Contact-center: 8 (800) 100-33-00 Free calls from landline phones in Russia

Financial and economic activity control authorities

Internal control system

The Basic Company’s internal document determining the goals and objectives of the internal control, procedure of the internal control, subjects, persons responsible for the carrying out of the procedures of the internal control as well as those who are responsible for the control over carrying out of the internal control procedures is the Regulation on the internal control procedures of IDGC of Centre and Volga Region, JSC, approved by the Decision of the Board of Directors as of December 25, 2008. (Minutes No.30). In order to develop and improve the Company’s internal control and risks management systems the Company designed and approved Internal Control Policy (Minutes No. 57 of 15.06.2010 of the Board of Directors’ meeting). The Internal Control Policy specifies obligatory key principles of arranging the internal control system of IDGC of Center and Volga Region, JSC and forms of common approach to the implementation of the internal control processes within the Company.

Goals and objectives of the internal control

The basic goal of the internal control is the prevention of the risks in the financial and industrial activity of the Company, timely implementation of