INTEREST DEFICIT AS AT 1 JANUARY 2011 10,501 (6,864) 361,267 (108,525) 873,160 944 874,104

COMPREHENSIVE INCOME FOR THE YEAR Profit / (loss) for the year - - - - 49,139 49,139 (151) 48,988 Other comprehensive income, net of related income tax Change in revaluation reserve for 17 - - - (1,227) 1,227 - - - property, plant and equipment Change in fair value of available- 9, 17 - - - (19,961) - (19,961) - (19,961) for-sale investments Change in revaluation reserve for 16, 17 - - - (10,749) 10,749 - - - property, plant and equipment of associates (previously classified as non-current assets held for sale) Accumulated gain on available- 9, 16, - - - (15,073) - (15,073) - (15,073) for-sale investments recycled to 17 profit or loss Foreign currency translation 8 - - - 66 - 66 - 66 difference Total other comprehensive income / - - - (46,944) 11,976 (34,968) - (34,968) (loss) Total comprehensive income / (loss) - - - (46,944) 61,115 14,171 (151) 14,020 for the year

TRANSACTIONS WITH THE SHAREHOLDERS OF JSC “FGC UES” RECORDED DIRECTLY IN EQUITY Issue of share capital 17 11 193 - - - - 11,193 - 11,193 Dividends declared 17 - - - - (2,552) (2,552) - (2,552) Share-based compensation 17 - - 1,342 - - 1,342 - 1,342

Total transactions with the 11 193 - 1,342 - (2,552) 9,983 - 9,983 shareholders of JSC “FGC UES”

As at 31 December 2011 627 974 10,501 (5,522) 314,323 (49,962) 897,314 793 898,107

46 The accompanying notes on pages 9 to 57 are an integral part of these Consolidated Financial Statements. FGC UES Group CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011

(in millions of Russian Roubles)

NOTE ATTRIBUTABLE TO THE SHAREHOLDERS OF JSC “FGC UES” NON-CON- TOTAL SHARE SHARE TREASURY RESERVES ACCU- TOTAL TROLLING EQUITY CAPITAL PREMIUM SHARES (NOTE 17) MULATED INTEREST DEFICIT AS AT 1 JANUARY 2010 576,757 10,347 (6,864) 290,674 (71,959) 798,955 1,570 800,525

COMPREHENSIVE INCOME FOR THE YEAR Profit / (loss) for the year - - - - 19,009 19,009 (626) 18,383 Other comprehensive income, net of related income tax Change in revaluation reserve for 17 - - - (1,316) 1,316 - - - property, plant and equipment Сhange in fair value of available- 9, 17 - - - 15,040 - 15,040 - 15,040 for-sale investments Foreign currency translation 8 - - - (22) - (22) - (22) difference Total other comprehensive income - - - 13,702 1,316 15,018 - 15,018 Total comprehensive income / (loss) - - - 13,702 20,325 34,027 (626) 33,401 for the year Transactions with the shareholders of JSC “FGC UES” recorded directly in equity Issue of share capital 17 40,024 154 - - - 40,178 - 40,178 Transfer of merger reserve to 17 - - - 56,891 (56,891) - - - retained earnings Total transactions with the 40,024 154 - 56,891 (56,891) 40,178 - 40,178 shareholders of JSC “FGC UES”

As at 31 December 2010 616,781 10,501 (6,864) 361,267 (108,525) 873,160 944 874,104

Authorised for issue and signed on behalf of the Management Board: 19 April 2012

Deputy Chairman of the A.V. Kazachenkov Head of Accounting and Financial A.P. Noskov Management Board Reporting – Chief Accountant

The accompanying notes on pages 9 to 57 are an integral part of these Consolidated Financial Statements. 47 FGC UES Group NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011

(in millions of Russian Roubles)

Note 1. THE GROUP AND ITS OPERATIONS tributes to the challenges faced by companies operating in the Russian Federation (Note 28). Open Joint Stock Company “Federal Grid Company of Unified Energy System” (“FGC UES” or the “Company”) was established The international sovereign debt crisis, stock market volatility on 25 June 2002 as a wholly-owned subsidiary of the Russian and other risks could have a negative effect on the Russian Open Joint Stock Company for Energy and Electrification United financial and corporate sectors. Energy System of Russia (“RAO UES”) ultimately controlled by the Government of the Russian Federation (the “RF”). Management determined impairment provisions by considering the economic situation and outlook at the end of the reporting RAO UES itself was created as the holder of certain significant period. Provisions for the Group’s receivables are determined electricity power generation, transmission and distribution using the “incurred loss” model required by the applicable assets during the industry privatisation in 1992. accounting standards. These standards require recognition of impairment losses for receivables that arose from past events FGC UES was established in the course of the Russian electric and prohibit recognition of impairment losses that could arise utilities industry restructuring, to maintain and operate the high from future events, no matter how likely those future events are. voltage electricity transmission network, received from RAO UES and its subsidiaries, and to provide electricity transmission Regulatory uncertainties related to electricity transmission tariff services using that network. During 2002-2008 the Company decisions may also have an impact on management’s cash flow consolidated electricity transmission businesses previously con- forecasts and assessment of the impairment of non-financial trolled by RAO UES. In 2008 the reorganisation of RAO UES assets. Management has considered the effect of these uncer- was completed and RAO UES ceased to exist as a legal entity. tainties on the recoverable amount of property, plant and equip- FGC UES is RAO UES’s legal successor. ment and concluded that there is no impairment charge should be recognised for the year ended 31 December 2011 (Notes 2 and 6). As at 31 December 2011 the FGC UES Group (the “Group”) comprises FGC UES and its subsidiaries presented in Note 4. The future economic development of the Russian Federation is The Group’s primary activity is the provision of services for the dependent upon external factors and internal measures under- transmission of electric power via the Unified National Electrical taken by the government to sustain growth, and to change the tax, Grid (“UNEG”). legal and regulatory environment. Management is unable to pre- dict all developments in the economic environment which could The Company’s ordinary registered uncertified shares are have an impact on the Group’s operations and consequently what traded on the MICEX-RTS exchange under the trading code effect, if any, they could have on the financial position of the “FEES”. Starting from March 2011 the Company’s Global Depos- Group.Management believes it is taking all necessary measures itory Receipts (GDRs) are listed on the Main Market of the Lon- to support the sustainability and development of the Group’s busi- don Stock Exchange. ness in the current business and economic environment.

The registered office of the Company is located at 5a, Acade- Note 2. BASIS OF PREPARATION mika Chelomeya Str., 117630, Moscow, Russian Federation. STATEMENT OF COMPLIANCE. These consolidated financial state- RELATIONS WITH THE STATE. As at 31 December 2011, the state ments (“Consolidated Financial Statements”) have been prepared owned 79.48 percent of the voting ordinary shares of the Com- in accordance with, and comply with, International Financial Report- pany (as at 31 December 2010: 79.48 percent). The Government ing Standards (“IFRS”) and its interpretations. of the RF is the ultimate controlling party of the Company. Each enterprise of the Group individually maintains its own books The RF directly affects the Group’s operations through regulation of accounts and prepares its statutory financial statements in accor- by the Federal Tariff Service (FTS). The investment program of dance with the Regulations on Accounting and Reporting of the FGC UES is subject to approval by the Ministry of Energy and FTS. Russian Federation (“RAR”). The accompanying Consolidated Financial Statements are based on the statutory records and As described in the Operating environment section below, the adjusted and reclassified for the purpose of fair presentation in Government’s economic, social and other policies could have accordance with IFRS. material effects on the operations of the Group. FUNCTIONAL AND PRESENTATION CURRENCY. The national cur- OPERATING ENVIRONMENT. The Russian Federation displays rency of the Russian Federation is the Russian Rouble (RR), certain characteristics of an emerging market. Tax, currency and which is FGC UES’s functional currency and the currency in customs legislation is subject to varying interpretations and con- which these Consolidated Financial Statements are presented.

48 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 2. BASIS OF PREPARATION (continued)

All financial information presented in RR has been rounded to requiring disclosure in a condensed interim financial report, the nearest million, unless otherwise stated. including transfers between the levels of fair value hierarchy, changes in classification of financial assets or changes in NEW ACCOUNTING DEVELOPMENTS. These Consolidated Finan- business or economic environment that affect the fair values of cial Statements have been prepared by applying the accounting the entity’s financial instruments; and IFRIC 13 was amended policies and methods of computation consistent with those of the to clarify measurement of fair value of award credits. The annual consolidated financial statements for the year ended above amendments resulted in additional or revised 31 December 2010, except for those policies which were changed disclosures, but had no material impact on measurement or to comply with the new or amended standards and interpretations recognition of transactions and balances reported in these that are in force for the financial periods beginning on 1 January Consolidated Financial Statements. 2011. • Amendment to IAS 24 “Related Party Disclosures” (issued in November 2009 and effective for annual periods beginning on (a) Certain new standards and interpretations became effective or after 1 January 2011). IAS 24 was revised in 2009 by: (a) for the Group from 1 January 2011: simplifying the definition of a related party, clarifying its • Improvements to International Financial Reporting Standards intended meaning and eliminating inconsistencies; and by (b) (issued in May 2010 and effective from 1 January 2011). The providing a partial exemption from the disclosure requirements improvements consist of a mixture of substantive changes and for government-related entities. The Group has early adopted clarifications in the following standards and interpretations: this amendment in its 2010 consolidated financial statements. IFRS 1 was amended (i) to allow previous GAAP carrying • Other revised standards and interpretations effective for the value to be used as deemed cost of an item of property, plant current period. IFRIC 19 “Extinguishing financial liabilities with and equipment or an intangible asset if that item was used in equity instruments”, amendments to IAS 32 on classification operations subject to rate regulation, (ii) to allow an event of rights issues, clarifications in IFRIC 14 “IAS 19 – The limit on driven revaluation to be used as deemed cost of property, plant a defined benefit asset, minimum funding requirements and and equipment even if the revaluation occurs during a period their interaction” relating to prepayments of minimum funding covered by the first IFRS financial statements and (iii) to require requirements and amendments to IFRS 1 “First-time adoption a first-time adopter to explain changes in accounting policies or of IFRS”, did not have any impact on these Consolidated in the IFRS 1 exemptions between its first IFRS interim report Financial Statements. and its first IFRS financial statements; IFRS 3 was amended (i) to require measurement at fair value (unless another (b) Certain new standards and interpretations have been issued measurement basis is required by other IFRS standards) of that are mandatory for the annual periods beginning on or after non-controlling interests that are not present ownership interest 1 January 2012 or later, and which the Group has not early or do not entitle the holder to a proportionate share of net adopted: assets in the event of liquidation, (ii) to provide guidance on the • IFRS 9, Financial Instruments: Classification and Measurement. acquiree’s share-based payment arrangements that were not IFRS 9, issued in November 2009, replaces those parts of IAS replaced, or were voluntarily replaced as a result of a business 39 relating to the classification and measurement of financial combination and (iii) to clarify that the contingent considerations assets. IFRS 9 was further amended in October 2010 to address from business combinations that occurred before the effective the classification and measurement of financial liabilities and in date of revised IFRS 3 (issued in January 2008) will be December 2011 to (i) change its effective date to annual periods accounted for in accordance with the guidance in the previous beginning on or after 1 January 2015 and (ii) add transition version of IFRS 3; IFRS 7 was amended to clarify certain disclosures. Key features of the standard are as follows: disclosure requirements, in particular (i) by adding an explicit –– Financial assets are required to be classified into two emphasis on the interaction between qualitative and measurement categories: those to be measured quantitative disclosures about the nature and extent of financial subsequently at fair value, and those to be measured risks, (ii) by removing the requirement to disclose carrying subsequently at amortised cost. The decision is to be made amount of renegotiated financial assets that would otherwise at initial recognition. The classification depends on the be past due or impaired, (iii) by replacing the requirement to entity’s business model for managing its financial disclose fair value of collateral by a more general requirement instruments and the contractual cash flow characteristics of to disclose its financial effect, and (iv) by clarifying that an the instrument. entity should disclose the amount of foreclosed collateral held –– An instrument is subsequently measured at amortised cost at the reporting date, and not the amount obtained during the only if it is a debt instrument and both (i) the objective of the reporting period; IAS 1 was amended to clarify the requirements entity’s business model is to hold the asset to collect the for the presentation and content of the statement of changes in contractual cash flows, and (ii) the asset’s contractual cash equity; IAS 27 was amended by clarifying the transition rules flows represent payments of principal and interest only (that for amendments to IAS 21, 28 and 31 made by the revised IAS is, it has only “basic loan features”). All other debt instruments 27 (as amended in January 2008); IAS 34 was amended to add are to be measured at fair value through profit or loss. additional examples of significant events and transactions

49 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 2. BASIS OF PREPARATION (continued)

–– All equity instruments are to be measured subsequently at interests in other entities, extended disclosures on share of non- fair value. Equity instruments that are held for trading will be controlling interests in group activities and cash flows, measured at fair value through profit or loss. For all other summarised financial information of subsidiaries with material equity investments, an irrevocable election can be made at non-controlling interests, and detailed disclosures of interests in initial recognition, to recognise unrealised and realised fair unconsolidated structured entities. The Group is currently value gains and losses through other comprehensive income assessing the impact of the new standard on its consolidated rather than profit or loss. There is to be no recycling of fair financial statements. value gains and losses to profit or loss. This election may be • IFRS 13, Fair value measurement, (issued in May 2011 and made on an instrument-by-instrument basis. Dividends are effective for annual periods beginning on or after 1 January to be presented in profit or loss, as long as they represent a 2013), aims to improve consistency and reduce complexity by return on investment. providing a revised definition of fair value, and a single source of –– Most of the requirements in IAS 39 for classification and fair value measurement and disclosure requirements for use measurement of financial liabilities were carried forward across IFRSs.The Group is currently assessing the impact of the unchanged to IFRS 9. The key change is that an entity will be new standard on its consolidated financial statements. required to present the effects of changes in own credit risk • IAS 27, Separate Financial Statements, (revised in May 2011 of financial liabilities designated at fair value through profit or and effective for annual periods beginning on or after 1 January loss in other comprehensive income. 2013), was changed and its objective is now to prescribe the accounting and disclosure requirements for investments in While adoption of IFRS 9 is mandatory from 1 January 2015, subsidiaries, joint ventures and associates when an entity earlier adoption is permitted. The Group is considering the prepares separate financial statements. The guidance on control implications of the standard, the impact on the Group and the and consolidated financial statements was replaced by IFRS 10, timing of its adoption by the Group. Consolidated Financial Statements. • IAS 28, Investments in Associates and Joint Ventures, (revised • IFRS 10, Consolidated Financial Statements (issued in May in May 2011 and effective for annual periods beginning on or 2011 and effective for annual periods beginning on or after 1 after 1 January 2013). The amendment of IAS 28 resulted from January 2013), replaces all of the guidance on control and the Board’s project on joint ventures. When discussing that consolidation in IAS 27 “Consolidated and separate financial project, the Board decided to incorporate the accounting for joint statements” and SIC-12 “Consolidation – special purpose ventures using the equity method into IAS 28 because this entities”. IFRS 10 changes the definition of control so that the method is applicable to both joint ventures and associates. With same criteria are applied to all entities to determine control. This this exception, other guidance remained unchanged. definition is supported by extensive application guidance. The • Disclosures – Transfers of Financial Assets – Amendments to Group is currently assessing the impact of the new standard on IFRS 7 (issued in October 2010 and effective for annual periods its consolidated financial statements. beginning on or after 1 July 2011). The amendment requires • IFRS 11, Joint Arrangements, (issued in May 2011 and effective additional disclosures in respect of risk exposures arising from for annual periods beginning on or after 1 January 2013), transferred financial assets. The amendment includes a replaces IAS 31 “Interests in Joint Ventures” and SIC-13 “Jointly requirement to disclose by class of asset the nature, carrying Controlled Entities—Non-Monetary Contributions by Ventures”. amount and a description of the risks and rewards of financial Changes in the definitions have reduced the number of types of assets that have been transferred to another party, yet remain on joint arrangements to two: joint operations and joint ventures. the entity's balance sheet. Disclosures are also required to enable The existing policy choice of proportionate consolidation for a user to understand the amount of any associated liabilities, and jointly controlled entities has been eliminated. Equity accounting the relationship between the financial assets and associated is mandatory for participants in joint ventures. liabilities. Where financial assets have been derecognised, but • IFRS 12, Disclosure of Interest in Other Entities, (issued in May the entity is still exposed to certain risks and rewards associated 2011 and effective for annual periods beginning on or after 1 with the transferred asset, additional disclosure is required to January 2013), applies to entities that have an interest in a enable the effects of those risks to be understood. subsidiary, a joint arrangement, an associate or an • Amendments to IAS 1, Presentation of Financial Statements unconsolidated structured entity. It replaces the disclosure (issued June 2011, effective for annual periods beginning on or requirements currently found in IAS 28 “Investments in after 1 July 2012), changes the disclosure of items presented in associates”. IFRS 12 requires entities to disclose information other comprehensive income. The amendments require entities that helps financial statement readers to evaluate the nature, to separate items presented in other comprehensive income into risks and financial effects associated with the entity’s interests in two groups, based on whether or not they may be reclassified to subsidiaries, associates, joint arrangements and unconsolidated profit or loss in the future. The suggested title used by IAS 1 has structured entities. To meet these objectives, the new standard changed to ‘statement of profit or loss and other comprehensive requires disclosures in a number of areas, including significant income’. The Group expects the amended standard to change judgments and assumptions made in determining whether an presentation of its consolidated financial statements, but have entity controls, jointly controls, or significantly influences its no impact on measurement of transactions and balances.

50 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 2. BASIS OF PREPARATION (continued)

• Amended IAS 19, Employee Benefits (issued in June 2011, cumstances. Management also makes certain judgements, effective for periods beginning on or after 1 January 2013), apart from those involving estimations, in the process of apply- makes significant changes to the recognition and measurement ing the accounting policies. Judgements that have the most sig- of defined benefit pension expense and termination benefits, and nificant effect on the amounts recognised in these Consolidated to the disclosures for all employee benefits. The standard Financial Statements and estimates that can cause a significant requires recognition of all changes in the net defined benefit adjustment to the carrying amount of assets and liabilities within liability (asset) when they occur, as follows: (i) service cost and the next financial year include: net interest in profit or loss; and (ii) remeasurements in other comprehensive income. The Group is currently assessing the Property, plant and equipment. The Group assessed the recov- impact of the amended standard on its consolidated financial erable amount of its non-current assets as at 31 December 2011 statements. applying certain estimates (Note 6). Actual results may be differ- • Disclosures – Offsetting Financial Assets and Financial Liabilities ent from these estimates. – Amendments to IFRS 7 (issued in December 2011 and effective for annual periods beginning on or after 1 January 2013). The Investment in OJSC “INTER RAO UES”. As at 31 December 2011 amendment requires disclosures that will enable users of an the Groupowns 19.95% of the voting shares of OJSC “INTER entity’s financial statements to evaluate the effect or potential RAO UES” (“INTER RAO UES”). Management has assessed the effect of netting arrangements, including rights of set-off. level of influence that the Group has on Inter RAO UES,taking into • Offsetting Financial Assets and Financial Liabilities – account its inability to obtain any additional financial information Amendments to IAS 32 (issued in December 2011 and which may be required to execute this influence,and determined effective for annual periods beginning on or after 1 January that it did not amount to significant influence. Consequently, this 2014). The amendment added application guidance to IAS 32 investment is classified as available-for-sale investment (Note 9). to address inconsistencies identified in applying some of the offsetting criteria. This includes clarifying the meaning of Decline on fair value of available-for-sale equity investments ‘currently has a legally enforceable right of set-off’ and that (Note 9). The Group determines that available-for-sale equity some gross settlement systems may be considered equivalent investments are impaired when there has been a significant or to net settlement. The Group is considering the implications of prolonged decline in the fair value below its cost. This determi- the amendment, the impact on the Group and the timing of its nation of what is significant or prolonged requires judgement. In adoption by the Group. making this judgement, the Group evaluates, among other fac- • Other revised standards and interpretations: The amendments tors, the volatility in share priceand trend in share price move- to IFRS 1 “First-time adoption of IFRS”, relating to severe ments during the period of analysis. As at 31 December 2011, hyperinflation and eliminating references to fixed dates for the decline in fair value of Inter RAO UES shares below cost is certain exceptions and exemptions, the amendment to IAS 12 considered significant and prolonged and therefore the Group “Income taxes”, which introduces a rebuttable presumption recorded an impairment of RR 12,661 million in the Consolidated that an investment property carried at fair value is recovered Statement of the Comprehensive Income.. entirely through sale, and IFRIC 20, “Stripping Costs in the Production Phase of a Surface Mine”, which considers when Carrying value of LLC “ENERGO-finance”promissory notes. As at and how to account for the benefits arising from the stripping 31 December 2011 the Group holds promissory notes issued by LLC activity in mining industry, will not have any impact on these “ENERGO-finance” with the carrying value of RR 9,197 million (Note Consolidated Financial Statements. 10). The recoverability of these notes significantly depends on the future trends in the Russian utility stock market. The Group assessed Unless otherwise described above, the new standards and inter- that the carrying value of these notes represents their recoverable pretations are not expected to significantly affect the Group’s amount. If actual stock market trends differ from current expecta- consolidated financial statements. tions, the notes may not be partly or fully recovered.

GOING CONCERN. These Consolidated Financial Statements Tax contingencies. Russian tax legislation is subject to varying have been prepared on a going concern basis, which contem- interpretations and changes, which can occur frequently. Where plates the realisation of assets and the satisfaction of liabilities in the Group management believes it is probable that their interpre- the normal course of business. tation of the relevant legislation and the Group’s tax positions cannot be sustained, an appropriate amount is accrued in the CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS. Man- consolidated financial statements. The possible tax claims in agement has made a number of estimates and assumptions respect of certain open tax positions of the Group companies are relating to the reporting of assets and liabilities and the disclo - disclosed in Note 28. sure of contingent assets and liabilities to prepare theseConsoli- dated Financial Statements in conformity with IFRS. Estimates CHANGES IN PRESENTATION. Where necessary, corresponding and judgments are continually evaluated and are based on man- figures have been adjusted to conform to the presentation of the agement’s experience and other factors, including expectations current period amounts. The effect of reclassifications for pre- of future events that are believed to be reasonable under the cir- sentation purposes was as follows:

51 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 2. BASIS OF PREPARATION (continued)

As at 31 December 2010: CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS ORIGINALLY RECLASSIFICA- AS CURRENTLY PRESENTED TION PRESENTED Loansgiven - 18 18 Accountsreceivableandprepayments 32,672 (18) 32,654 Accounts payable to the shareholders of JSC “FGC UES” 11,193 47 11,240 Current debt and current portion of non-current debt 7,385 112 7,497 Accounts payable and accrued charges 39,760 792 40,552 Other taxes payable 1,231 (1,231) - Incometax payable - 280 280

The reclassifications in the Consolidated Statement of Financial between the carrying amount of net assets, including the prede- Position had an impact on information in Notes 5, 11, 14, 18, 19, cessor entity's goodwill, and the consideration for the acquisition 21, 22, 29, 31 and had no impact on any other captions in the Con- is accounted for in the consolidated financial statements as an solidated Statement of Financial Position and related note disclo- adjustment to retained earnings within equity. sures. Management considered materiality and concluded omis- sion of opening statement of financial position is not material. ASSOCIATES. Associates are entities over which the Company has significant influence (directly or indirectly), but not control, generally accompanying a shareholding of between 20 and 50 Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING percent of the voting rights. Investments in associates are POLICIES accounted for using the equity method of accounting and are initially recognised at cost. The carrying amount of associates PRINCIPLES OF CONSOLIDATION. These Consolidated Financial includes goodwill identified on acquisition and is reduced by accu- Statements comprise the financial statements of FGC UES and mulated impairment losses, if any. The Group discontinues the the financial statements of those entities whose operations are use of the equity method of accounting from the date when it controlled by FGC UES. Control is presumed to exist when FGC ceases to have significant influence in the associate. UES controls, directly or indirectly, through subsidiaries, more than 50 percent of voting rights. The Group holds 49% of the vot- The Group’s share of the post-acquisition profits or losses of ing rights in OJSC “Kuban trunk grids”, a fully consolidated sub- associates is recorded in profit or loss, and its share of other sidiary. The Group has the power to govern the financial and comprehensive income of associates is recognised in the operating policies of this subsidiary on the basis of a significant Group’s other comprehensive income. When the Group’s share shareholding combined with other factors which allow the Group of losses in an associate equals or exceeds its interest in the to exercise control, most importantly: FGC UES has appointed associate, including any other unsecured receivables, the Group the majority or of the members of the Board of Directors, FGC does not recognise further losses, unless it has incurred obliga- UES is the dominant owner and FGC UES has in substance full tions or made payments on behalf of the associate. control of all aspects of the entity’s assets and operations. Unrealised gains on transactions between the Group and its All inter-company balances and transactions have been elimi- associates are eliminated to the extent of the Group’s interest in nated. The non-controlling interest in the Group subsidiaries has the associates; unrealised losses are also eliminated unless the been disclosed as part of the Group’s equity. transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been PURCHASES OF SUBSIDIARIES FROM PARTIES UNDER COMMON changed where necessary to ensure consistency with the poli- CONTROL. Purchases of subsidiaries from parties under com- cies adopted by the Group. mon control are accounted for using the predecessor values method. Under this method the consolidated financial statements FINANCIAL INSTRUMENTS – KEY MEASUREMENT TERMS. of the combined entity are presented as if the businesses had Depending on their classification financial instruments are car- been combined from the beginning of the earliest period pre- ried at fair value or amortised cost as described below. sented or, if later, the date when the combining entities were first brought under common control. The assets and liabilities of the Fair value is the amount for which an asset could be exchanged, subsidiary transferred under common control are at the prede- or a liability settled, between knowledgeable, willing parties in an cessor entity’s carrying amounts. The predecessor entity is con- arm’s length transaction. Fair value is the current bid price for sidered to be the highest reporting entity in which the subsidiary’s financial assets and current asking price for financial liabilities IFRS financial information was consolidated. Related goodwill which are quoted in an active market. A financial instrument is inherent in the predecessor entity’s original acquisitions is also regarded as quoted in an active market if quoted prices are read- recorded in the consolidated financial statements. Any difference ily and regularly available from an exchange or other institution

52 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) and those prices represent actual and regularly occurring mar- denced by the transaction price. A gain or loss on initial recogni- ket transactions on an arm’s length basis. tion is only recorded if there is a difference between fair value and transaction price which can be evidenced by other observable Valuation techniques such as discounted cash flow models or current market transactions in the same instrument or by a valua- models based on recent arm’s length transactions or consider- tion technique whose inputs include only data from observable ation of financial data of the investees are used to fair value cer- markets. tain financial instruments for which external market pricing information is not available. Valuation techniques may require DERECOGNITION OF FINANCIAL ASSETS. The Group derecog- assumptions notsupported by observable market data. Disclo- nises financial assets when (a) the assets are redeemed or the sures are made in theconsolidated financial statements if chang- rights to cash flows from the assets otherwise expired or (b) the ing any such assumptions to a reasonably possible alternative Group has transferred the rights to the cash flows from the finan- would result in significantly different profit, income, total assets cial assets or entered into a qualifying pass-through arrange- or total liabilities. ment while (i) also transferring substantially all the risks and rewards of ownership of the assets or (ii) neither transferring nor Amortised cost is the amount at which the financial instrument retaining substantially all risks and rewards of ownership but not was recognised at initial recognition less any principal repay- retaining control. Control is retained if the counterparty does not ments, plus accrued interest, and for financial assets less any have the practical ability to sell the asset in its entirety to an write-down for incurred impairment losses. Accrued interest unrelated third party without needing to impose additional includes amortisation of transaction costs deferred at initial rec- restrictions on the sale. ognition and of any premium or discount to maturity amount using the effective interest method. Accrued interest income and AVAILABLE-FOR-SALE INVESTMENTS. The Group classifies accrued interest expense, including both accrued coupon and investments as available-for-sale at the time of purchase. Avail- amortised discount or premium (including fees deferred at origi- able-for-sale investments are carried at fair value. Interest nation, if any), are not presented separately and are included in income on available-for-sale debt securities is calculated using the carrying values of related items in the consolidated state- the effective interest method and recognised in profit or loss as ment of financial position. finance income. Dividends on available-for-sale equity instruments are recognised in profit or loss when the Group’s right to The effective interest method is a method of allocating interest receive payment is established and it is probable that the divi- income or interest expense over the relevant period so as to dends will be collected. All other elements of changes in the fair achieve a constant periodic rate of interest (effective interest value are recognised in other comprehensive incomeuntil the rate) on the carrying amount. The effective interest rate is the investment is derecognised or impaired at which time the cumu- rate that exactly discounts estimated future cash payments or lative gain or loss is reclassified from other comprehensive receipts (excluding future credit losses) through the expected life income to profit or loss for the period. of the financial instrument or a shorter period, if appropriate, to the net carrying amount of the financial instrument. Impairment losses are recognised in profit or loss when incurred as a result of one or more events (“loss events”) that occurred CLASSIFICATION OF FINANCIAL ASSETS. The Group holds after the initial recognition of available-for-sale investments. financial assets of the following measurement categories: loans and receivables and available-for-sale financial assets. A significant or prolonged decline in the fair value of an equity security below its cost is an indicator that it is impaired. The Loans and receivables are unquoted non-derivative financial cumulative impairment loss – measured as the difference assets with fixed or determinable payments other than those that between the acquisition cost and the current fair value, less any the Group intends to sell in the near term. impairment loss on that asset previously recognised in profit or loss– is removed from other comprehensive income and recog- All other financial assets are included in the available-for-sale nised in profit or loss. Impairment losses on equity instruments category, which includes investment securities which the Group are not reversed through profit or loss. If, in a subsequent period, intends to hold for an indefinite period of time and which may be the fair value of a debt instrument classified as available-for-sale sold in response to needs for liquidity or changes in interest increases and the increase can be objectively related to an event rates, exchange rates or equity prices. occurring after the impairment loss was recognised, the impairment loss is reversed through current period’s profit or loss. CLASSIFICATION OF FINANCIAL LIABILITIES. The Group’s financial liabilities are carried at amortised cost. FOREIGN CURRENCY. Monetary assets and liabilities, which are held by the Group entities and denominated in foreign curren- INITIAL RECOGNITION OF FINANCIAL INSTRUMENTS. The cies at the end of the reporting period, are translated into Rus- Group’s financial instruments are initially recorded at fair value sian Roubles at the official exchange rates prevailing at that plus transaction costs. Fair value at initial recognition is best evi- date. Foreign currency transactions are accounted for at the

53 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) exchange rates prevailing at the date of the transaction. Gains The useful lives, in years, of assets by type of facility are as and losses resulting from the settlement of such transactions follows: and from the translation of monetary assets and liabilities USEFUL LIVES denominated in foreign currencies are recognised in profit or Buildings 25-60 loss. Electric power transmission grids 30-50 Substations 15-35 As at 31 December 2011, the official rate of exchange as deter- Other 5-15 mined by the Central Bank of the Russian Federation, between the Russian Rouble and the US Dollar (“US$”) was RR 32.20: At each reporting date the management assess whether there is US$ 1.00 (31 December 2010: RR 30.48: US$ 1.00); between any indication of impairment of property, plant and equipment. If the Russian Rouble and Euro: RR 41.67: Euro 1.00 (31 Decem- any such indication exists, the management estimates the recov- ber 2010: RR 40.33: Euro 1.00). erable amount, which is determined as the higher of an asset’s fair value less costs to sell and its value in use. The carrying PROPERTY, PLANT AND EQUIPMENT. Property, plant and equip- amount is reduced to the recoverable amount and the impairment ment are stated at revalued amounts less any subsequent accu- loss is recognised as current period loss to the extent it exceeds mulated depreciation and any subsequent accumulated impair- the previous revaluation surplus in equity on the same asset. An ment losses, where required. impairment loss recognised for an asset in prior years is reversed if there has been a change in the estimates used to determine the Property, plant and equipment are subject to revaluation on a asset’s value in use or fair value less costs to sell. regular basis to ensure that the carrying amount does not differ materially from that which is determined using the fair value at Intangible assets.All of the Group’s intangible assets have defi- the end of the reporting period. The frequency of revaluation nite useful lives and primarily include capitalised computer soft- depends upon the movements in the fair values of the assets ware and licences. being revalued. Increases in the carrying amount arising on revaluation of property, plant and equipment are credited to Acquired computer software and licences are capitalised on the other comprehensive income and increase the revaluation basis of the costs incurred to acquire and bring them to use. reserve in equity; the increase is recognised in current period Costs that are directly associated with the production of identifi- profits to the extent that it reverses previously recognised impair- able and unique software products controlled by the Group, and ment loss of the same assets. that will probably generate economic benefits, are recognised as intangible assets. After initial recognition, intangible assets are Decreases that offset previous increases of the same asset are carried at cost less accumulated amortisation and any accumu- recognised in other comprehensive income and decrease the lated impairment losses. Amortisation of intangible assets is cal- previously recognised revaluation reserve in equity; all other culated on a straight-line basis over the useful lives. decreases are recognised in profit or loss for the period. Any accumulated depreciation at the date of revaluation is eliminated At each reporting date the management assesses whether there against the gross amount of the assets, and the net amount is is any indication of impairment of intangible assets. If impaired, restated to the revalued amount of the asset. the carrying amount of intangible assets is written down to the higher of value in use and fair value less cost to sell. The revaluation reserve in respect of an item of property, plant and equipment is transferred directly to retained earnings when Research costs are recognised as an expense as incurred. Costs the item is derecognised (on the retirement or disposal of the incurred on development projects are recognised as intangible asset). assets only when the Group can demonstrate the technical feasi- bility of completing the intangible asset so that it will be available Renewals and improvements are capitalised and the assets for use or sale, its intention to complete and its ability to use or replaced are retired. The cost of minor repair and maintenance sell the asset, how the asset will generate future economic ben- are expensed as incurred. Gains and losses arising from the efits, the availability of resources to complete and the ability to retirement of property, plant and equipment are included in profit measure reliably the expenditure incurred during the develop- or loss as incurred. ment. Other development expenditures are recognised as an expense as incurred. Development costs previously recognised Depreciation on property, plant and equipment is calculated on as an expense are not recognised as an asset in a subsequent a straight-line basis over the estimated useful life of the asset period. The carrying value of development costs is reviewed for when it is available for use. The useful lives are reviewed at each impairment annually. financial year end and, if expectations differ from previous estimates, the changes are recognised prospectively. Cash and cash equivalents.Cash comprises cash in hand and cash deposited on demand at banks. Cash equivalents comprise short-term highly liquid investments that are readily convertible

54 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) into cash and have a maturity of three months or less from the Uncollectible assets are written off against the related impairment date of origination and are subject to insignificant changes in loss provision after all the necessary procedures to recover the value. Cash and cash equivalents are carried at amortised cost asset have been completed and the amount of the loss has been using the effective interest method. determined. Subsequent recoveries of amounts previously written off are credited to impairment loss account in profit or loss. BANK DEPOSITS. Bank deposits comprise cash deposited at banks with a maturity date of more than three months from the PREPAYMENTS. Prepayments are carried at cost less provision acquisition date. Bank deposits are carried at amortised cost for impairment. A prepayment is classified as non-current when using the effective interest method. the goods or services relating to the prepayment are expected to be obtained after one year, or when the prepayment relates to an PROMISSORY NOTES. Promissory notes are financial assets asset which will itself be classified as non-current upon initial rec- with fixed or determinable cash flows recognised initially at fair ognition. If there is an indication that the assets, goods or ser- value and subsequently carried at amortised cost using the vices relating to a prepayment will not be received, the carrying effective interest method. The Group classifies a promissory value of the prepayment is written down accordingly and a corre- note as short-term when it expects to realise it within twelve sponding impairment loss is recognised in profit or loss. months after the reporting period. All other promissory notes are classified as long-term. INVENTORIES. Inventories mostly include repair materials and spare parts for transmission assets. Inventories are valued at the TRADE AND OTHER RECEIVABLES. Trade and other receivables lower of cost and net realisable value. Cost of inventory is deter- are recorded inclusive of value added tax (VAT). Trade and other mined on the weighted average basis. Net realisable value is the receivables are initially recognised at fair value and subsequently estimated selling price in the ordinary course of business, less carried at amortised cost using the effective interest method. selling expenses.

IMPAIRMENT OF FINANCIAL ASSETS CARRIED AT AMORTISED VALUE ADDED TAX. Output value added tax related to sales is COST. Impairment losses are recognised in profit or loss when payable to tax authorities on the earlier of (a) collection of receiv- incurred as a result of one or more events (“loss events”) that ables from customers or (b) delivery of goods or services to cus- occurred after the initial recognition of the financial asset and tomers. Input VAT is generally recoverable against output VAT which have an impact on the amount or timing of the estimated upon receipt of the VAT invoice. The tax authorities permit the future cash flows of the financial asset or group of financial assets settlement of VAT on a net basis. VAT related to sales and pur- that can be reliably estimated. The primary factors that the Group chases is recognised in the consolidated statement of financial considers in determining whether a financial asset is impaired position on a gross basis and disclosed separately as an asset are its overdue status and realisability of related collateral, if any. and liability. Where provision has been made for impairment of receivables, impairment loss is recorded for the gross amount of If the terms of an impaired financial asset held at amortised cost the debtor, including VAT. are renegotiated or otherwise modified because of financial diffi- culties of the counterparty, impairment is measured using the NON-CURRENT ASSETS classified as held for sale. Non-current original effective interest rate before the modification of terms. assets and disposal groups (which may include both non-current and current assets) are classified in the consolidated statement Impairment losses are always recognised through an allowance of financial position as ‘non-current assets held for sale’ if their account to write down the asset’s carrying amount to the present carrying amount will be recovered principally through a sale value of expected cash flows (which exclude future credit losses transaction (including loss of control of a subsidiary holding the that have not been incurred) discounted at the original effective assets) within twelve months after the reporting period. Assets interest rate of the asset. The calculation of the present value of are reclassified when all of the following conditions are met: (a) the estimated future cash flows of a collateralised financial asset the assets are available for immediate sale in their present condi- reflects the cash flows that may result from foreclosure less tion; (b) the Group’s management approved and initiated an costs for obtaining and selling the collateral, whether or not fore - active programme to locate a buyer; (c) the assets are actively closure is probable. marketed for a sale at a reasonable price; (d) the sale is expected within one year; and (e) it is unlikely that significant changes to If, in a subsequent period, the amount of the impairment loss the plan to sell will be made or that the plan will be withdrawn. decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an Non-current assets or disposal groups classified as held for sale improvement in the debtor’s credit rating), the previously recog- in the current period’s consolidated statement of financial posi- nised impairment loss is reversed by adjusting the allowance tion are not reclassified or re-presented in the comparative con- account in profit or loss. solidated statement of financial position to reflect the classification at the end of the current period.

55 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

A disposal group is a group of assets (current or non-current) to been enacted or substantively enacted by the end of the report- be disposed of, by sale or otherwise, together as a group in a ing period and any known court or other rulings on such issues. single transaction, and liabilities directly associated with those Liabilities for penalties, interest and taxes other than on income assets that will be transferred in the transaction. are recognised based on management’s best estimate of the expenditure required to settle the obligations at the end of the Held for sale disposal groups as a whole are measured at the reporting period. lower of their carrying amount and fair value less costs to sell. Reclassified non-current financial instruments and deferred TRADE ACCOUNTS PAYABLE AND ACCRUED CHARGES. Trade taxes are not subject to the write down to the lower of their car- accounts payable are stated inclusive of value added tax. Trade rying amount and fair value less costs to sell. payables are accrued when the counterparty performed its obligations under the contract. Accounts payable are initially recog- INCOME TAXES. Income taxes have been provided for in these nised at fair value and subsequently carried at amortised cost Consolidated Financial Statements in accordance with Russian using the effective interest method. legislation enacted or substantively enacted by the end of the reporting period. The income tax charge comprises current tax ADVANCES RECEIVED. Advances received are primarily a and deferred tax and is recognised in the profit or loss unless it deferred income for the future connection services and are relates to transactions that are recognised, in the same or a dif- reflected at not discounted cost. ferent period, in other comprehensive income. DEBT. Debt is recognised initially at its fair value plus transaction Current tax is the amount expected to be paid to or recovered costs that are directly attributable to its issue. Fair value is deter- from the taxation authorities in respect of taxable profits/losses mined using the prevailing market rates of interest for similar for the current and prior periods. Taxes other than on income are instruments, if significantly different from the transaction price. recorded as operating expenses. In subsequent periods, debt is stated at amortised cost using the effective interest method; any difference between the fair value Deferred income tax is provided using the balance sheet liability of the proceeds (net of transaction costs) and the redemption method for tax loss carry forwards and temporary differences amount is recognised inprofit or loss as an interest expense over arising between the tax bases of assets and liabilities and their the period of the debt obligation. carrying amounts for financial reporting purposes. In accordance with the initial recognition exemption, deferred taxes are Borrowing costs are expensed in the period in which they are not recorded for temporary differences on initial recognition of incurred if not related to purchase or construction of qualifying an asset or a liability in a transaction other than a business com - assets. Borrowing costs directly attributable to the acquisition, con- bination if the transaction, when initially recorded, affects neither struction or production of assets that necessarily take a substantial accounting nor taxable profit. time to get ready for intended use or sale (qualifying assets) are capitalised as part of the costs of those assets, if the commence- Deferred tax balances are measured at tax rates enacted or sub- ment date for capitalisation is on or after 1 January 2009. The com- stantively enacted at the end of the reporting period which are mencement date for capitalisation is when the Group (a) incurs expected to apply to the period when the temporary differences expenditures for the qualifying asset; (b) incurs borrowing costs; will reverse or the tax loss carry forwards will be utilised. Deferred and (c) undertakes activities that are necessary to prepare the tax assets and liabilities are netted only within the individual asset for its intended use or sale. Capitalisation of borrowing costs companies of the Group. Deferred tax assets for deductible tem- continues up to the date when the assets are substantially ready for porary differences and tax loss carry forwards are recorded only their use or sale. The Group capitalises borrowing costs that could to the extent that it is probable that future taxable profit will be have been avoided if it had not made capital expenditure on qualify- available against which the deductions can be utilised. ing assets. Borrowing costs capitalised are calculated at the Group’s average funding cost (the weighted average interest cost is Deferred income tax is provided on post acquisition retained applied to the expenditures on the qualifying assets), except to the earnings and other post acquisition movements in reserves of extent that funds are borrowed specifically for the purpose of subsidiaries, except where the Group controls the subsidiary’s obtaining a qualifying asset. Where this occurs, actual borrowing dividend policy and it is probable that the difference will not costs incurred less any investment income on the temporary invest- reverse through dividends or otherwise in the foreseeable future. ment of those borrowings are capitalised.

The Group's uncertain tax positions are reassessed by manage- PENSION AND POST-EMPLOYMENT BENEFITS. In the normal ment at each end of the reporting period. Liabilities are recorded course of business the Group makes mandatory social security for income tax positions that are determined by management as contributions to the Pension Fund of the RF on behalf of its more likely than not to result in additional taxes being levied if the employees. These contributions are expensed when incurred positions were to be challenged by the tax authorities. The and included in employee benefit expenses and payroll taxes in assessment is based on the interpretation of tax laws that have profit or loss.

56 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In addition, the Group maintains a number of post-employment incidental to ownership from the lessor to the Group, the total and other long-term benefit plans which are defined benefit in lease payments, including those on expected termination, are nature. These plans include life pension, lump sum upon retire- charged to profit or loss on a straight-line basis over the period ment, financial support after retirement, jubilee and death ben- of the lease. efits and cover majority of the Group’s employees. Under the pension plan amount of pension benefits that an employee will FINANCE LEASE LIABILITIES. Where the Group is a lessee in a receive after retirement dependents on his date of birth, number lease which transferred substantially all the risks and rewards of years of service, position, salary and presence of awards. The incidental to ownership to the Group, the assets leased are capi- Group settles its liability to provide life pension through a non- talised in property, plant and equipment at the commencement state pension fund. However, the assets held in the non-state of the lease at the lower of the fair value of the leased asset and pension fund do not meet definition of plan assets in accordance the present value of the minimum lease payments. Each lease with IAS 19. These assets are accounted for as other non-cur- payment is allocated between the liability and finance charges rent assets. Other benefits, apart from life pension payable via so as to achieve a constant rate on the finance balance out- the non-state pension fund, are provided when they are due standing. The corresponding rental obligations, net of future directly by the Group. finance charges, are included in debts. The interest cost is charged to profit or loss over the lease period using the effective The liability recognised in the consolidated statement of finan- interest method. The assets acquired under finance leases are cial position in respect of the defined benefit pension plans is the depreciated over their useful life or the shorter lease term if the present value of the defined benefit obligation at the end of the Group is not reasonably certain that it will obtain ownership by reporting period together with adjustments for unrecognised the end of the lease term. actuarial gains or losses and past service cost. The defined benefit obligations are calculated using the projected unit credit TREASURY SHARES. Treasury shares are stated at weighted method. The present value of the defined benefit obligations is average cost. Any gains or losses arising on the disposal of trea- determined by discounting the estimated future cash outflows sury shares are recorded directly in shareholders’ equity. using interest rate of government bonds that have terms to maturity approximating the terms of the related pension liabilities. DIVIDENDS. Dividends are recognised as a liability and deducted from equity at the end of the reporting period only if they are With regard to post-employment benefits, actuarial gains and declared (approved by shareholders) before or on the end of the losses in excess of 10% of the defined benefit obligation are reporting period. Dividends are disclosed when they are declared recognised as an expense over the average remaining working after the end of the reporting period, but before the consolidated life of employees. Past service costs are recognised immedi- financial statements are authorised for issue. ately as an expense in the consolidated statement of comprehensive income to the extent that the benefits have vested, and NON-CONTROLLING INTEREST. Non-controlling interest repre- are otherwise recognised on a straight-line basis over the aver- sents minority’s proportionate share of the equity and compre- age period until the benefits vest. hensive income of the Group’s subsidiaries. This has been calculated based upon the non-controlling interests’ ownership Actuarial gains and losses and past service costs related to percentage of these subsidiaries. Specific rights on liquidation other long-term employee benefits are recognised as an expense for preference shareholders of subsidiaries are included in the in the consolidated statement of comprehensive income when calculation of non-controllinginterests. The Group uses the ‘eco- they arise. nomic entity’ approach to the recognition of non-controlling interest. Any gains or losses resulting from the purchases and SHARE-BASED COMPENSATION. The Group operates an equity- sales of the non-controlling interests are recognised in the con- settled, share-based compensation plan, under which the Group solidated statement of changes in equity. receives services from employees as consideration for equity instruments (options) of FGC UES. The fair value of options REVENUE RECOGNITION. Revenue amounts are presented granted to employees is recognised as an employee benefit exclusive of value added tax. Revenue from rendering the elec- expense, with a corresponding increase in equity, over the period tricity transmission services is recognised in the period when the that employees become unconditionally entitled to the options services are provided. Revenue from sales of electricity is recog- (vesting period). At the end of each reporting period the Group nised on the delivery of electricity. Revenue from connection revises its estimates of the number of options that are expected to services represents a non-refundable fee for connecting the vest based on the non-market vesting conditions. The impact of customer to the electricity grid network and is recognised when the revision to original estimates, if any, is recognised in the profit the customer is connected to the grid network. or loss, with a corresponding adjustment to equity. SHARE CAPITAL. Ordinary shares with discretionary dividends OPERATING LEASES. Where the Group is a lessee in a lease are classified as equity upon completion of share issue and regi- which does not transfer substantially all the risk and rewards stration of the issue in the Federal Financial Markets Service.

57 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Any excess of the fair value of consideration received over the par Note 4. PRINCIPAL SUBSIDIARIES value of shares issued is recorded as share premium in equity. All subsidiaries are incorporated and operate in the Russian EARNINGS PER SHARE. Earnings per share are determined by Federation. dividing the profit or loss attributable to owners of the Company by the weighted average number of participating shares out- The principal subsidiaries as at 31 December 2011 and standing during the reporting period. 31 December 2010 are presented below:

NAME 31 DECEMBER 2011 31 DECEMBER 2010 OWNERSHIP, % VOTING, % OWNERSHIP, % VOTING, % Transmission companies: OJSC “The Kuban trunk grids” 49.0 49.0 49.0 49.0 OJSC “The Tomsk trunk grids” 52.0 59.9 52.0 59.9 Other companies OJSC “Nurenergo” 77.0 77.0 77.0 77.0 OJSC “Mobile gas-turbine electricity plants” 100.0 100.0 100.0 100.0 OJSC “Power industry research and development Centre” 100.0 100.0 100.0 100.0 OJSC “Dalenergosetproject” 100.0 100.0 100.0 100.0 OJSC “Specialised electricity transmission service company of UNEG” 100.0 100.0 100.0 100.0 OJSC “Engineering and construction management centre of Unified Energy 100.0 100.0 100.0 100.0 System” LLC “Index energetiki – FGC UES” 100.0 100.0 100.0 100.0

Transmission companies. OJSC “The Kuban trunk grids” and functioning as a customer-developer in capital construction pro- OJSC “The Tomsk trunk grids” own UNEG grid assets which are jects associated with thereconstruction and technical moderni- maintained and operated by the Company. sation of electricity supply facilities and infrastructure.

OJSC “Nurenergo” performs electricity distribution and sale LLC “Index energetiki – FGC UES” (“Index Energetiki”) owns activity in the Republic of Chechnya. Due to the difficult operat- minority shares in OJSC “Inter RAO UES” and OJSC “IDGC ing environment in the Republic of Chechnya, OJSC “Nuren- Holding” (in 2010 owned minority shares in electricity industry ergo” has negative net assets. entities, former subsidiaries of RAO UES).

OJSC “Mobile gas-turbine electricity plants”. The primary activity of the company is generating and sale of electricity provided Note 5.BALANCES AND TRANSACTIONS by mobile gas-turbine electricity plants used in power deficient WITH RELATED PARTIES points of the power system or in peak periods as temporary source of additional capacity. GOVERNMENT-RELATED ENTITIES

OJSC “Power industry research and development centre” is a In the normal course of business the Group enters into transac- research and development project institution in the sphere of tions with government-relatedentities – entities, controlled, jointly electric power. controlled or significantly influenced by the Government of the RF. Large portion of the Group's primary activity – transmission ser- OJSC “Dalenergosetproject” is a grid engineering company. vices are rendered to government-related entities at the regulated tariffs. The Group borrows funds from government-related banks OJSC “Specialised electricity transmission service company of at the prevailing market rates. Taxes are accrued and settled in UNEG”. The main activities of this company are technical inspec- accordance with Russian tax legislation. tion, maintenance and regular and emergency repairs of power grids and other electric power facilities of UNEG. During the years ended 31 December 2011 and 31 December 2010 the Group had the following significant transactions with OJSC “Engineering and construction management centre of government-relatedentities: Unified Energy System”. The main activity of this company is

YEAR ENDED YEAR ENDED 31 DECEMBER 2011 31 DECEMBER 2010 Transmission revenue 120,247 100,562 Electricity sales 876 2,004 Connection services 373 500

58 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 5. BALANCES AND TRANSACTIONS WITH RELATED PARTIES (continued)

Significant balances with government-related entities are presented below: 31 DECEMBER 2011 31 DECEMBER 2010 Cash and cash equivalents 20,464 6,783 Bank deposits 390 618 Long-term promissory notes 3,836 1,599 Short-term promissory notes 14,680 19,478 Loans given 430 - Trade receivables 10,161 8,655 (Net of allowance for doubtful debtors of RR 3,931million as at 31 December 2011 and RR 375 million as at 31 December 2010) Available-for-sale investments 69,979 9,531 Advances to construction companies and suppliers of property, plant and equipment 2,764 2,506 (included in construction in progress) Accounts payable to the shareholders of JSC “FGC UES” (2,275) (11,240) Non-current debt 25,000 - Current debt (156) (505) Accounts payable and accrued charges (10,976) (14,580)

During the year ended 31 December 2011 the Group transferred management positions. The compensation is made up of a con- most of its investments in associated companies and available- tractual salary, non-cash benefits, and a performance bonus for-sale investments to Inter RAO UES in exchange for its ordi- depending on results for the period according to Russian statu- nary shares valued at RR 79,387 million at the relevant dates of tory financial statements. Also, additional medical coverage is the transaction (Notes 9, 16). provided to the members of Management Board and their close family members. As at 31 December 2011 the Group had long-term undrawn committed financing facilities with government-related banks of RR Fees, compensation or allowances to the members of the Board 60,000 million (as at 31 December 2010: nil) (Note19). Short- of Directors for their services in that capacity and for attending term undrawn committed financing facilities with government- Board meetings are paid depending on results for the year. related banks amounted to RR 15,000 million as at 31 December Fees, compensation or allowances, are not paid to the members 2011 and 31 December 2010 (Note 21). of the Board of Directors who are government employees.

Tax balances and charges are disclosed in Notes 18, 22 and 24. Total remuneration in the form of salary, bonuses and non-cash Tax transactions are disclosed in the Consolidated Statement of benefits provided to the members of the Board of Directors and Comprehensive Income. Management Board for the years ended 31 December 2011 and 31 December 2010 was as follows: DIRECTORS’ COMPENSATION. Compensation is paid to the members of the Management Board for their services in full time

YEAR ENDED YEAR ENDED 31 DECEMBER 2011 31 DECEMBER 2010 Short-term compensation, including salary and bonuses 416 176 Remuneration for serving on the Board of Directors 7 3 Post-employment benefits and other long-term benefits 23 14 Share-based compensation 638 - Total 1,084 193

The amount of the short-term compensation to members of the respective period, including bonuses based on the results of the Management Board represents remuneration accrued during the preceding financial year.

59 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 6. PROPERTY, PLANT AND EQUIPMENT BUILDINGS POWER SUBSTATIONS CONSTRUCTION OTHER TOTAL TRANSMISSION IN PROGRESS GRIDS APPRAISAL VALUE OR COST Opening balance as at 1 January 2011 8,257 437,535 134,401 289,934 13,171 883,298 Additions 6,022 231 452 152,589 6,779 166,073 Transfers 1,905 43,909 67,453 (116,905) 3,638 - Disposals (11) (140) (1,887) (609) (128) (2,775) Closing balance as at 31 December 2011 16,173 481,535 200,419 325,009 23,460 1,046,596 Including PPE under finance lease - - 2,273 - 914 3,187

ACCUMULATED DEPRECIATION AND IMPAIRMENT Opening balance as at 1 January 2011 (213) (16,151) (13,256) (332) (2,118) (32,070) Charge for the year (276) (17,249) (13,577) - (2,085) (33,187) Impairment loss - - - (1,127) (47) (1,174) Disposals 2 13 281 149 67 512 Closing balance as at 31 December 2011 (487) (33,387) (26,552) (1,310) (4,183) (65,919) Including PPE under finance lease - - (1,051) - (53) (1,104) Net book value as at 1 January 2011 8,044 421,384 121,145 289,602 11,053 851,228 Net book value as at 31 December 2011 15,686 448,148 173,867 323,699 19,277 980,677

APPRAISAL VALUE OR COST Opening balance as at 1 January 2010 7,719 430,039 120,602 171,095 9,587 739,042 Additions 565 136 1,118 139,877 3,180 144,876 Transfers 170 7,534 13,758 (21,932) 470 - Disposals (197) (174) (1,077) (464) (66) (1,978) Reversal of impairment provision - - - 1,358 - 1,358 Closing balance as at 31 December 2010 8,257 437,535 134,401 289,934 13,171 883,298 Including PPE under finance lease - - 2,273 - - 2,273

ACCUMULATED DEPRECIATION AND IMPAIRMENT Opening balance as at 1 January 2010 * ------Charge for the year (214) (16,231) (11,617) - (2,123) (30,185) Impairment loss - - (1,663) (332) (14) (2,009) Disposals 1 80 24 - 19 124 Closing balance as at 31 December 2010 (213) (16,151) (13,256) (332) (2,118) (32,070) Including PPE under finance lease - - (991) - - (991) Net book value as at 1 January 2010 7,719 430,039 120,602 171,095 9,587 739,042 Net book value as at 31 December 2010 8,044 421,384 121,145 289,602 11,053 851,228

* Accumulated depreciation was eliminated against the gross carrying amount of the assets before the revaluation as at 31 December 2009 was recorded.

Borrowing costs of RR 5,833 million for the year ended 31 Decem- ment of RR 525 million (as at 31 December 2010: RR 84,320 mil- ber 2011 were capitalised within additions (for the year ended lion net of specific impairment RR 297 million). 31 December 2010: RR 1,526 million). A capitalisation rate of 7.7% was used for the yearsended 31 December 2011 and Other property, plant and equipment include motor vehicles, com- 31 December 2010 to determine the amount of borrowing costs puter equipment, office fixtures and other equipment. eligible for capitalisation, representing the weighted average of the borrowing costs applicable to the borrowings of the Group that The Group has the option to purchase land on which electric were outstanding during the periods. power transmission lines are located upon application to the state registering body or to formalise the right for rent. According to Construction in progress is represented by the carrying amount of Russian legislation the expiry date of this option is 1 January property, plant and equipment that has not yet been put into oper- 2013. As at 31 December 2011 the Group companies had no ation and advances to construction companies and suppliers of intention to purchase this land. property, plant and equipment. As at 31 December 2011 such advances amounted to RR 69,504 million net of specific impair- REVALUATION. Property, plant and equipment was revalued at 31 December 2009. The revaluation was performed by indepen-

60 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 6. PROPERTY, PLANT AND EQUIPMENT (continued) dent appraisers on a depreciated replacement cost basis, except • The amount of expenditure for the period from 2012 through for most of administrative buildings which were valued on the 2030 required for the maintenance of the current property, basis of recent market transactions involving similar assets on plant and equipment is assumed to be equal to the amount of arm’s length terms. The replacement cost for most power trans- such expenditure determined as allowable for the purpose of mission lines, substations and construction in progress is based tariff regulation; on their technical capabilities, construction costs and construc- • A nominal pre-tax discount rate of 11.85% was determined tion cost estimates. The cost to replace the majority of the Group’s based on the weighted average cost of capital. equipment is measured on the basis of purchase agreements and manufacturers’ and selling companies’ price-lists. The depreci- The recoverable amount assessed for property, plant and equip- ated replacement cost was tested for impairment using a profit- ment involved in transmission activity approximates its carrying ability test with respect to each cash generating unit. The Group’s value. Therefore, neither revaluation nor impairment of property, Transmission segment (Note 31) was considered as a single cash plant and equipment was recorded as at 31 December 2011. If generating unit. the discount rate would be 0.5% higher the carrying amounts of property, plant and equipment would exceed the recoverable RECOVERABLE AMOUNT OF PROPERTY, PLANT AND EQUIP- amount by approximately 3.8%. MENT. The Group assessed the recoverable amount for transmission business at 31 December 2011.The following assumptions For each class of property, plant and equipment stated at reval- have been made as part of the impairment test for the companies ued amount in these Consolidated Financial Statements, the involved in transmission activity: carrying amount that would have been recognised had the • Revenue projections are based on the Group’s expectations assets been carried under the historical cost basis is as of an increase ofthe rate of return on capital employed prior to follows: the transfer to Regulatory Asset Base tariff regulation – up to 10% in 2014;

BUILDINGS POWER SUBSTATIONS CONSTRUCTION OTHER TOTAL TRANSMISSION IN PROGRESS RIDS Net book value as at 1 December 2011 12,826 164,818 179,641 374,811 20,623 752,719 Net book value as at 1 December 2010 4,519 118,145 106,065 373,238 11,816 613,783 Net book value as at 31 December 2009 4,288 117,611 92,070 266,034 9,442 489,445

IMPAIRMENT. For the year ended 31 December 2011 the Group gas-turbine plants”. At the same time RR 1,358 million of previ- recognised the impairment of property, plant and equipment in ously recognised impairment of advances to construction com- the amount of RR 1,174 million, which consisted of an impair- panies and suppliers of property, plant and equipment was mentof RR 442 million related toadvances to construction com- reversed. panies and suppliers of property, plant and equipment, an impairmentof RR 302 million related to property, plant and equip- LEASED PROPERTY, PLANT AND EQUIPMENT. Subsequent to the ment of OJSC “Nurenergo” located in Chechen Republic and a latest revaluationthe Group leased certain equipment under a specific impairmentof RR 430 million related to construction in number of finance lease agreements. As at 31 December 2011 progress which cost is not expected to be recovered. the net book value of leased property, plant and equipment was RR2,083million (as at 31 December 2010: RR 1,282million). The For the year ended 31 December 2010the Group recognised the leased equipment is pledged as security for the lease impairment of property, plant and equipment in the amount of RR obligations. 2,009 million, which consisted of an impairmentof RR 21 million related to advances to construction companies and suppliers of OPERATING LEASES. The Group leases a number of land areas property, plant and equipment, an impairmentof RR 206 million owned by the local government under operating lease. The related to property, plant and equipment of OJSC “Nurenergo” expected lease payments due are determined based on the located in Chechen Republic and an impairmentof RR 1,782 mil- lease agreements and payable as follows: lion related toproperty, plant and equipment of OJSC “Mobile

31 DECEMBER 2011 31 DECEMBER 2010 Under one year 413 340 Between one and five years 1,146 1,212 Over five years 7,627 6,356 Total 9,186 7,908

61 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 6. PROPERTY, PLANT AND EQUIPMENT (continued)

The above lease agreements are usually signed for period of 1 As at 31 December 2011 the carrying value of property, plant to 49 years and may be extended for a longer period. The lease and equipment leased out under operating lease was RR 1,744 payments are subject to review on a regular basis to reflect mar- million (as at 31 December 2010: RR 1,808 million). ket rent prices.

Note 7. INTANGIBLE ASSETS CORPORATE SYSTEM CORPORATE OTHER INTANGIBLE TOTAL OF MANAGING INFORMATION ASSETS GEOGRAPHICALLY MANAGEMENT SYSTEM DISPERSED (SAPR/3) RESOURCES Costas at 1 January 2010 1,707 4,498 2,539 8,744 Accumulated amortisation (532) (692) (662) (1,886) Accumulated impairment - (466) - (466) Carrying value as at 1 January 2010 1,175 3,340 1,877 6,392

Additions - 263 666 929 Disposals – cost - (39) (42) (81) Disposals – accumulated amortisation - - 13 13 Amortisation charge (171) (329) (369) (869) Impairment loss - (195) - (195) Carrying value as at 31 December 2010 1,004 3,040 2,145 6,189

Cost as at 31 December 2010 1,707 4,722 3,163 9,592 Accumulated amortisation (703) (1,021) (1,018) (2,742) Accumulated impairment - (661) - (661) Carrying value as at 31 December 2010 1,004 3,040 2,145 6,189

Additions - 309 1,401 1,710 Disposals – cost - (661) (157) (818) Disposals – accumulated amortisation - - 96 96 Amortisation charge (157) (320) (388) (865) Write-off of previously impaired assets - 661 - 661 Carrying value as at 31 December 2011 847 3,029 3,097 6,973 Cost as at 31 December 2011 1,707 4,370 4,407 10,484 Accumulated amortisation (860) (1,341) (1,310) (3,511) Accumulated impairment - - - - Carrying value as at 31 December 2011 847 3,029 3,097 6,973

The Corporate system of managing geographically dispersed costsof RR 2,424 millionas at 31 December 2011 (as at resources is a software system for gathering, processing and 31 December 2010: RR 2,399 million). storing information on conditions in the transmission network, which is required for effective maintenance of UNEG. The Other intangible assets include capitalised software development Corporate system of managing geographically dispersed costs that meet the definition of an intangible asset of RR 1,272 resources is amortised during 5 years. The Corporate system of million as at 31 December 2011(as at 31December 2010:RR managing geographically dispersed resources includes the 1,570 million). development cost of RR 847 million as at 31 December 2011 and 31 December 2010. As at 31 December 2011 management assessed the recoverable amount of non-current assets of Transmission segment (Note 6), The Corporate information management system (SAPR/3) which includes most of the intangible assets of the Group. As a consists of several modules (parts) and related licences. As at result of the assessment performed no impairment was identified 31 December 2011only certain modules (parts) were placed in as at that date. In 2010 the Group recorded a specific impairment operation and are subject to amortisation. These modules are of RR 195 million in relation to intangible assets which cost is not amortised during 5 years, on a straight-line basis. The Corporate expected to be recovered. In 2011 all previously impaired information management system (SAPR/3) includes development intangible assets were written-off in full, no new specific impairment was recorded.

62 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 8. INVESTMENTS IN ASSOCIATED COMPANIES

The movements in the carrying value of investments in associates are as follows:

YEAR ENDED YEAR ENDED 31 DECEMBER 2011 31 DECEMBER 2010 Carrying value as at 1 January 348 58,451 Share of result of associates 8 (833) Loss on dilution of share in associates - (2,790) Translation difference 66 (22) Disposal of associates - (1,231) Transfer from / (to) non-current assets held for sale 488 (53,227) Carrying value as at 31 December 910 348

The carrying value of investments in associates is as follows: 31 DECEMBER 2011 31 DECEMBER2010 JSC UES “GruzRosEnergo” 557 561 OJSC “WGC-1” - 27,559 OJSC “Volzhskaya TGC” - 16,268 OJSC “TGC-6” - 5,438 OJSC “TGC-11” - 3,401 Other associates 353 348 Less: transfer to non-current assets held for sale - (53,227) Total investments in associates 910 348

TRANSFER TO NON-CURRENT ASSETS HELDFORSALE. As at JSC UES “GruzRosEnergo”, were transferred to Inter RAO 31 December 2010 the investments in OJSC “WGC-1”, OJSC UESin exchange for its additionally issued ordinary shares (Note “TGC-6”, OJSC “TGC-11”, OJSC “Volzhskaya TGC” and JSC 16). Following its exclusion from the Inter RAO UES transaction, UES “GruzRosEnergo”, in the total amount of RR 53,227 million, the investment in JSC UES “GruzRosEnergo” was reclassified were classified as heldforsale under IFRS 5 “Non-current assets back from non-current assets held for sale to investments in heldfor sale and discontinued operations”. In March and May associates. 2011, all the above-mentioned investments, except for that in

Note 9. AVAILABLE-FOR-SALE INVESTMENTS 1 JANUARY 2011 ADDITIONS CHANGE IN FAIR IMPAIRMENT 31 DECEMBER VALUE* CHARGE 2011 OJSC “INTER RAO UES” 2,674 79,387 (2,323) (12,661) 67,077 OJSC “IDGC Holding” 6,857 - (3,955) - 2,902 Total 9,531 79,387 (6,278) (12,661) 69,979

1 JANUARY 2010 ADDITIONS CHANGE IN FAIR IMPAIRMENT TRANSFER TO 31 DECEMBER VALUE* CHARGE NON-CURRENT 2010 ASSETS HELD FOR-SALE OJSC “IDGC Holding” 4,247 - 2,610 - 6,857 OJSC “INTER RAO UES” 2,668 - 6 - 2,674 OJSC “Bashkirenergo” 7,699 - 7,852 - (15,551) - OJSC “RusHydro” 5,337 4 2,397 - (7,738) - OJSC “Mosenergo” 5,878 1 (97) - (5,782) - OJSC “WGC-6” 2,899 - 2,701 - (5,600) - OJSC “WGC-4” 2,261 1 1,878 - (4,140) - OJSC “WGC-2” 626 - 596 - (1,222) - OJSC “TGC-1” 857 - 260 - (1,117) - OJSC “WGC-3” 818 - 151 - (969) - OJSC “RAO ES of the East ” 487 - 68 - (555) - OJSC “TGC-9” 282 - 147 - (429) - OJSC “Kuzbassenergo” 255 - 130 - (385) -

63 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 9. AVAILABLE-FOR-SALE INVESTMENTS (continued)

1 JANUARY 2010 ADDITIONS CHANGE IN FAIR IMPAIRMENT TRANSFER TO 31 DECEMBER VALUE* CHARGE NON-CURRENT 2010 ASSETS HELD FOR-SALE OJSC “Sangtudinskaya GES-1” 555 - - (235) (320) - OJSC “TGC-13” 210 - 97 - (307) - OJSC “TGC-11 Holding” 150 - 13 - (163) - Total 35,229 6 18,809 (235) (44,278) 9,531

* Change in fair value of available-for-sale investments was recognised in other comprehensive income.

Available-for-sale investments valuation ments as at 1 January 2011 amounted to RR 2,323 million (with related deferred tax liability of RR 155 million). Therefore, the The fair value of the available-for-sale financial instruments was impairment charge reclassified from other comprehensive determined based on the quoted market prices. income to profit or loss amounted to RR 12,661 million (Note 17).

Impairment of investment in Inter RAO UES Transfer to non-current assets held-for-sale

During the year ended 31 December 2011 the fair value of shares Most of the available-for-sale investments held by the Group in in Inter RAO UES has declined below cost. The Group assessed 2010 were reclassified to non-current assets held for sale as at these investments for impairment at 31 December 2011 and con- 31 December 2010. In March and May 2011 those investments cluded that there was evidence of a significant and prolonged as well as investments in associated companies were trans- decline in the fair value or equity investments below their cost ferred to Inter RAO UES (Note 16) in exchange for its ordinary (Note 2). The fall in fair value of these investments during the shares valued at RR 79,387 million at the relevant dates of the reporting period amounted to RR14,984 million.The revaluation transaction. The Group continues to classify its investment in surplus accumulated in the reservefor available-for-sale invest- INTER RAO UES as available for sale.

Note 10. PROMISSORY NOTES RATING RATING AGENCY EFFECTIVE DUE 31 DECEMBER 31 DECEMBER INTEREST RATE, 2011 2010 % LONG-TERM PROMISSORY NOTES LLC “ENERGO-finance” Not available 9.1%-10.1% 2014 9,197 8,466 OJSC “IDGC of the South”* Not available 8.9% 2013 2,724 - OJSC “Alfa-Bank” BB Standard&Poor's 7.25%-12.6% 2013-2015 1,225 371 OJSC “System operator UES”* Not available 11.1% 2012-2013 984 1,461 Other long-term promissory notes 11.1%-12.6% 2013-2038 798 748 Total long-term promissory notes 14,928 11,046

SHORT-TERM PROMISSORY NOTES OJSC “Gazprombank”* ВВ+ Standard&Poor's 6.1%-7.4% 2012 14,040 - OJSC “Promsvyazbank” Ва2 Moody’s 8.00% 2012 3,014 3,002 OJSC Bank “ROSSIYA” B+ Standard&Poor's 8.3% 2012 2,010 4,076 OJSC "Bank "Saint Petersburg" Ва3 Moody’s 8.5% 2012 1,007 - OJSC “System operator UES”* Not available 11.1% 2012 607 - OJSC “VTB Bank”* BBB Standard&Poor's 1.5%-8.5% 2012 - 19,232 OJSC “Alfa-Bank” BB Standard&Poor's 2.6%-13.1% 2012 - 14,431 OJSC “International Financial Club” Not available 6.30% 2012 - 2,002 Other short-term promissory notes 11.1%-12.6% 2012 59 413 Total short-term promissory notes 20,737 43,156

Companies marked with * above are government-related entities All promissory notes are denominated in Russian roubles As at (Note 5). 31 December 2011 and 31 December 2010 the fair valueof promissory notes, determined using valuation technique, was RR 35,731 As at 31 December 2011 and 31 December 2010 the promissory million and RR 54,384 million respectively. The valuation was notes of LLC “ENERGO-Finance” were impaired (Note 29).The mainly based on discounting of the future expected cash flows at notes are not overdue as they were restructured in 2010. the current market interest rate available for debtors with similar level of credit risk.

64 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 11. OTHER NON-CURRENT ASSETS НА 31 ДЕКАБРЯ НА 31 ДЕКАБРЯ 2011 ГОДА 2010 ГОДА Long-term trade receivables 116 1 411 (Net of allowance for doubtful debtors of RR 108 million as at 31 December 2011 and RR 224 million as at 31 December 2010) Long-term loans given - 296 Total financial assets 116 1 707 VAT recoverable 216 253 Other non-current assets 707 547 Total other non-current assets 1,039 2,507

Note 12. CASH AND CASH EQUIVALENTS 31 DECEMBER 31 DECEMBER 2011 2010 Cash at bank and in hand 18,925 13,373 Cash equivalents 6,702 200 Total cash and cash equivalents 25,627 13,573

CASH AT BANK AND IN HAND RATING RATING AGENCY 31 DECEMBER 31 DECEMBER 2011 2010 OJSC “Sberbank” Ваа1 Moody’s 13,654 6,725 OJSC "Bank “ROSSIYA” B+ Standard&Poor's 4,000 - OJSC “Alfa-Bank” BB Standard&Poor's 1,065 6,434 OJSC “Gazprombank” ВВ+ Standard&Poor's 150 58 Other 56 156 Total cash at bank and in hand 18,925 13,373

Cash equivalents include short-term investments in certificates of deposit:

BANK DEPOSITS INTEREST RATE RATING RATING AGENCY 31 DECEMBER 31 DECEMBER 2011 2010 OJSC “Sberbank” 4.5%-6.0% Ваа1 Moody’s 5,420 192 OJSC “VTB bank” 7.0%-8.5% BBB Standard&Poor's 690 - OJSC “Gazprombank” 7.6% ВВ+ Standard&Poor's 550 - Other - 8 Total certificates of deposit 6,660 200 200

There were no certificates of deposit denominated in foreign currency included in cash equivalents as at 31 December 2011 and 31 December 2010.

Note 13. BANK DEPOSITS BANKDEPOSITS INTEREST RATE RATING RATING AGENCY 31 DECEMBER 31 DECEMBER 2011 2010 OJSC “Alfa-Bank” 5.2%-5.4% BB Standard&Poor's 794 988 OJSC “VTB bank” 6.1%-8.8% BBB Standard&Poor's 200 618 OJSC “Sberbank” 3.8%-5.5% Ваа1 Moody’s 190 - OJSC “Nomos-bank” 6.5% Ba3 Moody’s - 3,000 Totalbankdeposits 1,184 4,606 1 184 4 606

The carrying amount of bank deposits approximates their fair There were no bank deposits denominated in foreign currency value. as at 31 December 2011 (as at 31 December 2010: RR 88 million).

65 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 14. ACCOUNTS RECEIVABLE AND PREPAYMENTS 31 DECEMBER 31 DECEMBER 2011 2010 Trade receivables 12,036 10,605 (Net of allowance for doubtful debtors of RR 6,570 million as at 31 December 2011 and RR 2,900 million as at 31 December 2010) Other receivables 932 741 (Net of allowance for doubtful debtors of RR 908 million as at 31 December 2011 and RR 695 million as at 31 December 2010) Total financial assets 12,968 11,346 Advances to suppliers 2,764 1,646 (Net of allowance for doubtful debtors of RR 2,033 million as at 31 December 2011 and RR 1,874 million as at 31 December 2010) VAT recoverable 9,054 9,199 Tax prepayments 5,923 8,454 VAT related to advances received 2,235 2,009 Total accounts receivable and prepayments 32,944 32,654

Trade and other receivables are not interest-bearing and are expected future cash flows. The effects of discounting are largely due in 30 to 90 days. Given the short period of the trade reflected in the doubtful debtor allowance and expense. The and other receivables repayment, the fair value of such receiv- management of the Group believes that Group entities will be ables approximates their book value. able to realise the net receivable amount through direct collec- tions and other non-cash settlements, and that therefore the Tax prepayments will be settled against future tax liabilities. recorded value of receivables approximates their fair value.

Management has determined the provision for doubtful debtors The movement of the provision for doubtful debtors is shown based on specific customer identification, customer payment below: trends, subsequent receipts and settlements and analyses of

YEAR ENDED 31 DECEMBER 2011 TRADE OTHER ADVANCES TO LONG-TERM TOTAL RECEIVABLES RECEIVABLES SUPPLIERS AND ACCOUNTS PREPAYMENTS RECEIVABLE AS AT 1 JANUARY 2,900 695 1,874 224 5,693 Provision accrual 4,059 447 67 2 4,575 Provision reversal (98) (172) (22) - (292) Debt written-off (3) (13) - - (16) Amortisation of discount (314) (14) - (13) (341) Reclassification from/(to) other items 26 (35) 114 (105) - As at 31 December 6,570 908 2,033 108 9,619

YEAR ENDED 31 DECEMBER 2010 TRADE OTHER ADVANCES TO LONG-TERM TOTAL RECEIVABLES RECEIVABLES SUPPLIERS AND ACCOUNTS PREPAYMENTS RECEIVABLE AS AT 1 JANUARY 4,862 992 2,162 24 8,040 Provision accrual 206 171 132 205 714 Provision reversal (2,027) (338) (247) - (2,612) Debt written-off (5) (5) (173) - (183) Amortisation of discount (136) (125) - (5) (266) As at 31 December 2,900 695 1,874 224 5,693

As at 31 December 2011 the overdue accounts receivable for 3,516 million (as at 31 December 2010: RR 4,043 million). The which the provision had not been recorded amounted to RR ageing analysis is shown below:

66 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 14. ACCOUNTS RECEIVABLE AND PREPAYMENTS (continued)

31 DECEMBER 31 DECEMBER 2011 2010 Less than 3 months 2,011 2,432 3 to 6 months 1,347 1,270 6 to 12 months 64 14 1 year to 5 years 94 327 Total 3,516 4,043

The analysis of overdue accounts receivable for which the provision had been recorded as at 31 December 2011 is shown below, gross of allowance for doubtful debtors:

31 DECEMBER 31 DECEMBER 2011 2010 Less than 3 months 882 189 3 to 6 months 2,132 705 6 to 12 months 427 233 1 year to 5 years 2,496 2,200 More than 5 years 5 - Total 5,942 3,327

Note 15. INVENTORIES 31 DECEMBER 31 DECEMBER 2011 2010 Repair materials 3,751 3,501 Spare parts 2,232 1,669 Other inventories 337 432 Totalinventories 6,320 5,602

The cost of inventories is shown net of an obsolescence provi- ber 2010 the Group had no inventories pledged as security sion for RR 73 million as at 31 December 2011 (as at 31 Decem- under loan and other agreements. ber 2010: RR 38 million). As at 31 December 2011 and 31 Decem-

Note 16. NON-CURRENT ASSETS HELDFORSALE 31 DECEMBER 31 DECEMBER 2011 2010 OJSC “WGC-1” - 27,559 OJSC “Volzhskaya TGC” - 16,268 OJSC “Bashkirenergo” - 15,551 OJSC “RusHydro” - 7,738 OJSC “Mosenergo” - 5,782 OJSC “WGC-6” - 5,600 OJSC “TGC-6” - 5,438 OJSC “WGC-4” - 4,140 OJSC “TGC-11” - 3,401 OJSC “WGC-2” - 1,222 OJSC “TGC-1” - 1,117 OJSC “WGC-3” - 969 JSC UES “GruzRosEnergo” - 561 OJSC “RAO ES Vostoka” - 555 OJSC “TGC-9” - 429 OJSC “Kuzbassenergo” - 385 OJSC “Sangtudinskaya GES-1” - 320 OJSC “TGC-13” - 307 OJSC “TGC-11 Holding” - 163 Total - 97,505 Loss on re-measurement - (6,896) Total non-current assets held for sale - 90,609

67 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 16. NON-CURRENT ASSETS HELDFORSALE (continued)

Non-current assets held for sale were included in the Transmis- were reclassified as held for sale under IFRS 5 “Non-current sion segment (Note 31). assets heldfor sale and discontinued operations” as the management of the Company had committed to a plan to transfer As at 31 December 2010 all available-for-sale investments, these assets during 2011 year to Inter RAO UES in exchange for except for shares of OJSC “IDGC Holding” and OJSC “Inter ordinary shares of OJSC “Inter RAO UES” (Notes8, 9). RAO UES”, in the total amount of RR 44,278 million and most of investments in associates, such as OJSC “WGC-1”, OJSC Cumulative income recognised by 31 December 2010 in other “TGC-6”, OJSC “TGC-11”, OJSC “Volzhskaya TGC” and JSC comprehensive income relating to non-current assets held for UES “GruzRosEnergo”, in the total amount of RR 53,227 million, sale(Note 17):

31 DECEMBER 2010 Revaluation reservefor property, plant and equipment of associates 10,749 Foreign currency translation reserve 34 Revaluation reserve for available-for-sale investments 29,702 Total 40,485

In March and May 2011 allthe above-mentioned investments, ments classified as held for sale was recognised in other com- except for JSC UES “GruzRosEnergo”, were transferred to Inter prehensive income in the amount of RR 4,810 million net of cor- RAO UESin exchange for 1,883,043,160,666its ordinary shares. responding deferred tax in the amount of RR 1,203million.

In accordance with the provisions of IFRS 5, non-current assets At the dates of the transaction, cumulative income recognised in held for sale were re-measured at the date of de-recognition other comprehensive income and related to the disposed assets (transfer) to reflect the change in the value less costs to sell.A held for sale amounting to RR 31,115 million was transferred to loss of RR 4,718 million, and corresponded deferred tax of RR profit or loss as a gain on disposal of available-for-sale 944 million was recognised in profit or lossin respect of re-mea- investments.A related deferred tax change in the amount of RR surement of investments in associated companies classified as 6,223 million was recognised in the income tax expense for the held for sale. Decline in fair value of available-for-sale invest- year.

DATESOFDISPOSAL Available-for-sale investments classified as held for sale (38,222) Investments in associates classified as held for sale (41,165) Fair value of consideration received 79,387 Result of the exchange transaction - Accumulated gain on available-for-sale investments recycled to profit orloss (related deferred tax liability of RR 6,223 million) 31,115 Gain on disposal of available-for-sale investments 31,115

Note 17. EQUITY

SHARE CAPITAL

NUMBER OF SHARES ISSUED 31 DECEMBER 2011 31 DECEMBER 2010 AND FULLY PAID 31 DECEMBER 2011 31 DECEMBER 2010 Ordinary shares 1,255,948,128,393 1,233,561,333,552 627,974 616,781

As at 31 December 2011 the authorised share capital comprised result of this issue, the share capital was increased to RR 1,346,805,824 thousand ordinary shares with a nominal value of 627,974 million. RR 0.5 per share. In July 2011, FGC UES started an additional share issue.The ADDITIONAL ISSUE OF SHARES. In January 2010, FGC UES placement process started in September,but was only com- completed and registered the additional share issue for the total pleted after the year end (Note 32). The amount of RR 2,220 mil- amount of RR 40,024 million. As a result of this issue, the share lion received for shares issued was included as at 31 December capital was increased to RR 616,781 million and additional share 2011 in the Consolidated Statement of Financial Position as premium recognised in the amount of RR 154 million. accounts payable to the shareholders of FGC UES.

In March 2011 FGC UES completed and registered the addi- TREASURY SHARES. Treasury shares represent 13,727,165 thou- tional share issue for the total amount of RR 11,193 million. As a sand of ordinary shares in the amount of RR 5,522 million as at 31 December 2011 and of RR 6,864 million as at 31 December 2010. 68 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 17. EQUITY (continued)

Treasury shares were received by the Group during the reorgani- RESERVES. .Reserves include Revaluation reserve for property, sation process in the form of a legal merger with RAO UES in plant and equipment and available-for-sale investments and For- 2008. The Company’s shares are held by its subsidiary, LLC eign currency translation reserve. “Index Energetiki – FGC UES”. Treasury shares received during 2008 are accounted for at their nominal value of RR 0.5 per share. The Foreign currency translation reserve relates to the exchange differences arising on translation of the net assets of foreign In 2011, treasury shares decreased by RR 1,342 million with the associate. corresponding recognition of expense relating to share-based compensation (see below), since management plans to use trea- Reserves comprise the following: sury shares for the share option plan.

31 DECEMBER 31 DECEMBER 2011 2010 Revaluation reserve(net of tax) for: property, plant and equipment (Note 6) 312,298 313,525 available-for-sale investments (Note 9) 1,925 7,257 Amounts recognised in other comprehensive income and accumulated in equity relating to non-current assets held for - 40,485 sale (Note 16) Foreign currency translation reserve 100 - Totalreserves 314,323 361,267

Reserves for the year ended 31 December 2011 (net of tax): REVALUATION RESERVE FOR: AMOUNTS FOREIGN TOTAL RESERVES PROPERTY, PLANT AVAILABLE- RECOGNISED CURRENCY AND EQUIPMENT FOR-SALE IN OTHER TRANSLATION (NOTE 6) INVESTMENTS COMPREHENSIVE RESERVE (NOTE 9) INCOME AND ACCUMULATED IN EQUITY RELATING TO NON- CURRENT ASSETS HELDFORSALE (NOTE 16) AS AT 1 JANUARY 2011 313,525 7,257 40,485 - 361,267 Change in revaluation reserve for property, plant and (1,227) - - - (1,227) equipment Change in fair value of available-for-sale investments - (15,151) (4,810) - (19,961) Change in revaluation reserve for property, plant and - - (10,749) - (10,749) equipment of associates (previously classified as non- current assets held for sale) Accumulated loss / (gain) on available-for-sale investments - 9,819 (24,892) - (15,073) recycled to profit orloss Amounts relating to available-for-sale investments - - (34) 34 - previously classified as non-current assets held for sale Foreign currency translation difference (Note 8) - - - 66 66 As at 31 December 2011 312,298 1,925 - 100 314,323

The total reduction in fair value of available-for-sale investments recognised in other comprehensive income in 2011 was:

NOTES AMOUNT OF RELATED AMOUNT OF REDUCTION DEFERRED TAX REDUCTION NET OF DEFERRED TAX Decline in fair value of available-for-sale investments classified as non-current assets held for 16 6,013 (1,203) 4,810 sale Decline in fair value of available-for-sale investments within accumulated reserve 9, 18 6,278 (946) 5,332 Decline in fair value of available-for-sale investments below cost 9 12,661 (2,842) 9,819 Total 24,952 (4,991) 19,961

69 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 17. EQUITY (continued)

The total increase in fair value of available-for-sale investments recognised in other comprechensive income in 2010 was RR 18,800 million including related deferred tax of RR 3,751 million.

Reserves for the year ended 31 December 2010 (net of tax):

REVALUATION RESERVE FOR: AMOUNTS MERGER RESERVE FOREIGN TOTAL RESERVES PROPERTY, PLANT AVAILABLE- RECOGNISED CURRENCY AND EQUIPMENT FOR-SALE IN OTHER TRANSLATION (NOTE 6) INVESTMENTS COMPREHENSIVE RESERVE (NOTE 9) INCOME AND ACCUMULATED IN EQUITY RELATING TO NON- CURRENT ASSETS HELDFORSALE (NOTE 16)

As at 1 January 2010 325,590 21,919 - (56,891) 56 290,674 Change in revaluation reserve for (1,316) - - - - (1,316) property, plant and equipment Gain on change of fair value of - 15,049 - - - 15,049 available-for-sale investments Realised revaluation reserve for - (9) - - - (9) available-for-sale investments Foreign currency translation difference - - - - (22) (22) (Note 8) Amounts relating to non-current (10,749) (29,702) 40,485 - (34) - assets heldforsale, recognised in other comprehensive income and accumulated in equity Transfer of merger reserve to retained - - - 56,891 - 56,891 earnings As at 31 December 2010 313,525 7,257 40,485 - - 361,267

DIVIDENDS. The annual statutory accounts of the parent com- shares were allocated under the Programme. The treasury pany, FGC UES, form the basis for the annual profit distribution sharesheld by LLC “Index Energetiki – FGC UES” were used for and other appropriations. The specific Russian legislation identi- this allocation. fies the basis of distribution as the net profit. For the year ended 31 December 2011, the statutory net loss of the parent company, Options granted vest over the period of three years and are exer- FGC UES, as reported in the published statutory financial state- cisable during two years from the vesting date. In case of termi - ments, was RR 2,468 million (for the year ended 31 December nating employment at the initiative of the Company due to 2010 the net profit was RR 58,088 million). At the Annual Gen- breaching certain employment duties by the employee the Pro- eral Meeting in June 2011 the decision was approved to declare gramme participant will lose his right to purchase the shares. dividends for the year ended 31 December 2010 in the total amount of RR 2,578 million (RR 0.0020523650155 per share). All options were granted with an exercise price of RR 0.4065 per share. The total grant date fair value of stock options granted SHARE-BASED COMPENSATION.In February 2011, the Board of allowing updated forfeiture ratewas RR 2,821 million. Directors approved an Option programme (“the Programme”) in which the members of the Management Board and other employ- The Black-Scholes option valuation model is used for estimating ees of the Company can be participants. On 1 March 2011 the fair value of options. The significant inputs into the option 13,569,041,046 options to purchase the Company’s ordinary valuation model were as follows:

70 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 17. EQUITY (continued)

AWARDS GRANTED DURING THE YEAR ENDED 31 DECEMBER 31 DECEMBER 2011 2010 Shareprice RR 0.412 - Expectedvolatility 45% - Risk-free interest rate 7.58% - Expected optionslife 5years -

ACCOUNTS PAYABLE TO THE SHAREHOLDERS OF JSC “FGC UES”. Accounts payable to the shareholders of FGC UES include dividends payable and payables for shares issued:

31 DECEMBER 31 DECEMBER 2011 2010 Dividends payable 55 47 Accounts payable for shares issued 2,220 11,193 Total accounts payable to the shareholders of JSC “FGC UES” 2,275 11,240

Note 18. INCOME TAX

Income tax expense comprises the following: YEAR ENDED YEAR ENDED 31 DECEMBER 31 DECEMBER 2011 2010 Current income tax charge (8,588) (9,240) Deferred income tax (charge) / credit (5,287) 3,488 Total income tax expense (13,875) (5,752) During the years ended 31 December 2011 and 31 December other Group companies. Accordingly, tax may be accrued even 2010 most entities of the Group were subject to tax rates of 20 where there is a net consolidated tax loss. percent on taxable profit. Profit before income tax for financial reporting purposes is rec- In accordance with Russian tax legislation, tax losses in different onciled to income tax expenses as follows: Group companies may not be offset against taxable profits of

YEAR ENDED YEAR ENDED 31 DECEMBER 31 DECEMBER 2011 2010 Profit before income tax 62,863 24,135 Theoretical income tax charge at the statutory tax rate of 20 percent (12,573) (4,827) Tax effect of items which are not deductible for taxation purposes (1,245) 15 Unrecognised deferred tax assets (57) (940) Total incometax (13,875) (5,752)

DEFERRED INCOME TAX. Differences between IFRS and Rus- poses. Deferred income tax assets and liabilities were measured sian statutory taxation regulations give rise to certain temporary at 20 percentas at 31 December 2011 and 31 December 2010, differences between the carrying value of certain assets and lia- the rates expected to be applicable when the asset or liability will bilities for financial reporting purposes and for income tax pur- reverse.

71 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 18. INCOME TAX (continued)

DEFERRED INCOME TAX ASSETS AND LIABILITIES FOR THE YEAR ENDED 31 DECEMBER 2011:

31 DECEMBER MOVEMENTS FOR THE YEAR 1 JANUARY 2011 2011 RECOGNISED IN RECOGNISED PROFIT OR LOSS IN OTHER COMPREHENSIVE INCOME DEFERRED INCOME TAX LIABILITIES Property, plant and equipment 73,106 3,667 - 69,439 Investments in associates 71 1 - 70 Available-for-sale investments 10,059 10,499 (946) 506 Accounts receivable and prepayments - (241) - 241 Non-current assets held for sale - (8,139) (7,426) 15,565 Other deferred tax liabilities 63 31 - 32 Total deferred income tax liabilities 83,299 5,818 (8,372) 85,853

DEFERRED INCOME TAX ASSETS Property, plant and equipment (1,521) 29 - (1,550) Intangible assets (519) (388) - (131) Long-term promissory notes (1,496) 76 - (1,572) Accounts receivable and prepayments (267) 561 - (828) Retirement benefit obligation (391) (1) - (390) Current and non-current debt (170) (170) - - Accounts payable and accruals (179) 56 - (235) Other deferred tax assets (164) 30 - (194) Tax losses (2,414) (781) - (1,633) Unrecognised deferred tax assets 4,394 57 - 4,337 Total deferred income tax assets (2,727) (531) - (2,196)

Deferred income tax liabilities, net 80,572 5,287 (8,372) 83,657

The current portion of net deferred tax liabilities as at 31 Decem- subsidiaries. These deferred tax assets are not recognised ber 2011 equaled RR 1,315million and represented the amount of because it is not probable that sufficient taxable profits will be deferred tax liabilities to be settled during the year ended available against which the deferred tax assets can be utilised. 31 December 2012 (as at 31 December 2010: RR 14,122 million). Tax losses carried forward in respect of which deferred tax assets Unrecognised deferred tax assets include tax losses carried for- were not recognised are presented by companies in the table ward in the amount of RR2,414 million and deferred income tax below: assets on temporary differences arising in respect of loss-making

31 DECEMBER 31 DECEMBER 2011 2010 OJSC “Nurenergo” 8,876 5,098 OJSC “Mobile gas-turbine electricity plants” 2,670 2,300 OJSC “The principle electricity transmission service company of Unified National Electrical Network” 318 259 OJSC “Specialised electricity transmission service company of Unified National Electrical Network” - 170 Others 206 338 Total tax losses carried forward 12,070 8,165

The tax losses expire 10 years after their origination. These tax years (during 2013-2016) and RR 9,820 million with term over 5 losses expire mostly during 2012-2020, RR 143 million expire years (during 2017-2021). during the year 2012, RR 2,107 million with terms from 2 to 5

72 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 18. INCOME TAX (continued)

DEFERRED INCOME TAX ASSETS AND LIABILITIES FOR THE YEAR ENDED 31 DECEMBER 2010:

31 DECEMBER MOVEMENTS FOR THE YEAR 1 JANUARY 2010 2010 RECOGNISED IN RECOGNISED PROFIT OR LOSS IN OTHER COMPREHENSIVE INCOME DEFERRED INCOMETAX LIABILITIES Property, plant and equipment 69,439 (926) - 70,365 Investments in associates 70 (2,395) (9,048) 11,513 Available-for-sale investments 506 - (2,757) 3,263 Accounts receivable and prepayments 241 235 - 6 Non-current assets held for sale 15,565 - 15,565 - Other deferred tax liabilities 32 1 - 31 Total deferred income tax liabilities 85,853 (3,085) 3,760 85,178

DEFERRED INCOME TAX ASSETS Property, plant and equipment (1,550) (389) - (1,161) Long-term promissory notes (1,572) (452) - (1,120) Accounts receivable and prepayments (828) 124 - (952) Retirement benefit obligation (390) (69) - (321) Accounts payable and accruals (235) (221) - (14) Other deferred tax assets (325) (38) - (287) Tax losses (1,633) (298) - (1,335) Unrecognised deferred tax assets 4,337 940 - 3,397 Total deferred income tax assets (2,196) (403) - (1,793)

Deferred income tax liabilities, net 83,657 (3,488) 3,760 83,385

Note 19. NON-CURRENT DEBT CURRENCY EFFECTIVE DUE 31 DECEMBER 31 DECEMBER INTEREST 2011 2010 RATE Certified interest-bearing non-convertible bearer bonds, Series 19 RR 7.95% 06.07.2023 20,710 - Certified interest-bearing non-convertible bearer bonds, Series 18 RR 8.50% 27.11.2023 15,066 - Certified interest-bearing non-convertible bearer bonds, Series 10 RR 7.75% 15.09.2020 10,202 10,200 Certified interest-bearing non-convertible bearer bonds, Series 06 RR 7.15% 15.09.2020 10,186 10,184 Certified interest-bearing non-convertible bearer bonds, Series 08 RR 7.15% 15.09.2020 10,186 10,184 Certified interest-bearing non-convertible bearer bonds, Series 15 RR 8.75% 12.10.2023 10,156 - Certified interest-bearing non-convertible bearer bonds, Series 11 RR 7.99% 16.10.2020 10,140 10,138 Certified interest-bearing non-convertible bearer bonds, Series 13 RR 8.50% 22.06.2021 9,993 - Certified interest-bearing non-convertible bearer bonds, Series 09 RR 7.99% 16.10.2020 5,070 5,069 Certified interest-bearing non-convertible bearer bonds, Series 07 RR 7.50% 16.10.2020 5,066 5,065 Certified interest-bearing non-convertible bearer bonds, Series 04 RR 7.30% 06.10.2011 - 6,102 OJSC “Gazprombank” RR 9.50% 13.10.2014 15,000 - OJSC “Gazprombank” RR 9.50% 22.11.2014 10,000 - Finance lease liabilities RR 9.50% 23.03.2018 849 - Total non-current debt 132,624 56,942 Less: current portion of non-current bonds (1,775) (6,942) Less: current portion of finance lease liabilities (71) - Non-current debt 130,778 50,000

73 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 19. NON-CURRENT DEBT (continued)

In September and October 2010, the Group issued certified The bondholders have the option to redeem the bonds for cash interest-bearing non-convertible bearer bonds of Series 06-11 instead of accepting the revised terms. The interest is payable with an interest rate fixed for the first 6 coupons for Series 06 every six months during the terms of the bonds. and 08, for the first 10 coupons for Series 07 and 10 and for the first 14 coupons for Series 09 and 11. The interest rate for other As at 31 December 2011the estimated fair value of total non- coupons will be determined before the end of the previous cou- current debt (including the current portion) was RR 128,351 pon period. million (as at 31 December 2010: RR 56,048 million), which was estimated using the market prices for quoted FGC UES In July, October and December 2011, the Group issued certi- bonds as at 31 December 2011. fied interest-bearing non-convertible bearer bonds of Series 13, 19, 15 and 18 with an interest rate fixed for all 20 coupons As at 31 December 2011 the Group had long-term undrawn for Series 13, for the first 14 coupons for Series 19, for the first committed financing facilities of RR 102,500 million (as at 6 coupons for Series 15 and for the first 5 coupons for Series 31 December 2010: RR 15,000 million) which could be used for 18.The interest rate for other coupons will be determined before the general purposes of the Group. the end of the previous coupon period. FINANCE LEASE. Minimum lease payments under finance leases and their present values are as follows:

DUE IN 1 YEAR DUE BETWEEN DUE AFTER TOTAL 1 AND 5 YEARS 5 YEARS Minimum lease payments as at 31 December 2011 150 749 307 1,206 Less future finance charges (79) (271) (7) (357) Present value of minimum lease payments as at 31 December 2011 71 478 300 849 Minimum lease payments as at 31 December 2010 - - - - Less future finance charges - - - - Present value of minimum lease payments as at 31 December 2010 - - - -

Leased assets with carrying amount disclosed in Note 6 are effectively pledged for finance lease liabilities as the rights to the leased asset revert to the lessor in the event of default.

Note 20. RETIREMENT BENEFIT OBLIGATIONS YEAR ENDED YEAR ENDED 31 DECEMBER 31 DECEMBER 2011 2010 Net liability in the Consolidated Statement of Financial Position as at 1 January 4,318 3,439 Net periodical cost 879 1,152 Benefits paid by the plan (511) (273) Net liability in the Consolidated Statement of Financial Position as at 31 December 4,686 4,318

The Group’s post-employment benefits policy includes the Additionally, financial aid in the form of defined benefits is pro- employee pension scheme and various post-employment, retire- vided to former employees who have state, industry or corporate ment and jubilee payments. The post-employment and retire- awards. Such financial aid is provided both to employees enti- ment benefit system is a defined benefit program as part of tled and not entitled to non-state pensions. which every participating employee receives benefits calculated in accordance with certain formula or rules. The program’s core The most recent actuarial valuation was performed as at element is the corporate pension scheme implemented by the 31 December 2010. Group in cooperation with the Non-State Pension Fund of Elec- tric Power Industry (NPFE). The tables below provide information about benefit obligations and actuarial assumptions as at 31 December 2011 and The Group also pays various long-term post-employment bene- 31 December 2010. fits, including lump sum benefits in case of death of employees or former employees receiving pensions, lump sum benefits The amounts recognised in the Consolidated Statement of upon retirement and in connection with jubilees. Financial Position are determined as follows:

74 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 20. RETIREMENT BENEFIT OBLIGATIONS (continued)

31 DECEMBER 31 DECEMBER 2011 2010 Total present value of defined benefit obligations 4,735 5,148 Net actuarial gains / (losses) not recognised in the Consolidated Statement of Financial Position 445 (142) Unrecognised past service cost (494) (688) Liability recognised in the Consolidated Statement of Financial Position 4,686 4,318

The amounts recognised in profit or loss are as follows: YEAR ENDED YEAR ENDED 31 DECEMBER 31 DECEMBER 2011 2010 Interest cost 401 412 Current service cost 308 338 Net actuarial (gains) / losses recognised in the period (24) 60 Recognised past service cost 194 460 Curtailments - (118) Net cost recognised in the Consolidated Statement of Comprehensive Income 879 1,152

Changes in the present value of the Group’s retirement benefit obligation are as follows: YEAR ENDED YEAR ENDED 31 DECEMBER 31 DECEMBER 2011 2010 Defined benefit obligations as at 1 January 5,148 4,544 Benefits paid by the plan (511) (273) Current service costs 308 338 Interest cost 401 412 Actuarialgains (611) (182) Past service cost - 460 Curtailments - (151) Present value of defined benefit obligations as at 31 December 4,735 5,148

Principal actuarial assumptions (expressed as weighted averages) are as follows:

(i) Financial assumptions

31 DECEMBER 31 DECEMBER 2011 2010 Discount rate 8.1% 7.8% Inflation rate 5.1% 5.7% Future salary increases 5.1% 6.7% Future pension increase 5.1% 5.7%

(ii) Demographic assumptions Mortality table: Russian population mortality table 1998. Withdrawal rates assumption is as follows: expected staff turnover rates depends on past service – around 10% for employees The expected contributions under voluntary pension programs with 2 years of service going down to 5% for employees with 10 in 2012 are expected in the amount of RR 389 million. or more years of service. Experience adjustments on benefit obligation are as follows: Retirement ages assumption is as follows: average retirement ages are 60.5 years for men and 56 years for women. Similar retirement age assumption was used as at 31 December 2010.

31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 2011 2010 2009 2008 2007 Total present value of defined benefit obligations 4,735 5,148 4,544 4,262 3,841 Deficit in plan (4,735) (5,148) (4,544) (4,262) (3,841) Experience adjustment on defined benefit obligations 123 (197) 323 808 376

75 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 21. CURRENT DEBT AND CURRENT PORTION OF NON-CURRENT DEBT EFFECTIVE 31 DECEMBER 31 DECEMBER INTEREST RATE 2011 2010 OJSC “Kalmenergosbyt” 7.0% 106 - OJSC “RusHydro” 17.0% 50 50 OJSC “IDGC Holding” 14.1% - 505 Current portion of non-current bonds(Note 19) 7.15%-8.75% 1 775 6 942 Current portion of finance lease liabilities 1,775 6,942 - Total current debt and current portion of non-current debt 2,002 7,497

As at 31 December 2011 and 31 December 2010 the Group had short-term undrawn committed financing facilities of RR 15,000 million which could be used for the general purposes of the Group.

Note 22. Accounts payable and accrued charges 31 DECEMBER 31 DECEMBER 2011 2010 Trade payables 12,374 14,499 Accounts payable to construction companies and suppliers of property, plant and equipment 16,699 10,844 Other creditors and accrued liabilities 1,568 1,916 Total financial liabilities 30,641 27,259 Advances received 11,013 11,744 Accounts payable to employees 1,172 405 Other taxes payable 1,364 951 VAT related to advances to suppliers 343 193 Other provisions for liabilities and charges 441 - Totalaccounts payable and accrued charges 44,974 40,552

Note 23. REVENUE YEAR ENDED YEAR ENDED 31 DECEMBER 31 DECEMBER 2011 2010 Transmission fee 134,754 109,371 Electricity sales 2,246 3,070 Connection services 2,178 609 Grids repair and maintenance services 393 280 Total revenue 139,571 113,330

Other operating income primarily includes income from non-core activities. YEAR ENDED YEAR ENDED 31 DECEMBER 31 DECEMBER 2011 2010 Write-off of accounts payable * 2,753 1 Insurance compensation 986 733 Communication lines repair and maintenance 839 494 Penalties and fines 772 500 Design works 553 743 Rental income 450 235 Research and development services 434 682 Communication services 249 216 Other income 757 880 Total other operating income 7,793 4,484

* Accounts payable in the amount of RR 2,747 million relating to OJSC “Nurenergo” were written off as these amounts had been recognised in 2003-2006 years and the relevant limitation period had expiredin 2011, according to Russian legislation. There are no claims to OJSC “Nurenergo” concerned with these payables.

76 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 24. OPERATING EXPENSES YEAR ENDED YEAR ENDED 31 DECEMBER 31 DECEMBER 2011 2010 Depreciation of property, plant and equipment 33,187 30,185 Employee benefit expenses and payroll taxes 24,046 20,114 Purchased electricity 13,781 15,942 Accrual / (reversal) of allowance for doubtful debtors 4,305 (2,164) Repair and maintenance services(by contractors) 3,977 4,427 Materials for repair 2,326 2,868 Rent 2,314 1,944 Business trips and transportation expenses 2,099 1,734 Security services 1,680 1,234 Other materials 1,435 1,055 Electricity transit via foreign countries 1,350 784 Consulting, legal and auditing services 1,323 729 Taxes, other than on income 1,141 933 Research and development 1,064 755 Insurance 972 946 Information system maintenance 955 1,048 Amortisation of intangible assets 865 869 Communication service 674 627 Fuel 561 576 (Gain) / loss on disposal of property, plant and equipment (617) 910 Other 3,312 2,357 Total operating expenses 100,750 87,873

FGC UES purchases electricity to compensate electricity losses Employee benefit expenses and payroll taxes include expenses which occur during transmission. on voluntary pension programs, long-term compensation payments and share-based compensation. Rent expenses principally represent short-term operating lease, including rent of land (Note 6) and office facilities.

YEAR ENDED YEAR ENDED 31 DECEMBER 31 DECEMBER 2011 2010 Wages and salaries 17,926 16,049 Social security contributions to the Pension Fund 2,995 2,076 Social security contributions to other state non-budgetary funds 904 837 Pension costs – defined benefit plans (Note 20) 879 1,152 Share-based compensation (Note 17) 1,342 - Total employee benefit expenses and payroll taxes 24,046 20,114 Note 25. FINANCE INCOME YEAR ENDED YEAR ENDED 31 DECEMBER 31 DECEMBER 2011 2010 Interest income 3,834 5,546 Foreign currency exchange differences 61 6 Dividends 45 255 Other finance income 17 - Total finance income 3,957 5,807

77 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 26. FINANCE COSTS YEAR ENDED YEAR ENDED 31 DECEMBER 31 DECEMBER 2011 2010 Interest expense 5,895 1,906 Foreign currency exchange differences 72 - Other finance costs 144 239 Total finance cost 6,111 2,145 Less capitalised interest expenses on borrowings related to qualifying assets (Note 6) (5,833) (1,526) Total finance cost recognised in profit or loss 278 619

Note 27. EARNINGS PER ORDINARY SHARE FOR PROFIT ATTRIBUTABLE TO THE SHAREHOLDERS OF JSC “FGC UES” YEAR ENDED YEAR ENDED 31 DECEMBER 31 DECEMBER 2011 2010 Weighted average number of ordinary shares (millions of shares) 1,247,984 1,228,079 Profit attributable to the shareholders of JSC “FGC UES” (millions of RR) 49,139 19,009 Weighted average earning per share – basic and diluted (in RR) 0.039 0.015

The Group has no dilutive potential ordinary shares; therefore, taken by management and the formal documentation supporting the diluted earnings per share equal the basic earnings per the tax positions may be successfully challenged by the relevant share. regional and federal authorities. Russian tax administration is gradually strengthening, including the fact that there is a higher risk of review of tax transactions without a clear business pur- Note 28. CONTINGENCIES, COMMITMENTS AND pose or with tax incompliant counterparties. Fiscal periods OPERATING RISKS remain open to review by the authorities in respect of taxes for three calendar years preceding the year of review. Under certain POLITICAL ENVIRONMENT. The operations and earnings of the circumstances reviews may cover longer periods. Group continue, from time to time and in varying degrees, to be affected by the political, legislative, fiscal and regulatory devel- As at 31 December 2011 management believes that its interpre- opments, including those related to environmental protection, in tation of the relevant legislation is appropriate and the Group’s Russian Federation. tax, currency and customs positions will be sustained, including the uncertainty of deductibility of certain types of costs for taxa- INSURANCE.The Group held limited insurance policies in relation tion purposes. Where management believes it is probable that a to its assets, operations, public liability or other insurable risks. position cannot be sustained, an appropriate amount has been Accordingly, the Group is exposed to those risks for which it accrued for in these Consolidated Financial Statements. The does not have insurance. Group estimates that possible tax claims in respect of certain open tax positions of the Group companies primarily related to LEGAL PROCEEDINGS. In the normal course of business the Group revenue recognition for taxation purposes could amount to as entities may be a party to certain legal proceedings. In the opinion much as RR 1,309 million if the tax positions would be success- of management, currently there are no existing legal proceedings fully challenged (as at 31 December 2010: RR 5,616 million of or claims outstanding or final dispositions which will have a material the open tax positions primarily related to recoverability of VAT adverse effect on the financial position of the Group. and revenue recognition for taxation purposes).

As at 31 December 2011 the Group's subsidiary, OJSC "Nuren- In addition, tax and other legislation do not address all the specific ergo" was engaged in a number of litigations involving claims aspects of the Group’s reorganisation related to reforming of the amounting in total to RR 4,947 million (as at 31 December 2010: electric utilities industry. As such there may be tax and legal chal- RR 3,217 million), for collection of amounts payable for electric- lenges to the various interpretations, transactions and resolutions ity purchased by OJSC "Nurenergo". The amount is recorded that were a part of the reorganisation and reform process. within accounts payable.No additional provision has been made as the Group's management believes that these claims are ENVIRONMENTAL MATTERS. The enforcement of environmental unlikely to result in any further liabilities. regulation in the Russian Federation is evolving and the enforcement posture of government authorities is continually being TAX CONTINGENCY. Russian tax and customs legislation is sub- reconsidered. Group entities periodically evaluate their obliga- ject to varying interpretation when being applied to the transactions under environmental regulations. tions and activities of the Group.Consequently, tax positions

78 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 28. CONTINGENCIES, COMMITMENTS AND OPERATING RISKS (continued)

Potential liabilities might arise as a result of changes in legisla- Note 29. FINANCIAL INSTRUMENTS AND FINANCIAL tion and regulation or civil litigation. The impact of these poten- RISKS tial changes cannot be estimated, but could be material. In the current enforcement climate under existing legislation, manage- FINANCIAL RISK FACTORS. The Group’s ordinary financial and ment believes that there are no significant liabilities for environ- business activities expose it to a variety of financial risks, includ- mental damage, other than any amounts which have been ing but not limited to the following: market risk (foreign exchange accrued in these Consolidated Financial Statements. risk, interest rate risks related to changes in the fair value of the interest rate and the cash flow interest rate, and price risk), credit CAPITAL COMMITMENTS RELATED TO CONSTRUCTION OF risk, and liquidity risk. Such risks give rise to the fluctuations of PROPERTY, PLANT AND EQUIPMENT. Future capital expendi- profit, reserves and equity and cash flows from one period to tures for which contracts have been signed amount to RR another. The Group’s financial management policy aims to mini- 351,189 millionas at 31 December 2011 (as at 31 December mise or eliminate possible negative consequences of the risks 2010: RR 389,228 million) including VAT. These amounts include for the financial results of the Group. The Group could use deriv- accounts payable to construction companies and suppliers of ative financial instruments from time to time for such purposes property, plant and equipment in the amount of RR 16,699 mil- as part of its risk management strategy. lion as at 31 December 2011 (as at 31 December 2010: RR 10,844 million) (Note 22). Financial instruments by categories:

31 DECEMBER 2011 LOANS AND INVESTMENTS OTHER FINANCIAL TOTAL RECEIVABLES AVAILABLE FOR LIABILITIES SALE FINANCIAL ASSETS Available-for-sale investments (Note 9) - 69,979 - 69,979 Long-term promissory notes (Note 10) 14,928 - - 14,928 Other non-current assets (Note 11) 116 - - 116 Cash and cash equivalents (Note 12) 25,627 - - 25,627 Bank deposits (Note 13) 1,184 - - 1,184 Short-term promissory notes (Note 10) 20,737 - - 20,737 Loans given 448 - - 448 Accounts receivable (Note 14) 12,968 - - 12,968 Total financial assets 76,008 69,979 - 145,987

FINANCIAL LIABILITIES Non-current debt (Note 19) - - 130,778 130,778 Accounts payable to the shareholders of JSC “FGC UES” (Note 17) - - 2,275 2,275 Current debt and current portion of non-current debt (Note 21) - - 2,002 2,002 Accounts payable and accrued charges (Note 22) - - 30,641 30,641 Total financial liabilities - - 165,696 165,696

31 DECEMBER 2010 LOANS AND INVESTMENTS OTHER FINANCIAL TOTAL RECEIVABLES AVAILABLE FOR LIABILITIES SALE FINANCIAL ASSETS Available-for-sale investments (Note 9) - 9,531 - 9,531 Long-term promissory notes (Note 10) 11,046 - - 11,046 Other non-current assets (Note 11) 1,707 - - 1,707 Cash and cash equivalents (Note 12) 13,573 - - 13,573 Bank deposits (Note 13) 4,606 - - 4,606 Short-term promissory notes (Note 10) 43,156 - - 43,156 Loans given 18 - - 18 Accounts receivable (Note 14) 11,346 - - 11,346 Non-current assets held for sale (Note 16) - 44,278 - 44,278 Total financial assets 85,452 53,809 - 139,261

FINANCIAL LIABILITIES Non-current debt (Note 19) - - 50,000 50,000 Accounts payable to the shareholders of JSC “FGC UES” (Note 17) - - 11,240 11,240 Current debt and current portion of non-current debt (Note 21) - - 7,497 7,497 Accounts payable and accrued charges (Note 22) - - 27,259 27,259 Total financial liabilities - - 95,996 95,996

79 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 29. FINANCIAL INSTRUMENTS AND FINANCIAL RISKS (continued)

(а) Market risk. primary goal of the Group’s investment strategy is to maximise investment returns in order to meet partially the Group’s invest- FOREIGN EXCHANGE RISK. The Group operates within the Rus- ment program needs. Transactions in equity products are moni- sian Federation. The major part of the Group’s purchases is tored and authorised by the Group’s treasury department. The denominated in Russian Roubles. Therefore, the Group’s expo- total amount of investments available-for-sale exposed to the sure to foreign exchange risk is insignificant. market risk equals RR69,979 million. As at 31 December 2011, if equity prices at that date had been 10% higher (lower), with all (II) INTEREST RATE RISK.The Group’s operating profits and cash other variables held constant, the Group’s comprehensive flows from operating activity are notlargely dependent on the income and revaluation reserve in equity would increase changes in market interest rates. As at 31 December 2011 the (decrease) by RR 290 million before tax, and profit before tax interest rates on the borrowing are fixed. would increase (decrease) by RR 6,708 million. As at 31 Decem- ber 2010, if equity prices at that date had been 10% higher (III) PRICE RISK. Equity price risk arises from available-for-sale (lower) with all other variables held constant, the Group’s com- investments. Management of the Group monitors its investment prehensive income andrevaluation reserve in equity would portfolio based on market indices. Material investments within increase (decrease) by RR 5,381 million, but profit before tax the portfolio are managed on an individual basis and all buy and would not be affected. sell decisions are taken by the management of the Group. The

(b) Credit risk.

The amounts exposed to credit risk are as follows:

31 DECEMBER 2011 LONG-TERM OTHER NON- CASH AND BANK SHORT-TERM LOANS ACCOUNTS PROMISSORY CURRENT CASH EQUI- DEPOSITS PROMISSORY GIVEN RECEIVABLE NOTES ASSETS VALENTS (Note 13) NOTES (Note 14) (Note 10) (Note 11) (Note 12) (Note 10) Not overdue, not impaired 5,731 100 25,627 1,184 20,737 5 9,452 Not overdue, but impaired: 9,197 ------gross amount 12,022 90 - - - - 1,536 - less impairment provision (2,825) (90) - - - - (1,536) Overdue, but not impaired - 16 - - - 443 3,516 Overdue and impaired: ------gross amount - 18 - - - 15 5,942 - less impairment provision - (18) - - - (15) (5,942) Total amount 14,928 116 25,627 1,184 20,737 448 12,968

31 DECEMBER 2011 LONG-TERM OTHER NON- CASH AND BANK SHORT-TERM LOANS ACCOUNTS PROMISSORY CURRENT CASH EQUI- DEPOSITS PROMISSORY GIVEN RECEIVABLE NOTES ASSETS VALENTS (Note 13) NOTES (Note 14) (Note 10) (Note 11) (Note 12) (Note 10) Not overdue, not impaired 2,580 675 13,573 4,606 42,198 18 8,335 Not overdue, but impaired: 8,466 ------gross amount 12,022 49 - - - - 442 - less impairment provision (3,556) (49) - - - - (442) Overdue, but not impaired - 1,032 - - 958 - 3,011 Overdue and impaired: ------gross amount 175 - - 47 - 3,172 - less impairment provision (175) - - (47) - (3,172) Total amount 11,046 1,707 13,573 4,606 43,156 18 11,346

As at 31 December 2011 the amount of financial assets, which were The Group’s trade debtors are quite homogenous as regards their exposed to credit risk, was RR 76,008 million (as at 31 December credit quality and concentration of credit risk. They are primarily com- 2010: RR 85,452 million). Although collection of receivables could be prised of large, reputable customers, most of which are controlled by influenced by economic factors, management of the Group believes the State. Historical data, including payment histories during the that there is no significant risk of loss to the Group beyond the provi- recent credit crisis, would suggest that the risk of default from such sion for impairment of receivables already recorded. customers is very low.

80 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 29. FINANCIAL INSTRUMENTS AND FINANCIAL RISKS (continued)

Credit risk is managed at the Group level. In most cases the Group (c) Liquidity risk. does not calculate their customers’ credit status but rates their credit- worthiness on the basis of the financial position, prior experience and Liquidity risk is managed at the Group level and includes main- other factors. The cash has been deposited in the financial institutions taining the appropriate volume of monetary funds, conservative with no more than minimal exposure to the default risk at the time of approach to excess liquidity management, and access to financial account opening. Although some of the banks and companies have no resources by securing credit facilities and limiting the concentra- international credit rating, management believes that they are reliable tions of cash in banks. The table below analyses the Group’s counterparties with a stable position on the Russian market. financial liabilities into relevant maturity groupings based on the remaining period at the end of the reporting period to the contrac- The main credit risks of the Group are concentrated within the bal- tual maturity date. The amounts disclosed in the table are the con- ances of promissory notes. The detailed information on promissory tractual undiscounted cash flows. Balances due within 12 months notes is presented in Note 10. equal their carrying balances, as the impact of discounting is not significant.

LESS THAN 1 YEAR 1 TO 2 YEARS 2 TO 5 YEARS OVER 5 YEARS TOTAL AS AT 31 DECEMBER 2011 Non-current and current debt and interest payable (Notes 12,735 10,804 52,280 148,079 223,898 19, 21) Accounts payable to the shareholders of JSC “FGC UES” 2,275 - - - 2,275 (Note 17) Accounts payable to the shareholders of JSC “FGC UES” 30,641 - - - 30,641 (Note 17) Total as at 31 December 2011 45,651 10,804 52,280 148,079 256,814

AS AT 31 DECEMBER 2010 Non-current and current debt and interest payable (Notes 10,457 3,779 11,336 67,948 93,520 19, 21) Accounts payable to the shareholders of JSC “FGC UES” 11,240 - - - 11,240 (Note 17) Accounts payable to the shareholders of JSC “FGC UES” 27,259 - - - 27,259 (Note 17) Total as at 31 December 2010 48,956 3,779 11,336 67,948 132,019

(d) Fair value. • in case the share capital of an entity is greater than statutory net assets of the entity, such entity must reduce its share capital to Management believes that the fair value of financial assets and lia- the value not exceeding its statutory net assets; bilities is not significantly different from their carrying amounts. The • in case the minimum allowed share capital exceeds the entity’s carrying value of trade receivables less provision for doubtful debt- statutory net assets, such entity is subject for liquidation. ors is assumed to approximate their fair value due to the short-term nature of the receivables. The fair value of financial liabilities for dis- As at 31 December 2011 several companies of the Group namely closure in the consolidated financial statements is estimated by dis- OJSC “Nurenergo”,OJSC “Mobile gas-turbine electricity plants”, counting future contractual cash flows at the current market interest OJSC “The Kuban trunk grids”, OJSC “Engineering and con- rate that is available for Group for similar financial instruments. struction management centre of Unified Energy System” and OJSC “The principle electricity transmission service company of The financial instruments of the Group carried at fair value repre- Unified National Electrical Network” were not in compliance with sent available-for-sale investments (Note 9). The fair value of the all requirements mentioned above. Management of the Group is available-for-sale investments is determined by the quoted prices in currently implementing measures to ensure compliance with all active markets for identical financial assets. legislation requirements within a short period.

The Group’s capital management objectives are to ensure that Note 30. CAPITAL RISK MANAGEMENT its operations be continued at a profit for the shareholders and with benefits for other stakeholders, and to maintain the optimal The Group’s management of the capital of its entities aims to capital structure with a view to reduce the cost of capital. In order comply with the capital requirements established by the legisla- to maintain or adjust the capital structure, the Group can adjust tion of the Russian Federation for joint stock companies, in the dividends paid to the shareholders or their contributions to particular: the authorised capital by issuing new shares or by selling assets • share capital cannot be lower than RR 100 thousand; to reduce debts.

81 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 30. CAPITAL RISK MANAGEMENT (continued)

The Group monitors capital ratios, including the gearing ratio, Maintenance (service) subsidiaries – OJSC “The principle elec- calculated on the basis of figures of financial statements pre- tricity transmission service company of UNEG” and OJSC “Spe- pared under the RAR. The Group should ensure that its gearing cialised electricity transmission service company of UNEG” –are ratio, being the total debt divided by the total equity, does not engaged in maintenance services (repair and restoration) for the exceed 0.50. As at 31 December 2011 the Company’s gearing Unified National Electric Grid. ratio calculated under RAR was 0.15 (as at 31 December 2010: 0.07). Assets and liabilities of Index Energetiki acquired as the result of RAO UES liquidation are held only for the purpose of implementation of FGC UES investment program through sale in the Note 31. SEGMENT INFORMATION appropriate market situation. As this division of financial assets and liabilities between FGC UES and Index Energetikiis only of Under IFRS 8 operating segments are components of an enter- a legal nature and the management of the Group analyses infor- prise about which separate financial information is available that mation on financial assets of these two entities simultaneously, is evaluated regularly by the chief operating decision-maker (fur- the operations and balances relating to Index Energetiki are ther “the CODM”) in deciding how to allocate resources and in included within the Transmission Segment. assessing performance. The Board of Directors of the Company has been determined as the CODM. The Board of Directors of the Company does not evaluate financial information of other components of the Group to allocate The Group has a single primary activity i.e. the provision of elec- resources or assess performance and does not determine these tricity transmission services within the Russian Federation which components as segments. The key indicator of the transmission is represented as Transmission segment comprising JSC “FGC segment performance is return on equity ratio (ROE). It is calcu- UES”, its’ maintenance (service) subsidiaries, LLC “Index Ener- lated based on statutory financial statements prepared accord- getiki – FGC UES”, OJSC “The Kuban trunk grids” and OJSC ing to RAR as net profit divided by net assets. Accordingly, the “The Tomsk trunk grids”. measure of transmission segment profit or loss analysed by the CODM is net profit of segment based on the statutory financial FGC UES itself maintains the high voltage electricity transmis- statements prepared according to RAR. The other information sion network. provided to the CODM is also based on statutory financial statements prepared according to RAR.

TRANSMISSION SEGMENT – BASED ON STATUTORY FINANCIAL STATEMENTS PREPARED ACCORDING TO RAR YEAR ENDED YEAR ENDED 31 DECEMBER 2011 31 DECEMBER 2010 Revenue from external customers 137,450 112,191 Intercompany revenue 337 230 Total revenue 137,787 112,421 Depreciation and amortisation * 40,092 32,279 Interest income 4,253 6,011 Interest expenses 69 350 Current income tax 8,413 9,298 (Loss) / profit for the year (15,597) 66,428 Capital expenditure 166,852 117,901

31 DECEMBER 2011 31 DECEMBER 2010 Total reportable segment assets 1,072,677 925,118 Total reportable segment liabilities 233,819 161,535

* Depreciation charge under RAR is based on useful lives determined by statutory regulations. YEAR ENDED YEAR ENDED 31 DECEMBER 2011 31 DECEMBER2010 Total revenue from segment (RAR) 137,787 112,421 Reclassification between revenue and other income (367) (1,932) Non-segmental revenue 2,488 3,071 Elimination of intercompany revenue (337) (230) Total revenue (IFRS) 139,571 113,330

82 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 31. SEGMENT INFORMATION (continued)

YEAR ENDED YEAR ENDED 31 DECEMBER 2011 31 DECEMBER2010 (Loss) / profit for the year (RAR) (15,597) 66,428 Property, plant and equipment Adjustment to the carrying value of property, plant and equipment 8,129 2,823 (Impairment) / reversal of impairment of property, plant and equipment (808) 1,362 Financial instruments Reversal of re-measurement of available-for-sale investments and investments in associates 36,645 (39,885) Adjustment to the gain on disposal of available-for-sale investments and investments in 28,927 (344) associates Impairment of available-for-sale investments (12,661) (235) Loss on re-measurement of assets held for sale (4,718) (6,896) Discounting of promissory notes (764) (1,841) Consolidation Reversal of impairment of investments in subsidiaries 1,518 - Reversal of impairment / (impairment) of intercompany promissory notes 13,037 (7,607) Reversal of re-measurement of treasury shares 1,200 (659) Unrealised profit adjustment (920) (558) Other Write-off of research and development to expenses (656) (500) Share of result of associates 8 (833) Loss on dilution of share in associates - (2,790) Adjustment to allowance for doubtful debtors (4,316) 6,065 Share-based compensation (1,342) - Accrual of retirement benefit obligations (236) (541) Deferred tax adjustment 614 7,150 Reversal / (accrual) of expenses recognised in different accounting period 843 (644) Other adjustments 383 1,081 Non-segmental other operating loss (298) (3,193) Profit for the year (IFRS) 48,988 18,383

31 DECEMBER 2011 31 DECEMBER 2010 Total reportable segment assets (RAR) 1,072,677 925,118 Property, plant and equipment Adjustment to the carrying value of property, plant and equipment 147,661 223,284 Reversal of impairment of property, plant and equipment 37 845 Recognition of property, plant and equipment under finance lease 861 - Financial instruments Reversal of impairment of investments in associates - 38,440 Adjustment to cost of investments in associates (62) (40,699) Adjustment to cost of available-for-sale investments (3,881) 351 Discounting of promissory notes (3,867) (3,103) Consolidation Reversal of impairment of investments in subsidiaries 7,098 5,580 Reversal of impairment of intercompany promissory notes 16,703 3,666 Reversal of re-measurement of treasury shares (3,838) (5,038) Unrealised profit adjustment (2,020) (1,201) Elimination of investments in subsidiaries (23,462) (23,462) Elimination of intercompany balances (55,928) (53,714) Other Write-off of research and development to expenses (2,260) (1,604) Adjustment to allowance for doubtful debtors 2,809 7,125 Re-measurement of assets held for sale - (6,896) Deferred tax assets adjustment (3,895) (4,975) Netting of VAT recoverable and payable (6,701) (8,592) Netting of advances and payables to construction companies (1,043) - Other adjustments 1,163 794 Non-segmental assets 21,625 15,729 Total assets (IFRS) 1,163,677 1,071,648

83 Notes to the Consolidated Financial Statements for the year ended 31 December 2011 (in millions of Russian Roubles unless otherwise stated)

Note 31. SEGMENT INFORMATION (continued)

31 DECEMBER 2011 31 DECEMBER 2010 Total reportable segment liabilities (RAR) 233,819 161,535 Netting of VAT recoverable and payable (6,701) (8,592) Netting of advances and payables to construction companies (1,043) - Recognition of finance lease liabilities 849 - Accrual of retirement benefit obligations 4,495 4,105 Deferred tax liabilities adjustment 71,515 77,335 Accrual of payables recognised in another accounting period 769 1,019 Other adjustments 136 (42) Non-segmental liabilities 17,659 15,898 Elimination of intercompany balances (55,928) (53,714) Total liabilities (IFRS) 265,570 197,544

The main differences between financial information prepared in The major customers of the Group are entities controlled by the accordance with IFRS and the financial information reported to the Government of the RF. The amounts of revenue from such entities chief operating decision-maker related to profit or loss, and assets are disclosed in Note 5. The Group has no other major customers and liabilities results from the differences in the accounting meth- with turnover over 10 percent of the Group revenue. ods under IFRS and RAR. Financial information on segments reported to the CODM under RAR does not reflect the adjustments made in accordance with IFRS. Note 32. EVENTS AFTER THE REPORTING PERIOD

Non-segmental revenue, non-segmental other operating loss, non- ADDITIONAL SHARE ISSUE. In March 2012, the Company com - segmental assets and non-segmental liabilities represent corre- pleted and registered an additional share issue. As the result of sponding revenue, loss (profit), assets and liabilities of components this share issue 4,438,530,347 ordinary shares with a nominal (subsidiaries) that are not determined as segments by the CODM. value of RR 0.5 per share were placed, and the Company received cash in the amount of RR 2,220 million. As a result of Information on revenue for separate services and products of the the exercise of the state’s pre-emptive rights during the share Group is presented in Note 23. The Group performs most of its issue, the interest of the state in the Company increased from activities in the Russian Federation and does not have any signifi- 79.48 to 79.55 per cent. Cash proceeds from the share issue will cant revenue from foreign customers or any non-current assets be used for financing of the investment program of the located in foreign countries. Company.

84 ANNUAL FINANCIAL REPORT 2011 KEY RESULTS IN 2011

INDICATOR 2009 2010 2011 Number of substations* 804 805 854 Transformer capacity (MVA)* 306,422.35 311,007.93 322,533.241 Total transmission grid length, thousand km* 121.1 121.7 124.6 Electricity transmitted from UNEG to distribution grid companies, direct private consumers on the wholesale energy market, and independent AO-Energos (million kWh) 452,662.172 470,648.072 484,663.552 Electricity transmitted from UNEG to neighboring countries (million kW) 13,628.309 15,716.33 19,284.808 Total actual electricity losses (million kWh) 22,120.610 22,525.621 22,553.172 Declared capacity (MW)** 95,545 91,179 90,937 * Owned, managed or operated by Federal Grid Company. ** Capacity that has been requested by consumers.

KEY FINANCIAL INDICATORS (RUR MILLION)*

INDICATOR 2010** 2011 Revenue 113,330 139,571 Adjusted EBITDA *** 67,717 83,760 Adjusted operating profit *** 29,941 46,614 Adjusted profit for the period *** 27,910 38,241 Net debt *** (3,838) 85,232 Market capitalization 452,717 351,163

* Under IFRS. ** Based on comparative information presented in the 2011 Audited Consolidated Financial Statements. *** Details of calculation provided in the Financial Performance section of this Management Report.

86 FINANCIAL PERFORMANCE

FINANCIAL RESULTS SUMMARY OF RESULTS

This chapter contains selected financial information which has For the years ended 31 December 2011 and 2010, our revenue been derived from the Group’s audited consolidated financial amounted to RUR139,571 million and RUR113,330 million statements as at and for the year ended 31 December 2011, pre- respectively. pared in accordance with the International Financial Reporting Standards ("IFRS"). The selected financial and operating data For the years ended 31 December 2011 and 2010, our net profit below should be read in conjunction with the Group’s consoli- amounted to RUR48,988 million and RUR18,383 million dated financial statements prepared in accordance with IFRS. respectively.

CONSOLIDATED INCOME STATEMENT (IFRS) YEAR ENDED 31 DECEMBER 2011 2010 (1) (IN MILLIONS OF RUBLES) Revenue 139,571 113,330 Other operating income 7,793 4,484 Operating expenses (100,750) (87,873) Gain on disposal of available-for-sale investments and investments in associates 31,115 606 Loss on re-measurement of assets held for sale (4,718) (6,896) Impairment of property, plant and equipment and intangible assets (1,174) (846) Operating profit 71,837 22,805 Finance income 3,957 5,807 Finance costs (278) (619) Impairment of available-for-sale investments (12,661) (235) Share of result of associates 8 (833) Loss on dilution of share in associates - (2,790) Profit before income tax 62,863 24,135 Income tax (13,875) (5,752) Profit for the year 48,988 18,383

(1) As presented in comparative information in the 2011 Audited Consolidated Financial Statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (IFRS) YEAR ENDED 31 DECEMBER 2011 2010 (1) (IN MILLIONS OF RUBLES) ASSETS Non-current assets Property, plant and equipment 980,677 851,228 Intangible assets 6,973 6,189 Investments in associated companies 910 348 Available-for-sale investments 69,979 9,531 Long-term promissory notes 14,928 11,046 Other non-current assets 1,039 2,507 Total non-current assets 1,074,506 880,849

Current assets Cash and cash equivalents 25,627 13,573 Bank deposits 1,184 4,606 Short-term promissory notes 20,737 43,156 Loans given 448 18 Accounts receivable and prepayments 32,944 32,654 Income tax prepayments 1,911 581 Inventories 6,320 5,602 89,171 100,190 Non-current assets held for sale. - 90,609 Total current assets 89,171 190,799 TOTAL ASSETS 1,163,677 1,071,648

87 EQUITY AND LIABILITIES Equity Share capital: Ordinary shares 627,974 616,781 Treasury shares (5,522) (6,864) Share premium 10,501 10,501 Reserves 314,323 361,267 Accumulated deficit (49,962) (108,525) Equity attributable to the shareholders of Federal Grid Company 897,314 873,160 Non-controlling interest 793 944 Total equity 898,107 874,104

Non-current liabilities Deferred income tax liabilities 80,572 83,657 Non-current debt 130,778 50,000 Retirement benefit obligations 4,686 4,318 Total non-current liabilities 216,036 137,975

Current liabilities Accounts payable to the shareholders of Federal Grid Company 2,275 11,240 Current debt and current portion of non-current debt 2,002 7,497 Accounts payable and accrued charges 44,974 40,552 Income tax payable 283 280 Total current liabilities 49,534 59,569 Total liabilities 265,570 197,544

TOTAL EQUITY AND LIABILITIES 1,163,677 1,071,648

(1) As presented in comparative information in the 2011 Audited Consolidated Financial Statements.

SUMMARY OF CONSOLIDATED STATEMENT OF CASH FLOWS (IFRS) YEAR ENDED 31 DECEMBER 2011 2010 (1) (IN MILLIONS OF RUBLES) Net cash generated by operating activities 68,645 53,449 Net cash used in investing activities (124,743) (127,043) Net cash generated by financing activities 68,152 53,468 Net increase / (decrease) in cash and cash equivalent 12,054 (20,126)

NON-IFRS FINANCIAL INFORMATION YEAR ENDED 31 DECEMBER 2011 2010 (1) (IN MILLIONS OF RUBLESEXCEPT MARGINS AND RATIOS IN %) EBITDA 93,236 50,001 EBITDA margin (1) 66.8% 44.1% Adjusted EBITDA 83,760 67,717 Adjusted EBITDA margin (1) 60.0% 59.8% Adjusted operating profit (2) 46,614 29,941 Adjusted operating profit margin (1) 33.4% 26.4% Adjusted profit for the period (3) 38,241 27,910 Return on assets (4) 3.4% 2.7% Return on equity (5) 4.3% 3.2%

(1) Margins are calculated as EBITDA, Adjusted EBITDA and Adjusted operating profit divided by the total revenue for the period. (2) Adjusted operating profit is calculated as operating profit adjusted for gain on disposal of available-for-sale investments and investments in associates, loss on re-measurement of assets held for sale, and non-specific impairment of property, plant and equipment. (3) Adjusted profit for the period is calculated as profit for the period adjusted for gain on sale of available-for-sale investments and investments in associates (only in 2011), loss on re-measurement of assets held for sale, non-specific impairment of property, plant and equipment, impairment of available-for-sale investments, and loss on dilution of share in associates (including respective deferred income tax). (4) Return on assets is calculated as adjusted profit for the period divided by average total assets for the period. (5) Return on equity is calculated as adjusted profit for the period divided by the average total equity for the respective period. For the purpose of this ratio the amounts received from the shareholders of Federal Grid Company for the additional shares issues before the registration of these issues (recorded as accounts payable to the shareholders of Federal Grid) are treated as an element of equity. 88 The measures presented above are not measures of financial performance that are required by, or presented in accordance with IFRS. Accordingly, they should not be considered as alternatives to profit for the period as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Our calculation of these ratios may be different from the calculation used by other companies and therefore comparability may be limited. We believe that EBITDA and Adjusted EBITDA provide useful information to investors because they are indicators of the strength and performance of our ongoing business operations and indicators of our ability to fund discretionary spending such as capital expenditures, acquisition of subsidiaries and other investments and our ability to incur and service debt. While depreciation and amortization are considered operating costs under IFRS, these expenses primarily represent non-cash current period allocations of costs associated with long-lived assets acquired or constructed in prior periods.

ADJUSTED PROFIT FOR THE PERIOD

Adjusted profit for the period is used to calculate the return on assets and the return on equity. The following table sets forth a reconciliation of adjusted profit for the period to profit for the peri - ods indicated: YEAR ENDED 31 DECEMBER 2011 2010 (1) (IN MILLIONS OF RUBLES) Profit for the period 48,988 18,383 Adjustments to profit for the period: Gain on disposal of available-for-sale investments and investments in associates (31,115) - Loss on re-measurement of assets held for sale 4,718 6,896 Non-specific impairment of property, plant and equipment 303 1,988 Impairment of available-for-sale investments 12,661 235 Loss on dilution of share in associates - 2,790 Deferred income tax on adjustments (1) 2,687 (2,382) Adjusted profit for the period (1) 38,241 27,910

(1) Unaudited

in 2011), loss on re-measurement of assets held for sale, non-spe- EBITDA AND ADJUSTED EBITDA cific impairment of property, plant and equipment, impairment of available-for-sale investments, loss on dilution of share in associ- EBITDA represents profit for the period before income tax expense, ates, and to include finance income. finance income and costs, depreciation and amortization. Adjusted EBITDA represents EBITDA adjusted to exclude gain on sale of The following table sets forth a reconciliation of EBITDA and available-for-sale investments and investments in associates (only Adjusted EBITDA to profit for the periods indicated:

YEAR ENDED 31 DECEMBER 2011 2010 (1) (IN MILLIONS OF RUBLES) Profit for the period 48,988 18,383 Add back: Income tax 13,875 5,752 Finance income (3,957) (5,807) Finance costs 278 619 Depreciation and amortization 34,052 31,054 EBITDA (1) 93,236 50,001 Adjustments to EBITDA: Gain on disposal of available-for-sale investments and investments in associates (31,115) - Loss on re-measurement of assets held for sale 4,718 6,896 Non-specific impairment of property, plant and equipment 303 1,988 Impairment of available-for-sale investments 12,661 235 Loss on dilution of share in associates - 2,790 Add back: Finance income 3,957 5,807 Adjusted EBITDA (2) 83,760 67,717

(1), (2) Unaudited

89 LIQUIDITY RATIOS AND OTHER MEASURES AS OF 31 DECEMBER 2011 2010 (1) (IN MILLIONS OF RUBLES, EXCEPT RATIOS) Current liquidity ratio (2) 1.9 3.9 Cash liquidity ratio (3) 1.0 1.3 Total equity / Total assets ratio (4) 0.77 0.83 Net debt (5) 85,232 (3,838)

(1) As presented in comparative information in the 2011 Audited Consolidated Financial Statements. (2) Current liquidity ratio is calculated as total current assets divided by total current liabilities. For the purpose of this ratio the amounts received from the shareholders of Federal Grid Company for the additional share issues before the registration of these issues (recorded as accounts payable to the shareholders of Federal Grid Company) are excluded from current liabilities. (3) Cash liquidity ratio is calculated as sum of cash and cash equivalents, short-term bank deposits and short-term promissory notes divided by total current liabilities. For the purpose of this ratio the amounts received from the shareholders of Federal Grid Company for the additional share issues before the registration of these issues (recorded as accounts payable to the shareholders of Federal Grid Company) are excluded from current liabilities. (4) For the purpose of this ratio the amounts received from the shareholders of Federal Grid Company for the additional share issues before the registration of these issues (recorded as accounts payable to the shareholders of Federal Grid Company) are treated as an element of equity. (5) Net debt represents non-current and current debt reduced by cash and cash equivalents, short-term bank deposits and short-term promissory notes.

generated and sold by the Group’s subsidiaries to third parties REVENUE on the wholesale market.

The Group's revenue is derived primarily from provision of ser- The Group's revenue increased RUR26,241 million, or 23.2%, vices for the transmission of electric power. Changes in revenue from RUR113,330 million for the year ended 31 December 2010 derived from electricity transmission services are primarily to RUR139,571 million for the year ended 31 December 2011. dependent on changes in the level of tariffs established by the FTS. The Group also earns revenue from the sale of electricity The table below sets out the Group's revenue for the periods indicated:

YEAR ENDED 31 DECEMBER 2011 PERCENTAGE OF 2010 PERCENTAGE OF PERCENTAGE TOTAL REVENUES TOTAL REVENUES CHANGE BETWEEN YEARS ENDED 31 DECEMBER 2011 AND 2010 (IN MILLIONS OF RUBLES, EXCEPT PERCENTAGES) Transmission fee 134,754 96.5% 109,371 96.5% 23.2% Electricity sales 2,246 1.6% 3,070 2.7% (26.8)% Other revenues 2,571 1.8% 889 0.8% 189.2% Total revenue 139,571 100.0% 113,330 100.0% 23.2%

TRANSMISSION FEE 31 December 2010 to RUR2,246 million for the year ended 31 December 2011, as a result of a fall in revenues of OJSC The Group's revenue from electricity transmission services Mobile Gas-Turbine Electricity Plants due to a decrease in tariffs increased RUR25,383 million, or 23.2%, from RUR109,371 mil- for the sales of electricity and capacity. lion for the year ended 31 December 2010 to RUR134,754 million for the year ended 31 December 2011, primarily as a result of an increase in tariffs for transmission services established by the OTHER REVENUES FTS by 28% and a slight decrease in revenue from the compensation of electricity losses by 4.7%. Other revenues include connection services and grid repair and maintenance services.

ELECTRICITY SALES The Group's other revenues increased RUR1,682 million, or 189.2%, from RUR889 million for the year ended 31 December The Group's revenue from electricity sales decreased RUR824 2010 to RUR2,571 million for the year ended 31 December million, or 26.8%, from RUR3,070 million for the year ended 2011, primarily as a result of an increase in the volume of technological connection services rendered.

90 OTHER OPERATING INCOME OPERATING EXPENSES

Other operating income primarily includes income from non- The table below sets out the Group's operating expenses for the core activities. The Group's other operating income increased periods indicated. RUR3,309 million, or 74%, from RUR4,484 million for the year ended 31 December 2010 to RUR7,793 million for the year ended 31 December 2011 primarily due to a write-off of accounts payable in the amount of RUR2,747 million at OJSC Nurenergo. These payables had been recognized for 2003-2006 and the relevant limitation period expired in 2011, in accordance with Rus- sian legislation.

YEAR ENDED 31 DECEMBER 2011 PERCENTAGE OF 2010(1) PERCENTAGE OF PERCENTAGE TOTAL OPERATING TOTAL OPERATING CHANGE BETWEEN EXPENSES EXPENSES YEARS ENDED 31 DECEMBER 2011 AND 2010 (IN MILLIONS OF RUBLES, EXCEPT PERCENTAGES) Depreciation of property, plant and equipment and amortization of intangible assets 34,052 33.8% 31,054 35.3% 9.7% Employee benefit expenses and payroll taxes 24,046 23.9% 20,114 22.9% 19.5% Purchased electricity 13,781 13.7% 15,942 18.1% (13.6)% Repair and maintenance services 3,977 3.9% 4,427 5.0% (10.2)% Accrual / (reversal) of allowance for doubtful debtors 4,305 4.3% (2,164) (2.5)% (298.9)% Other operating expenses 20,589 20.4% 18,500 21.1% 11.3% Total operating expenses 100,750 100.0% 87,873 100.0% 14.7%

(1) As presented in comparative information in the 2011 Audited Consolidated Financial Statements.

The Group's operating expenses increased by RUR12,877 mil- 12.9%, is primarily explained by an increase in the average num- lion, or 14.7%, from RUR87,873 million for the year ended ber of employees by 6.3% and an increase in average salaries 31 December 2010 to RUR100,750 million for the year ended due to remuneration indexation. 31 December 2011.

PURCHASED ELECTRICITY DEPRECIATION OF PROPERTY, PLANT AND EQUIP- MENT AND AMORTIZATION OF INTANGIBLE ASSETS Federal Grid Company purchases electricity to compensate for electricity losses that occur during transmission. The Group’s electricity The Group's depreciation and amortization expenses increased purchases decreased by RUR2,161 million, or 13.6% from by RUR2,998 million, or 9.7%, from RUR31,054 million for the RUR15,942 million to RUR13,781 million. Changes in regulations year ended 31 December 2010 to RUR34,052 million for the year related to the calculation of the volume of capacity purchases on the ended 31 December 2011, primarily due to new property, plant wholesale electricity and capacity market (WECM) resulted in a and equipment put into operation. reduction in expense by approximately RUR 4,834 million compensated for by an increase of RUR2,673 million due to increased electricity purchase prices. EMPLOYEE BENEFIT EXPENSES AND PAYROLL TAXES REPAIR AND MAINTENANCE SERVICES The Group's employee benefits expenses and payroll taxes expenses increased by RUR3,932 million, or 19.5%, from The Group's expenses for repair and maintenance services RUR20,114 million for the year ended 31 December 2010 to obtained from external contractors decreased RUR450 million, RUR24,046 million for the year ended 31 December 2011. This or 10.2%, from RUR4,427 million for the year ended 31 Decem- increase includes an expense of RUR1,342 million relating to re- ber 2010 to RUR3,977 million for the year ended 31 December cognition of share-based compensation in accordance with the 2011, primarily as a result of the decreased share of repair works Option program launched by the Group in February 2011. The from external contractors and increased share of non-contracted remaining part of the growth amounting to RUR2,590 million, or repair works.

91 ACCRUAL / (REVERSAL) OF ALLOWANCE FOR IMPAIRMENT OF PROPERTY, PLANT DOUBTFUL DEBTS AND EQUIPMENT AND INTANGIBLE ASSETS

After a detailed analysis of accounts receivable as of 31 Decem- For the year ended 31 December 2011 the Group recognized the ber 2011, the Group recognized an accrual of the allowance for impairment of property, plant and equipment in the amount of doubtful debts in the amount of RUR4,305 million for the year RUR 1,174 million, which consisted of an impairment of RUR 442 ended 31 December 2011. This amount includes an impairment of million related to advances to construction companies and sup- the receivables of OJSC IDGC of Siberia to Federal Grid Com- pliers of property, plant and equipment, an impairment of RUR pany for transmission services of RUR2,714 million and an impair- 302 million related to property, plant and equipment of OJSC ment of the receivables of different contractors to the Group’s sub- Nurenergo located in Chechen Republic and a specific impair- sidiary OJSC Nurenergo for electricity sales of RUR1,257 million. ment of RUR 430 million related to construction in progress For the year ended 31 December 2010 the Group recognized a which cost is not expected to be recovered. reversal of the allowance in the amount of RUR2,164 million. For the year ended 31 December 2010 the Group recognized the impairment of property, plant and equipment in the amount of GAIN ON DISPOSAL OF AVAILABLE-FOR-SALE IN- RUR 2,009 million, which consisted of an impairment of RUR 21 VESTMENTS AND INVESTMENTS IN ASSOCIATES million related to advances to construction companies and suppliers of property, plant and equipment, an impairment of RUR 206 Gains on the disposal of available-for-sale investments and million related to property, plant and equipment of OJSC Nuren- investments in associates amounted to RUR31,115 million and ergo located in Chechen Republic and an impairment of RUR RUR606 million for the years ended 31 December 2011 and 1,782 million related to property, plant and equipment of OJSC 31 December 2010, respectively. The gain recognized in 2011 Mobile gas-turbine plants. At the same time RUR 1,358 million of resulted from the accumulated gain on available-for-sale invest- previously recognized impairment of advances to construction ments recycled to profit or loss in connection with transfer of companies and suppliers of property, plant and equipment was shares to OJSC INTER RAO UES (see below). The gain recog- reversed. nized in 2010 is primarily attributable to the partial disposal of the shares of an associated company (OJSC Volzhskaya TGK). OPERATING PROFIT

LOSS ON THE RE-VALUATION OF ASSETS HELD FOR As a result of the foregoing factors, operating result increased SALE RUR49,032 million, or 215.0%, from RUR22,805 million for the year ended 31 December 2010 to RUR71,837 million for the year As at 31 December 2010 all available-for-sale investments, ended 31 December 2011. except for shares of OJSC IDGC Holding and OJSC Inter RAO UES, in the total amount of RUR44,278 million, and most of investments in associates, such as OJSC WGC-1, OJSC TGC- FINANCE INCOME 6, OJSC TGC-11, OJSC Volzhskaya TGC and JSC UES Gruz- RosEnergo, in the total amount of RUR53,227 million, were Finance income decreased RUR1,850 million, or 31.9%, from reclassified as held for sale as the management of the Company RUR5,807 million for the year ended 31 December 2010 to had committed to a plan to transfer these assets during 2011 to RUR3,957 million for the year ended 31 December 2011, primar- OJSC INTER RAO UES in exchange for its ordinary shares. The ily due to a decrease in interest income caused by a reduction of loss on the re-valuation of these assets in accordance with IFRS investments in bank deposits and promissory notes. 5 was recognized in profit or loss in the amount of RUR4,718 million and RUR6,896 million for the years ended 31 December 2011 and 31 December 2010 respectively. FINANCE COSTS

In March and May 2011, all the above-mentioned investments, Finance costs decreased RUR341 million, or 55.1%, from except for JSC UES GruzRosEnergo, were transfeRURed to RUR619 million for the year ended 31 December 2010 to OJSC INTER RAO UES. Following its exclusion from the Inter RUR278 million for the year ended 31 December 2011, primarily RAO UES transaction, the investment in JSC UES GruzRosEn- due to increase of amount of interest costs capitalized in con- ergo was reclassified back from non-current assets held for sale struction in progress. to investments in associates.

92 IMPAIRMENT OF AVAILABLE-FOR-SALE PROFIT FOR THE PERIOD INVESTMENTS As a result of the factors discussed above, the net result for the year Impairment of available-for-sale investments amounted to increased RUR30,605 million, from RUR18,383 million for the year RUR12,661 million and RUR235 million for the years ended ended 31 December 2010 to RUR48,988 million for the year ended 31 December 2011 and 31 December 2010 respectively. The loss 31 December 2011. recognized in 2011 is attributable to an impairment of shares in OJSC INTER RAO UES due to a significant and prolonged decline in the fair value or these equity investments below their cost. The LIQUIDITY AND CAPITAL RESOURCES loss recognized in 2010 is attributable to an impairment of OJSC Sangtudinskaya GES-1. The Group's primary sources of liquidity are cash provided by operating activities and debt and equity financing. Future requirements for the Group's business needs, including those to fund additional SHARE OF RESULT OF ASSOCIATES capital expenditures in accordance with its business strategy, are expected to be financed by a combination of cash flows generated The share of results of associates increased RUR841 million, or by Group's operating activities, as well as external sources of 101.0%, from a net loss of RUR833 million for the year ended financing and funds from the Russian government. 31 December 2010 to a net income of RUR8 million for the year ended 31 December 2011. In 2011, most of the Group’s investments in associates were exchanged to available-for-sale invest- CAPITAL REQUIREMENTS ments in OJSC INTER RAO UES. The electricity transmission business is capital-intensive and many of the Group's facilities are ageing and require regular LOSS ON DILUTION OF SHARE IN ASSOCIATES maintenance and upgrades. Expenditures to maintain, expand and increase the efficiency and size of the transmission grid are, The loss recognized in 2010 in the amount of RUR 2,790 million is accordingly, an important priority and have a significant effect on attributable to a dilution of the Group’s share in OJSC WGC-1 due the Group's cash flows and future results of operations. to an additional issue of ordinary shares of that company and a respective decrease of the Group’s interest to 29.4%. The table below sets out total additions to property, plant and equipment for the periods indicated. YEAR ENDED 31 DECEMBER PROFIT BEFORE INCOME TAX 2011 2010 (IN MILLIONS OF RUBLES) Profit before income tax increased RUR38,728 million, or 160.5%, Total additions to property, from RUR24,135 million for the year ended 31 December 2010 to plant and equipment 166,073 144,876 RUR62,863 million for the year ended 31 December 2011. LIQUIDITY AND WORKING CAPITAL

INCOME TAX The Group relies on cash from its operating activities, debt financing and proceeds from issuance of additional shares of Income tax expense for the year ended 31 December 2011 Federal Grid Company as its main sources of liquidity and work- amounted to RUR13,875 million, as compared to RUR5,752 mil- ing capital. lion for the year ended 31 December 2010. The change in income tax expenses was caused by an increase in deferred income tax. HISTORICAL CASH FLOWS

The table below summarises the Group's cash flows for the periods indicated.

YEAR ENDED 31 DECEMBER 2011 2010 (IN MILLIONS OF RUBLES) Net cash generated by operating activities 68,645 53,449 Net cash used in investing activities (124,743) (127,043) Net cash generated by financing activities 68,152 53,468 Net increase / (decrease) in cash and cash equivalents 12,054 (20,126)

93 NET CASH GENERATED BY OPERATING ACTIVITIES As at 31 December 2011, the Group's non-current debt amounted to RUR130,778 million and comprised of certified interest-bearing Net cash generated by the Group's operating activities increased non-convertible ruble-denominated bearer bonds, with the aggre- RUR15,196 million, or 28.4%, from RUR53,449 million for the gate nominal value of RUR105,000 million, a long-term bank loan year ended 31 December 2010 to RUR68,645 million for the from OJSC Gazprombank in the total amount of RUR25,000 mil- year ended 31 December 2011. This happened primarily due to lion and a long-term part of finance lease liabilities of RUB778 growth in the electricity transmission tariff and was partially million. compensated by the net change in working capital items.

DISCLAIMER NET CASH USED IN INVESTING ACTIVITIES This Annual Financial Report has been prepared for the share- Net cash used in the Group's investing activities decreased holders of Joint-Stock Company "Federal Grid Company of Uni- RUR2,300 million, or 1.8%, from RUR127,043 million for the year fied Energy System" (the Company) as a body and no other per- ended 31 December 2010 to RUR124,743 million for the year sons. The Company, its directors, employees, agents or advisers ended 31 December 2011. This happened primarily due to an do not accept responsibility to any other person to whom this doc- increase of purchases of property, plant and equipment by ument is shown or into whose hands it may come and any such RUR11,589 million (from RUR141,882 million for the year ended responsibility or liability is expressly disclaimed. 31 December 2010 to RUR153,471 million for the year ended 31 December 2011), a decrease of interest received by RUR6,952 By their nature, the statements concerning the risks and uncer- million and an increase of investments in bank deposits by tainties facing the Company in this Annual Financial Report RUR2,398 million. Cash outflows for investing activities were involve uncertainty since future events and circumstances can partially compensated by an increase in proceeds received due cause results and developments to differ materially from those to the redemption of promissory notes by RUR19,135 million. anticipated. The forward-looking statements contained in this Annual Financial Report reflect knowledge and information available at the date of preparation of this Annual Financial Report and NET CASH GENERATED BY FINANCING ACTIVITIES the Company undertakes no obligation to update these forward- looking statements. Further, nothing in this Annual Report should Net cash generated by the Group's financing activities increased be construed as a profit forecast. by RUR14,684 million, or 27.5%, from RUR53,468 million for the year ended 31 December 2010 to RUR68,152 million for the year ended 31 December 2011. This happened primarily as a result of RESPONSIBILITY STATEMENT significant cash proceeds from non-current borrowings of RUR80,000 million (including RUR55,000 million relating to I hereby confirm that to the best of my knowledge: issuance of corporate bonds and RUR25,000 million relating to raising of a long-term bank loan), as compared to RUR50,000 (a) the consolidated financial statements, prepared in accordance million relating to issuance of corporate bonds in prior year. with International Financial Reporting Standards, give a true and fair value of the assets, liabilities, financial position and profit or loss of Federal Grid Company UES Group, and the undertakings DEBT included in the consolidations taken as a whole (the "Group"); and

As at 31 December 2011, the Group's total debt amounted to (b) the management report includes a fair review of the develop- RUR132,780 million as compared to RUR57,497 million as at ment and performance of the business and the position of the 31 December 2010. Group, together with a description of the principal risks and uncertainties that they face. The following table sets out the current debt and non-current debt of the Group for the periods indicated: Andrey Kazachenkov AS AT 31 DECEMBER First Deputy Chairman of the Management Board, Member of the 2011 2010 (1) Management Board of Federal Grid Company, 23 April 2012 (IN MILLIONS OF RUBLES) Current debt and current portion of non-current debt 2,002 7,497 Non-current debt 130,778 50,000 Total debt 132,780 57,497

(1) As presented in comparative information in the 2011 Audited Consolidated Financial Statements.

94 2011 INTERESTED PARTY AND MAJOR TRANSACTIONS INFORMATION ON INTERESTED PARTY TRANSACTIONS CARRIED OUT BY FEDERAL GRID COMPANY IN 2010, WHICH COMPLY WITH RUSSIAN LAWS AND REQUIRE THE APPROVAL OF THE COMPANY’S AUTHORIZED MANAGEMENT BODY:

1. "On approval of the transaction (interrelated transactions) in the amount of RUR7,627 (seven thousand six hundred concluded between Federal Grid Company and INTER twenty-seven) and 12 kopecks (Minutes the BOD No 132 as RAO UES to purchase additional shares of INTER RAO of 15 June 2011). UES placed by private subscription". The total value of 7. An agreement for the provision of special examination property transferred in return for the Issuer’s securities is services concluded between Federal Grid Company and not more than RUR78,652,495,013 (seventy-eight billion six OGK-1. The value of the agreement is RUR50,000 (fifty hundred fifty-two million four hundred and ninety-five thousand), including Russian VAT (18%) in the amount of thousand and thirteen) (Minutes the BOD No 124 as of 9 RUR7,627 (seven thousand six hundred twenty-seven) and February 2011). 12 kopecks. (Minutes the BOD No 132 as of 15 June 2011). 2. An agreement for the use of standards of organizations, 8. Additional agreement No 1 to the Agreement for the services between Federal Grid Company and SO UES. Due to the of the listing agent’s investment bank concluded on 28 fact that this agreement does not cause and may not cause December 2010 between Federal Grid Company and VTB money liabilities and doesn’t relate to the transfer of property Capital. The value of the agreement is RUR9.5 million (nine (property rights), the value of the agreement for the use of million five hundred thousand), including overheads and standards of organizations, between Federal Grid Company Russian VAT in accordance with the Additional agreement and SO UES is not defined. (Minutes the BOD No 125 as of No 1 to the Agreement (Minutes the BOD No 132 as of 15 15 March 2011). June 2011). 3. An agreement for repair and operation of the 500 kV outdoor 9. An agreement on real property lease concluded between switch-gear of the Iriklinskaya HPP, a branch of OGK-1 RusHydro and Federal Grid Company. The value of lease concluded between Federal Grid Company and OGK-1. agreement is RUR1,562,215 (one million five hundred sixty- The value of the agreement is RUR8,942,812 (eight million two thousand two hundred and fifteen) and 49 kopecks, nine hundred and forty-two thousand eight hundred and including Russian VAT (18%) in the amount of RUR238,304 twelve) and 56 kopecks. (Minutes the BOD No 125 as of 15 (two hundred and thirty-eight thousand three hundred and March 2011). four) and 6 kopecks (Minutes the BOD No 134 as of 15 June 4. Approval of the agreement on the termination of trust 2011). agreements concluded between Federal Grid Company 10. An agreement for development of lightning protection for and INTER RAO UES, an agreement on the termination of 110 – 750 kV power facilities through suppressing counter trust agreement of 11 March 2009 No 82 531 and an discharge by corona space charge in an electric field of a agreement on the termination of trust agreement of 26 July thundercloud concluded between Federal Grid Company 2010 № 128 164 don’t have monetary obligations (Minutes and ENIN. The value of the agreement is RUR29,000,000 the BOD No 125 as of 15 March 2011). (twenty nine million), including Russian VAT (Minutes the 5. Additional Agreement to the Agreement No Ts/01 for BOD No 134 as of 15 June 2011) performing functions of the owner/developer concluded on 11. An agreement for development of method for calculating 01 April 2008 between Federal Grid Company and TSIUS corona discharge energy losses in high-voltage AC and DC UES. The amount of remuneration for the services of the lines concluded between Federal Grid Company and ENIN. owner/developer consists of – a permanent part is RUR2.15 The value of the agreement is RUR6,000,000 (six million), billion for the period 1 January- 31 December 2011, plus including Russian VAT (Minutes the BOD No 134 as of 15 Russian VAT in accordance with Russian legislation, and a June 2011) variable part, the maximum value of which over quarter is 12. An agreement for development of the Russian UNEG RUR97 million. Total remuneration for the services of the modernization program up to 2020, with view to 2030 owner/developer for the period 1 January – 31 December concluded between Federal Grid Company and ENIN. The 2011 in view of the permanent part and variable part shall value of the agreement is RUR100 million (one hundred not exceed RUR2.538 billion, plus Russian VAT in million), including Russian VAT (Minutes the BOD No 134 as accordance with Russian legislation (Minutes the BOD No of 15 June 2011) 127 as of 07 April 2011). 13. An agreement for design and creation of experimental- 6. An agreement for the provision of special examination industrial sample of phase shifter device for the selected services concluded between Federal Grid Company and UNEG facility concluded between Federal Grid Company OGK-1 (Kashira SDPP). The value of the agreement is and ENIN. The value of the agreement is RUR380 million RUR50,000 (fifty thousand), including Russian VAT (18%)

96 (three hundred eighty million), including Russian VAT energy companies concluded between Federal Grid (Minutes the BOD No134 as of 15 June 2011) Company and APBE. The value of the agreement is 14. An agreement for design of a multifunctional device for RUR17,700,000 (seventeen million seven hundred UNEG high-voltage line processes` registration and fault thousand), including Russian VAT (18%) in the amount of location concluded between Federal Grid Company and RUR2.7 million (two million seven hundred thousand) ENIN. The value of the agreement is RUR30 million (thirty (Minutes the BOD No 142 as of 12 September 2011). million), including Russian VAT(Minutes the BOD No 134 of 21. Service agreement on drawing the forecast balance of the 15 June 2011). electrical energy industry for the 2012-2018 period and with 15. Service agreement for the benchmarking performance a view to 2030 concluded between Federal Grid Company indicators of Federal Grid Company concluded between and APBE. The value of the agreement is RUR18,880,000 Federal Grid Company and APBE. The value of the (eighteen million, eight hundred eighty thousand), including agreement is RUR14,160,000 (fourteen million one hundred Russian VAT (18%) in the amount of RUR2,880,000 (two sixty thousand), including Russian VAT (18%) in the amount million eight hundred eighty thousand) (Minutes the BOD of RUR2,160,000 (two million one hundred sixty thousand) No 142 as of 12 September 2011). (Minutes the BOD No 142 as of 12 September 2011). 22. Service agreement for monitoring the reported cost data 16. Service agreement for the development of a guidance (disbursements) for electric energy transmission and document on decision support for forecasting and design of distribution and the formation of quarterly analytical reports energy system development concluded between Federal concluded between Federal Grid Company and APBE. The Grid Company and APBE. The value of the agreement is value of the agreement is RUR7,080,000 (seven million RUR12,980,000 (twelve million nine hundred eighty eighty thousand), including Russian VAT (18%) in the thousand), including Russian VAT (18%) in the amount of amount of RUR1,080,000 (one million and eighty thousand) RUR1,980,000 (one million nine hundred eighty thousand) (Minutes the BOD No 142 as of 12 September 2011). (Minutes the BOD No 142 as of 12 September 2011). 23. Service agreement on the calculation of the normative 17. Service agreement on drawing medium-term forecast number of executive apparatus and the staff size for the new balance of electric power and capacity for the period 2012- Federal Grid Company`s facilities for the 2011-2016 period 2014 and suggestions on tariffs (prices) for products and concluded between Federal Grid Company and ENIN. The services in the electrical energy industry for the 2012-2014 value of the agreement is RUR1,812,000 (one million eight period concluded between Federal Grid Company and hundred twelve thousand), including Russian VAT (18%) in APBE. The value of the agreement is RUR11,800,000 the amount of RUR276,406 (two hundred and seventy-six (eleven million eight hundred thousand), including Russian thousand four hundred and six) and 78 kopecks (Minutes VAT (18%) in the amount of RUR1,800,000 (one million the BOD No 144 as of 06 October 2011). eight hundred thousand) (Minutes the BOD No 142 as of 12 24. An agreement for not-residential premises lease concluded September 2011). between Federal Grid Company and TSIUS UES. The value 18. Service agreement for preparation of express – report on of the agreement is RUR13,465,601 (thirteen million four the functioning of the electrical energy industry in 2010, hundred and sixty-five thousand six hundred and one) and 2011 forecasting of electrical energy industry functioning 71 kopecks, including Russian VAT (18%) in the amount of and its quarterly adjustment concluded between Federal RUR2,054,074 (two million fifty-four thousand and seventy- Grid Company and APBE. The value of the agreement is four) and 84 kopecks (Minutes the BOD No 144 as of 06 RUR22,420,000 (twenty two million four hundred twenty October 2011). thousand), including Russian VAT (18%) in the amount of 25. Transportation service agreement concluded between RUR3,420,000 (three million four hundred twenty thousand) Federal Grid Company and TSIUS UES. The value of the (Minutes the BOD No 142 as of 12 September 2011). agreement is not more than RUR2,540,000 (two million five 19. Service agreements for the periodic provision of forecast hundred forty thousand), including Russian VAT (18%) data on electric power consumption in Russia Federation (Minutes the BOD No 146 as of 30 November 2011). subjects in the medium-term (seven years) and long-term 26. An agreement concluded between Member of the Board of period up to 2030 concluded between Federal Grid Directors Kirill Levin and Federal Grid Company. The size, Company and APBE. The value of the agreement is terms and conditions of remuneration payment and RUR28,674,000 (twenty-eight million six hundred seventy reimbursement for expenses (the value of the agreements four thousand), including Russian VAT (18%) in the amount mentioned in this decision) to Members of the Board of of RUR4,374,000 (four million three hundred and seventy- Directors of the Company specified in this decision, in four thousand) (Minutes the BOD No 142 as of 12 September accordance with paragraph 2 of Article 64 of the Federal 2011). Law "On Joint Stock Companies" are determined by the 20. Service Agreement for the periodic acquisition, processing General Shareholders Meeting. (Minutes the BOD No 146 and analysis of reporting information on the condition and as of 30 November 2011). functioning of the UNEG in 2010-2011, supplied by electric

97 27. Interested party agreement concluded between Member of 53491 concluded between Federal Grid Company and the Board of Directors Denis Fedorov and Federal Grid RusHydro. Agency compensation under the agreement is Company. The size, terms and conditions of remuneration set at 2% (two percent) of the amount of contracts with payment and reimbursement for expenses (the value of the performers and is RUR198,452 (one hundred and ninety- agreements mentioned in this decision) to Members of the eight thousand four hundred fifty-two) and 96 kopecks, plus Board of Directors of the Company specified in this decision, Russian VAT (18%) in the amount of RUR35,721 (thirty five in accordance with paragraph 2 of Article 64 of the Federal thousand seven hundred twenty-one) and 53 kopecks Law "On Joint Stock Companies" are determined by the (Minutes the BOD No 147 as of 09 December 2011). General Shareholders Meeting. (Minutes the BOD No 146 as of 30 November 2011). In 2011, the Company didn’t conclude any transactions (groups 28. Agency agreement on the performance of legal and other of interrelated transactions) worth 5% or more of its book value actions related to equipment supply and performing of assets, determined according to its financial statements for complex of works on drafting and implementation of works the last reporting date before transaction made by the Company on reconstruction of electric protections ORU-220 INV No in 2010.

98 DETAILS ON FEDERAL GRID COMPANY'S PARTICIPATION IN SUBSIDIARIES, DEPENDENT AND OTHER COMPANIES # ABBREVIATED COMPANY NAME FEDERAL GRID BOOK VALUE OF DIVIDEND FINANCIAL PERFORMANCE IN 2011** TYPE OF BUSINESS THE PURPOSE OF PARTICIPATION INFORMATION ON CONCLUDED SHARE PURCHASE AGREEMENTS, COMPANY`S SHARE IN SHARES, INTEREST IN AMOUNT FOR UNDER THE CHARTER INCLUDING INFORMATION ON THE PARTIES, SUBJECT, PRICE AND OTHER TERMS THE CHARTER CAPITAL THE COMPANY, RUR 2010, RUR OF THESE AGREEMENTS OF THE COMPANY THOUSAND THOUSAND* 01.01.11 31.12.11 01.01.11 31.12.11 REVENUE NET PROFIT, RUR NET ASSETS, RUR THOUSAND RUR THOUSAND THOUSAND Shares received under the separation balance System-wide forecasting and sheet of RAO UES of Russia in the process of 1 APBE 100,00 % 100,00 % 3,500 3,500 - 379,318 6,675 179,735 analytical work in the electrical accession of RAO UES of Russia" to Federal energy industry Grid Company within reorganization on 01.07.2008 Establishment of the Company approved by the Services for maintenance and 2 Glavsetservis UNEG 100,00 % 100,00 % 1,000 0 - 195,450 -142,976 -684,694 resolution of the Board of Directors of Federal repair of power grid facilities Grid Company of 13.11.2007 (Minutes № 50) Shares received under the separation balance sheet of RAO UES of Russia in the process of 3 Mobile GTES 100,00 % 100,00 % 10,594,257 9,271,056 - 860,211 -574,576 9,002,492 Production of electricity accession of RAO UES of Russia to Federal Grid Company within reorganization on 01.07.2008 15.04.2005 under resolution of the Board of Directors of RAO UES of Russia (Minutes No 183 as of 24.12.2004) a controlling interest 4 MUS Energetiki 100,00 % 100,00 % 19,997 19,997 28,768 2,554,575 21,667 160,758 Communication services was transferred to Federal Grid Company. The share purchase agreement was approved by the Board of Directors of Federal Grid Company(Minutes No 22 as of 22.03.2005) Acquisition of shares of the Company was S&T of UES FGC (previously 5 100,00 % 100,00 % 3,895,820 3,895,820 32,278 1,729,348 47,569 1,190,869 R&D approved by the Board of Directors of Federal named S&T Elektroenergetika) Grid Company on 29.07.2007 (Minutes No 46) Performing owner/developer functions in the field of capital Establishment of the Company was approved 6 CIUS UES 100,00 % 100,00 % 833,000 833,000 107,953 2,719,250 -41,161 807,474 construction, reconstruction, by the Board of Directors of Federal Grid and technical upgrade of Company on 13.11.2007 (Minutes No 50) facilities Communication services, Reorganization of JSC "Chita Main Grids" ( reconstruction of UNEG the owner of 100% shares of the Company) 7 Chitatekhenergo 100,00 % 100,00 % 4,092 4,092 2,529 308,214 21,209 49,994 facilities, design and operation through accession to Federal Grid Company on of the communication lines 01.07.2008 Shares received under the separation balance sheet of RAO UES of Russia in the process of 8 JSC "ESSK" 100,00 % 100,00 % 133,870 206,252 69,891 354,095 143,317 261,389 Agency procurement services accession of RAO UES of Russia to Federal Grid Company within reorganization on 01.07.2008 Establishment of the Company was approved by Services for maintenance and 9 Elektrosetservice UNEG 100,00 % 100,00 % 953,804 953,804 0 4,636,320 24,115 1,094,850 the Board of Directors of Federal Grid Company repair of power grid facilities on 13.11.2007 (Minutes No 50) Shares received under the separation balance sheet of RAO UES of Russia in the process of 10 Index of Energy – UES FGC 100,00 % 100,00 % 0 0 - 47,138 -12,982,067 -16,636,059 Securities trading accession of RAO UES of Russia to Federal Grid Company within reorganization on 01.07.2008 Shares of additional issue received in return for Transmission, distribution and loans granted earlier to the Company. Decision 11 Nurenergo 76,9996 % 76,9996 % 0 0 0 2,385,550 -1,629,502 -5,328,760 sale of electricity of the Board of Directors of Federal Grid Company of 20.05.2004 (Minutes No 15) In accordance with the scheme of consolidation of the UNEG facilities of AO-energo approved Providing services for by the Board of Directors of RAO UES of 12 MES Tomsk 52,025 % 52,025 % 866,424 616,411 0 213,708 34,754 1,229,326 transmission and distribution of Russia (Minutes No 188 as of 25.02.2005), the electric energy Company's shares were transferred in return for the additional issue of ordinary shares of Federal Grid Company Shares received under the separation balance 50,0031 % 50,0031 % sheet of RAO UES of Russia in the process of 13 GVS Energetiki (50 % plus (50 % plus 163 163 - 58,982 -192,194 204,899 Own real estate leasing accession of RAO UES of Russia to Federal 1 share) 1 share) Grid Company within reorganization on 01.07.2008

100 # ABBREVIATED COMPANY NAME FEDERAL GRID BOOK VALUE OF DIVIDEND FINANCIAL PERFORMANCE IN 2011** TYPE OF BUSINESS THE PURPOSE OF PARTICIPATION INFORMATION ON CONCLUDED SHARE PURCHASE AGREEMENTS, COMPANY`S SHARE IN SHARES, INTEREST IN AMOUNT FOR UNDER THE CHARTER INCLUDING INFORMATION ON THE PARTIES, SUBJECT, PRICE AND OTHER TERMS THE CHARTER CAPITAL THE COMPANY, RUR 2010, RUR OF THESE AGREEMENTS OF THE COMPANY THOUSAND THOUSAND* 01.01.11 31.12.11 01.01.11 31.12.11 REVENUE NET PROFIT, RUR NET ASSETS, RUR THOUSAND RUR THOUSAND THOUSAND Shares received under the separation balance System-wide forecasting and sheet of RAO UES of Russia in the process of 1 APBE 100,00 % 100,00 % 3,500 3,500 - 379,318 6,675 179,735 analytical work in the electrical accession of RAO UES of Russia" to Federal energy industry Grid Company within reorganization on 01.07.2008 Establishment of the Company approved by the Services for maintenance and 2 Glavsetservis UNEG 100,00 % 100,00 % 1,000 0 - 195,450 -142,976 -684,694 resolution of the Board of Directors of Federal repair of power grid facilities Grid Company of 13.11.2007 (Minutes № 50) Shares received under the separation balance sheet of RAO UES of Russia in the process of 3 Mobile GTES 100,00 % 100,00 % 10,594,257 9,271,056 - 860,211 -574,576 9,002,492 Production of electricity accession of RAO UES of Russia to Federal Grid Company within reorganization on 01.07.2008 15.04.2005 under resolution of the Board of Directors of RAO UES of Russia (Minutes No 183 as of 24.12.2004) a controlling interest 4 MUS Energetiki 100,00 % 100,00 % 19,997 19,997 28,768 2,554,575 21,667 160,758 Communication services was transferred to Federal Grid Company. The share purchase agreement was approved by the Board of Directors of Federal Grid Company(Minutes No 22 as of 22.03.2005) Acquisition of shares of the Company was S&T of UES FGC (previously 5 100,00 % 100,00 % 3,895,820 3,895,820 32,278 1,729,348 47,569 1,190,869 R&D approved by the Board of Directors of Federal named S&T Elektroenergetika) Grid Company on 29.07.2007 (Minutes No 46) Performing owner/developer functions in the field of capital Establishment of the Company was approved 6 CIUS UES 100,00 % 100,00 % 833,000 833,000 107,953 2,719,250 -41,161 807,474 construction, reconstruction, by the Board of Directors of Federal Grid and technical upgrade of Company on 13.11.2007 (Minutes No 50) facilities Communication services, Reorganization of JSC "Chita Main Grids" ( reconstruction of UNEG the owner of 100% shares of the Company) 7 Chitatekhenergo 100,00 % 100,00 % 4,092 4,092 2,529 308,214 21,209 49,994 facilities, design and operation through accession to Federal Grid Company on of the communication lines 01.07.2008 Shares received under the separation balance sheet of RAO UES of Russia in the process of 8 JSC "ESSK" 100,00 % 100,00 % 133,870 206,252 69,891 354,095 143,317 261,389 Agency procurement services accession of RAO UES of Russia to Federal Grid Company within reorganization on 01.07.2008 Establishment of the Company was approved by Services for maintenance and 9 Elektrosetservice UNEG 100,00 % 100,00 % 953,804 953,804 0 4,636,320 24,115 1,094,850 the Board of Directors of Federal Grid Company repair of power grid facilities on 13.11.2007 (Minutes No 50) Shares received under the separation balance sheet of RAO UES of Russia in the process of 10 Index of Energy – UES FGC 100,00 % 100,00 % 0 0 - 47,138 -12,982,067 -16,636,059 Securities trading accession of RAO UES of Russia to Federal Grid Company within reorganization on 01.07.2008 Shares of additional issue received in return for Transmission, distribution and loans granted earlier to the Company. Decision 11 Nurenergo 76,9996 % 76,9996 % 0 0 0 2,385,550 -1,629,502 -5,328,760 sale of electricity of the Board of Directors of Federal Grid Company of 20.05.2004 (Minutes No 15) In accordance with the scheme of consolidation of the UNEG facilities of AO-energo approved Providing services for by the Board of Directors of RAO UES of 12 MES Tomsk 52,025 % 52,025 % 866,424 616,411 0 213,708 34,754 1,229,326 transmission and distribution of Russia (Minutes No 188 as of 25.02.2005), the electric energy Company's shares were transferred in return for the additional issue of ordinary shares of Federal Grid Company Shares received under the separation balance 50,0031 % 50,0031 % sheet of RAO UES of Russia in the process of 13 GVS Energetiki (50 % plus (50 % plus 163 163 - 58,982 -192,194 204,899 Own real estate leasing accession of RAO UES of Russia to Federal 1 share) 1 share) Grid Company within reorganization on 01.07.2008

101 # ABBREVIATED COMPANY NAME FEDERAL GRID BOOK VALUE OF DIVIDEND FINANCIAL PERFORMANCE IN 2011** TYPE OF BUSINESS THE PURPOSE OF PARTICIPATION INFORMATION ON CONCLUDED SHARE PURCHASE AGREEMENTS, COMPANY`S SHARE IN SHARES, INTEREST IN AMOUNT FOR UNDER THE CHARTER INCLUDING INFORMATION ON THE PARTIES, SUBJECT, PRICE AND OTHER TERMS THE CHARTER CAPITAL THE COMPANY, RUR 2010, RUR OF THESE AGREEMENTS OF THE COMPANY THOUSAND THOUSAND* 01.01.11 31.12.11 01.01.11 31.12.11 REVENUE NET PROFIT, RUR NET ASSETS, RUR THOUSAND RUR THOUSAND THOUSAND Acquisition of shares of the Company was 14 GruzRosenergo IPS ** 50.00 % 50.00 % 763,227 763,227 - 282,522 0 5,844,724 Electricity transmission services approved by the Board of Directors of Federal Grid Company of 29.07.2007 (№ 46) Shares received under the separation balance sheet of RAO UES of Russia in the process of Production and sale of electricity 15 Severovostokenergo 49.00 % 49.00 % 9,800 9,800 - 0 0 132,978 accession of RAO UES of Russia to Federal and heat Grid Company within reorganization on 01.07.2008 In accordance with the scheme of consolidation of the UNEG facilities of AO-energo approved Providing services for by the Board of Directors of RAO UES of 16 MES Kuban 48.999 % 48.999 % 134,139 134,139 0 118,660 -62,116 329,168 transmission and distribution of Russia (Minutes No 188 as of 25.02.2005), the electric energy Company's shares were transferred in return for the additional issue of ordinary shares of Federal Grid Company Providing intermediary Shares received under the separation balance services for enterprises and sheet of RAO UES of Russia in the process of 17 Energotekhkomplekt 48.999 % 48.999 % 100 100 - 3,771 7 447 organizations involved in accession of RAO UES of Russia to Federal operation and construction of Grid Company within reorganization on energy facilities in Russia 01.07.2008 18 IT Energy Service 39.999 % 39.999 % 198,360 198,360 - 376,026 38,596 262,103 IT services 19 ENIN 38.24 % 38.24 % 1,024 1,024 748 444,055 3,502 95,286 R&D 20 INTER RAO UES - 15.1237 % - 53,791,030 22,688 73,387,956 -143,127,967 314,127,781 Production of electricity and Shares acquired in exchange for shares of 1. Share purchase agreement No 28.03.2011 concluded between INTER RAO heat generating companies alienated by Federal UES and Federal Grid Company, under which Federal Grid Company acquires Grid Company The decision of the Management additional shares of INTER RAO UES and pays for it by shares of the following Board of Federal Grid Company. (Minutes as of companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", 31.01.2011 No 926/2) "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; 2. Share purchase agreement No 1005 of 10.05.2011 concluded between JSC "INTER RAO UES" and JSC Federal Grid Company, under which Federal Grid Company acquires additional shares of JSC "INTER RAO UES" and pays for it by shares of JSC "Sangtuda HPP- 1" 21 Energorynok 8.50 % 8.50 % 1 1 Financial statements are not published Publishing and printing services Shares acquired in accordance with the decision of the Board of Directors of Federal Grid Company of 28.12.2004 (Minutes No 20) 22 Stand 0.83 % 0.83 % 3,000 3,000 Financial statements are not published Carrying out installation and Shares received under the separation balance commissioning of gas turbine sheet of RAO UES of Russia in the process of engines GTD-110 and its accession of RAO UES of Russia to Federal modifications, production and Grid Company within reorganization on sale of electric energy 01.07.2008 23 DESP 1 share *** 1 share *** 0 0 0 1,138,347 35,799 197,100 Integrated design in energy Share purchase agreement approved by the industry Board of Directors of Federal Grid Company on 27.05.2008 (Minutes No 63) 24 Centrenergoholding 0.00133 % 0.00133 % 6 6 Financial statements are not published Property trust management, performing agency 25 Volgaenergosnabkomplekt 100.00 % 100.00 % 0 0 No business operations Delivery of materials and Shares received under the separation balance equipment sheet of RAO UES of Russia in the process of accession of RAO UES of Russia to Federal Grid Company within reorganization on 01.07.2008 26 UC Energetiki 100.00 % 100.00 % 55,071 The decision on liquidation has been made Distribution of encryption Shares received under the separation balance (cryptographic) means (means sheet of RAO UES of Russia in the process of of cryptographic protection of accession of RAO UES of Russia to Federal information) Grid Company within reorganization on 01.07.2008 27 CSRI NPKenergo **** 100.00 % 100.00 % 1 1 The decision on liquidation has been made Management company services Shares received under the separation balance sheet of RAO UES of Russia in the process of accession of RAO UES of Russia to Federal Grid Company within reorganization on 01.07.2008

102 # ABBREVIATED COMPANY NAME FEDERAL GRID BOOK VALUE OF DIVIDEND FINANCIAL PERFORMANCE IN 2011** TYPE OF BUSINESS THE PURPOSE OF PARTICIPATION INFORMATION ON CONCLUDED SHARE PURCHASE AGREEMENTS, COMPANY`S SHARE IN SHARES, INTEREST IN AMOUNT FOR UNDER THE CHARTER INCLUDING INFORMATION ON THE PARTIES, SUBJECT, PRICE AND OTHER TERMS THE CHARTER CAPITAL THE COMPANY, RUR 2010, RUR OF THESE AGREEMENTS OF THE COMPANY THOUSAND THOUSAND* 01.01.11 31.12.11 01.01.11 31.12.11 REVENUE NET PROFIT, RUR NET ASSETS, RUR THOUSAND RUR THOUSAND THOUSAND Acquisition of shares of the Company was 14 GruzRosenergo IPS ** 50.00 % 50.00 % 763,227 763,227 - 282,522 0 5,844,724 Electricity transmission services approved by the Board of Directors of Federal Grid Company of 29.07.2007 (№ 46) Shares received under the separation balance sheet of RAO UES of Russia in the process of Production and sale of electricity 15 Severovostokenergo 49.00 % 49.00 % 9,800 9,800 - 0 0 132,978 accession of RAO UES of Russia to Federal and heat Grid Company within reorganization on 01.07.2008 In accordance with the scheme of consolidation of the UNEG facilities of AO-energo approved Providing services for by the Board of Directors of RAO UES of 16 MES Kuban 48.999 % 48.999 % 134,139 134,139 0 118,660 -62,116 329,168 transmission and distribution of Russia (Minutes No 188 as of 25.02.2005), the electric energy Company's shares were transferred in return for the additional issue of ordinary shares of Federal Grid Company Providing intermediary Shares received under the separation balance services for enterprises and sheet of RAO UES of Russia in the process of 17 Energotekhkomplekt 48.999 % 48.999 % 100 100 - 3,771 7 447 organizations involved in accession of RAO UES of Russia to Federal operation and construction of Grid Company within reorganization on energy facilities in Russia 01.07.2008 18 IT Energy Service 39.999 % 39.999 % 198,360 198,360 - 376,026 38,596 262,103 IT services 19 ENIN 38.24 % 38.24 % 1,024 1,024 748 444,055 3,502 95,286 R&D 20 INTER RAO UES - 15.1237 % - 53,791,030 22,688 73,387,956 -143,127,967 314,127,781 Production of electricity and Shares acquired in exchange for shares of 1. Share purchase agreement No 28.03.2011 concluded between INTER RAO heat generating companies alienated by Federal UES and Federal Grid Company, under which Federal Grid Company acquires Grid Company The decision of the Management additional shares of INTER RAO UES and pays for it by shares of the following Board of Federal Grid Company. (Minutes as of companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", 31.01.2011 No 926/2) "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; 2. Share purchase agreement No 1005 of 10.05.2011 concluded between JSC "INTER RAO UES" and JSC Federal Grid Company, under which Federal Grid Company acquires additional shares of JSC "INTER RAO UES" and pays for it by shares of JSC "Sangtuda HPP- 1" 21 Energorynok 8.50 % 8.50 % 1 1 Financial statements are not published Publishing and printing services Shares acquired in accordance with the decision of the Board of Directors of Federal Grid Company of 28.12.2004 (Minutes No 20) 22 Stand 0.83 % 0.83 % 3,000 3,000 Financial statements are not published Carrying out installation and Shares received under the separation balance commissioning of gas turbine sheet of RAO UES of Russia in the process of engines GTD-110 and its accession of RAO UES of Russia to Federal modifications, production and Grid Company within reorganization on sale of electric energy 01.07.2008 23 DESP 1 share *** 1 share *** 0 0 0 1,138,347 35,799 197,100 Integrated design in energy Share purchase agreement approved by the industry Board of Directors of Federal Grid Company on 27.05.2008 (Minutes No 63) 24 Centrenergoholding 0.00133 % 0.00133 % 6 6 Financial statements are not published Property trust management, performing agency 25 Volgaenergosnabkomplekt 100.00 % 100.00 % 0 0 No business operations Delivery of materials and Shares received under the separation balance equipment sheet of RAO UES of Russia in the process of accession of RAO UES of Russia to Federal Grid Company within reorganization on 01.07.2008 26 UC Energetiki 100.00 % 100.00 % 55,071 The decision on liquidation has been made Distribution of encryption Shares received under the separation balance (cryptographic) means (means sheet of RAO UES of Russia in the process of of cryptographic protection of accession of RAO UES of Russia to Federal information) Grid Company within reorganization on 01.07.2008 27 CSRI NPKenergo **** 100.00 % 100.00 % 1 1 The decision on liquidation has been made Management company services Shares received under the separation balance sheet of RAO UES of Russia in the process of accession of RAO UES of Russia to Federal Grid Company within reorganization on 01.07.2008

103 # ABBREVIATED COMPANY NAME FEDERAL GRID BOOK VALUE OF DIVIDEND FINANCIAL PERFORMANCE IN 2011** TYPE OF BUSINESS THE PURPOSE OF PARTICIPATION INFORMATION ON CONCLUDED SHARE PURCHASE AGREEMENTS, COMPANY`S SHARE IN SHARES, INTEREST IN AMOUNT FOR UNDER THE CHARTER INCLUDING INFORMATION ON THE PARTIES, SUBJECT, PRICE AND OTHER TERMS THE CHARTER CAPITAL THE COMPANY, RUR 2010, RUR OF THESE AGREEMENTS OF THE COMPANY THOUSAND THOUSAND* 01.01.11 31.12.11 01.01.11 31.12.11 REVENUE NET PROFIT, RUR NET ASSETS, RUR THOUSAND RUR THOUSAND THOUSAND 28 Schekinskie PGU 45.21 % - 0 - No business operations Construction and technical JSC "Schekinskie PGU" was closed down on 02.11.2011 reconstruction of electric power industry facilities 29 UEUK 33.33 % 33.33 % 50 50 3,511 -59,645 55,353 Energy companies governance 30 Sangtuda HPP-1 14.48 % - 316,473 - Production, transmission and In accordance with the Government of the Share purchase agreement of 10.05.2011 No 1005 concluded between JSC distribution of electric energy Russian Federation and the Government of the "INTER RAO UES" and OAO "UES FGC", under which Federal Grid Company Republic of Tajikistan Protocol on the adoption acquires additional shares of JSC "INTER RAO UES" and pays for it by shares of joint solution on issuance of Company’s of JSC "Sangtuda HPP- 1 shares of 06.12.2005 31 Intergeneration 0.0004 % - 6 0 Asset management Shares purchased by JSC "Intergeneration" on the basis of a shareholder demand on the redemption by JSC "Intergeneration" shares owned by Federal Grid Company No BO-391 of 25.01.2011 32 OGC-1 40.17 % - 21,851,019 - Production of electricity and Shares received under the separation balance Share purchase agreement No 28.03.2011 concluded between INTER RAO heat sheet of RAO UES of Russia in the process of UES and Federal Grid Company, under which Federal Grid Company acquires accession of RAO UES of Russia to Federal additional shares of INTER RAO UES and pays for it by shares of the following Grid Company within reorganization on companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", 01.07.2008 "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4, RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00 055 of 28.03.2011. 33 TGC-7 29.99 % - 20,066,560 - Production of electricity and 1. Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4, RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities №110328/00066 of 28.03.2011. 34 TGC-11 27.45 % - 2,702,867 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4, RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00070 of 28.03.2011. 35 TGC-6 23.58 % - 7,291,153 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4, RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00065 of 28.03.2011. 36 Bashkirenergo 21.27 % - 15,456,189 - Production, transmission and Share purchase agreement No 28.03.2011 concluded between INTER RAO sale of electricity and heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6, JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4, RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00077 of 28.03.2011. 37 OGC-6 9.60 % - 4,422,284 - Production and transmission of Share purchase agreement No 28.03.2011 concluded between INTER RAO electricity and heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4, RusHydro, TGC-1, TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00059 of 28.03.2011.

104 # ABBREVIATED COMPANY NAME FEDERAL GRID BOOK VALUE OF DIVIDEND FINANCIAL PERFORMANCE IN 2011** TYPE OF BUSINESS THE PURPOSE OF PARTICIPATION INFORMATION ON CONCLUDED SHARE PURCHASE AGREEMENTS, COMPANY`S SHARE IN SHARES, INTEREST IN AMOUNT FOR UNDER THE CHARTER INCLUDING INFORMATION ON THE PARTIES, SUBJECT, PRICE AND OTHER TERMS THE CHARTER CAPITAL THE COMPANY, RUR 2010, RUR OF THESE AGREEMENTS OF THE COMPANY THOUSAND THOUSAND* 01.01.11 31.12.11 01.01.11 31.12.11 REVENUE NET PROFIT, RUR NET ASSETS, RUR THOUSAND RUR THOUSAND THOUSAND 28 Schekinskie PGU 45.21 % - 0 - No business operations Construction and technical JSC "Schekinskie PGU" was closed down on 02.11.2011 reconstruction of electric power industry facilities 29 UEUK 33.33 % 33.33 % 50 50 3,511 -59,645 55,353 Energy companies governance 30 Sangtuda HPP-1 14.48 % - 316,473 - Production, transmission and In accordance with the Government of the Share purchase agreement of 10.05.2011 No 1005 concluded between JSC distribution of electric energy Russian Federation and the Government of the "INTER RAO UES" and OAO "UES FGC", under which Federal Grid Company Republic of Tajikistan Protocol on the adoption acquires additional shares of JSC "INTER RAO UES" and pays for it by shares of joint solution on issuance of Company’s of JSC "Sangtuda HPP- 1 shares of 06.12.2005 31 Intergeneration 0.0004 % - 6 0 Asset management Shares purchased by JSC "Intergeneration" on the basis of a shareholder demand on the redemption by JSC "Intergeneration" shares owned by Federal Grid Company No BO-391 of 25.01.2011 32 OGC-1 40.17 % - 21,851,019 - Production of electricity and Shares received under the separation balance Share purchase agreement No 28.03.2011 concluded between INTER RAO heat sheet of RAO UES of Russia in the process of UES and Federal Grid Company, under which Federal Grid Company acquires accession of RAO UES of Russia to Federal additional shares of INTER RAO UES and pays for it by shares of the following Grid Company within reorganization on companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", 01.07.2008 "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4, RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00 055 of 28.03.2011. 33 TGC-7 29.99 % - 20,066,560 - Production of electricity and 1. Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4, RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities №110328/00066 of 28.03.2011. 34 TGC-11 27.45 % - 2,702,867 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4, RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00070 of 28.03.2011. 35 TGC-6 23.58 % - 7,291,153 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4, RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00065 of 28.03.2011. 36 Bashkirenergo 21.27 % - 15,456,189 - Production, transmission and Share purchase agreement No 28.03.2011 concluded between INTER RAO sale of electricity and heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6, JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4, RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00077 of 28.03.2011. 37 OGC-6 9.60 % - 4,422,284 - Production and transmission of Share purchase agreement No 28.03.2011 concluded between INTER RAO electricity and heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4, RusHydro, TGC-1, TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00059 of 28.03.2011.

105 # ABBREVIATED COMPANY NAME FEDERAL GRID BOOK VALUE OF DIVIDEND FINANCIAL PERFORMANCE IN 2011** TYPE OF BUSINESS THE PURPOSE OF PARTICIPATION INFORMATION ON CONCLUDED SHARE PURCHASE AGREEMENTS, COMPANY`S SHARE IN SHARES, INTEREST IN AMOUNT FOR UNDER THE CHARTER INCLUDING INFORMATION ON THE PARTIES, SUBJECT, PRICE AND OTHER TERMS THE CHARTER CAPITAL THE COMPANY, RUR 2010, RUR OF THESE AGREEMENTS OF THE COMPANY THOUSAND THOUSAND* 01.01.11 31.12.11 01.01.11 31.12.11 REVENUE NET PROFIT, RUR NET ASSETS, RUR THOUSAND RUR THOUSAND THOUSAND 38 SOVASATOM 3.38 % - 1 - Construction and technical In pursuance of the decision of the Board of Directors of Federal Grid reconstruction of electric power Company(Minutes of 29.12.2010 No 121) an agreement to purchase ordinary industry facilities registered uncertificated shares of JSC "SOVASATOM "in the amount of 700 units concluded between Federal Grid Company(the seller) and "AVAN" (the purchaser). The value of the agreement is RUR 21 000. Transfer of shares,– 02.02.2011 (Report on fulfilment of depository operation of 02.02.2011 № 001288-001) 39 Mosenergo 3.37 % - 4,311,255 - Production, distribution and sale Share purchase agreement No 28.03.2011 concluded between INTER RAO of electricity UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00062 of 28.03.2011. 40 TGC-11 Holding 0.0043 % - 54 - Facilities management Share purchase agreement No 28.03.2011 concluded between INTER RAO organization UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No No 10328/00071, 110328/00072 of 28.03.2011 41 OGC-4 0.0009 % - 1,736 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00058 of 28.03.2011. 42 OGC-2 0.0009 % - 514 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00056 of 28.03.2011. 43 RusHydro 0.0008 % - 3,859 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00076 of 28.03.2011. 44 TGC-1 0.0006 % - 470 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00060 of 28.03.2011. 45 Fortum 0.0006 % - 238 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00063 of 28.03.2011.

106 # ABBREVIATED COMPANY NAME FEDERAL GRID BOOK VALUE OF DIVIDEND FINANCIAL PERFORMANCE IN 2011** TYPE OF BUSINESS THE PURPOSE OF PARTICIPATION INFORMATION ON CONCLUDED SHARE PURCHASE AGREEMENTS, COMPANY`S SHARE IN SHARES, INTEREST IN AMOUNT FOR UNDER THE CHARTER INCLUDING INFORMATION ON THE PARTIES, SUBJECT, PRICE AND OTHER TERMS THE CHARTER CAPITAL THE COMPANY, RUR 2010, RUR OF THESE AGREEMENTS OF THE COMPANY THOUSAND THOUSAND* 01.01.11 31.12.11 01.01.11 31.12.11 REVENUE NET PROFIT, RUR NET ASSETS, RUR THOUSAND RUR THOUSAND THOUSAND 38 SOVASATOM 3.38 % - 1 - Construction and technical In pursuance of the decision of the Board of Directors of Federal Grid reconstruction of electric power Company(Minutes of 29.12.2010 No 121) an agreement to purchase ordinary industry facilities registered uncertificated shares of JSC "SOVASATOM "in the amount of 700 units concluded between Federal Grid Company(the seller) and "AVAN" (the purchaser). The value of the agreement is RUR 21 000. Transfer of shares,– 02.02.2011 (Report on fulfilment of depository operation of 02.02.2011 № 001288-001) 39 Mosenergo 3.37 % - 4,311,255 - Production, distribution and sale Share purchase agreement No 28.03.2011 concluded between INTER RAO of electricity UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00062 of 28.03.2011. 40 TGC-11 Holding 0.0043 % - 54 - Facilities management Share purchase agreement No 28.03.2011 concluded between INTER RAO organization UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No No 10328/00071, 110328/00072 of 28.03.2011 41 OGC-4 0.0009 % - 1,736 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00058 of 28.03.2011. 42 OGC-2 0.0009 % - 514 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00056 of 28.03.2011. 43 RusHydro 0.0008 % - 3,859 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00076 of 28.03.2011. 44 TGC-1 0.0006 % - 470 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00060 of 28.03.2011. 45 Fortum 0.0006 % - 238 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00063 of 28.03.2011.

107 # ABBREVIATED COMPANY NAME FEDERAL GRID BOOK VALUE OF DIVIDEND FINANCIAL PERFORMANCE IN 2011** TYPE OF BUSINESS THE PURPOSE OF PARTICIPATION INFORMATION ON CONCLUDED SHARE PURCHASE AGREEMENTS, COMPANY`S SHARE IN SHARES, INTEREST IN AMOUNT FOR UNDER THE CHARTER INCLUDING INFORMATION ON THE PARTIES, SUBJECT, PRICE AND OTHER TERMS THE CHARTER CAPITAL THE COMPANY, RUR 2010, RUR OF THESE AGREEMENTS OF THE COMPANY THOUSAND THOUSAND* 01.01.11 31.12.11 01.01.11 31.12.11 REVENUE NET PROFIT, RUR NET ASSETS, RUR THOUSAND RUR THOUSAND THOUSAND 46 Kuzbassenergo 0.0006 % - 160 - Production, distribution and sale Share purchase agreement No 28.03.2011 concluded between INTER RAO of electricity UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00073 of 28.03.2011. 47 TGC-13 0.0006 % - 129 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00074 of 28.03.2011. 48 OGC-3 0.0005 % - 401 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00057 of 28.03.2011. 49 Quadra 0.0005 % - 147 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00064 of 28.03.2011 50 TGC-2 0.0005 % - 63 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00061 of 28.03.2011. 51 TGK-9 0.0004 % - 186 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00067 of 28.03.2011. 52 TGC-14 0.0004 % - 23 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00075 of 28.03.2011. Total: 94,896,493 70,743,267 264,856

* – Obtained in 2011 on the basis of 2010 net income tax. ** According to the currency exchange rate (GEL1 = RUR16.95). *** – The remaining share owned by S&T Elektroenergetika, a 100% subsidiary of Federal Grid Company. **** – An entry about liquidation of the legal entity made in the Unified State Register of Legal Entities 11 March 2012.

108 # ABBREVIATED COMPANY NAME FEDERAL GRID BOOK VALUE OF DIVIDEND FINANCIAL PERFORMANCE IN 2011** TYPE OF BUSINESS THE PURPOSE OF PARTICIPATION INFORMATION ON CONCLUDED SHARE PURCHASE AGREEMENTS, COMPANY`S SHARE IN SHARES, INTEREST IN AMOUNT FOR UNDER THE CHARTER INCLUDING INFORMATION ON THE PARTIES, SUBJECT, PRICE AND OTHER TERMS THE CHARTER CAPITAL THE COMPANY, RUR 2010, RUR OF THESE AGREEMENTS OF THE COMPANY THOUSAND THOUSAND* 01.01.11 31.12.11 01.01.11 31.12.11 REVENUE NET PROFIT, RUR NET ASSETS, RUR THOUSAND RUR THOUSAND THOUSAND 46 Kuzbassenergo 0.0006 % - 160 - Production, distribution and sale Share purchase agreement No 28.03.2011 concluded between INTER RAO of electricity UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00073 of 28.03.2011. 47 TGC-13 0.0006 % - 129 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00074 of 28.03.2011. 48 OGC-3 0.0005 % - 401 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00057 of 28.03.2011. 49 Quadra 0.0005 % - 147 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00064 of 28.03.2011 50 TGC-2 0.0005 % - 63 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00061 of 28.03.2011. 51 TGK-9 0.0004 % - 186 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00067 of 28.03.2011. 52 TGC-14 0.0004 % - 23 - Production of electricity and Share purchase agreement No 28.03.2011 concluded between INTER RAO heat UES and Federal Grid Company, under which Federal Grid Company acquires additional shares of INTER RAO UES and pays for it by shares of the following companies: "Bashkirenergo Volga Territorial Generating Company (TGC-7)", "Mosenergo, "OGK-1", OGC-6, TGC-11, TGC-6", JSC "Yenisei Territorial Generating Company ( TGC-13)", Quadra, Kuzbassenergo, OGC-2, OGC-3, OGC-4,RusHydro, TGC-1,TGC-2, TGC-9, TGC-14, Fortum, TGC-11 Holding; Transfer of securities No 110328/00075 of 28.03.2011. Total: 94,896,493 70,743,267 264,856

109 2012 INVESTOR CALENDAR

110 DATE EVENT 31 January – 4 February Annual “Russia 2012” Investor Forum, Troika Dialog – Sberbank (Moscow) 20 March 2011 Annual Results (RAS) 23 April 2011 Annual Financial Report (IFRS) 3 May Q1 2012 Financial Results (RAS) 22 May Annual “Russia Calling!” Investor Conference, VTB Capital (London) 25 May Record Date 25-26 June Annual Investor Conference, Renaissance Capital (Moscow) 26 June Meeting with minority shareholders 29 June Annual General Shareholders Meeting Not later than 30 July H1 2012 Financial Results (RAS) Not later than 30 September H1 2012 Financial Results (IFRS) Not later than 30 October Q3 2012 Financial Results (RAS) October Annual “Russia Calling!” Investor Conference, VTB Capital (Moscow)

The latest version is available on the Company’s website (Investors / Investor Calendar).

111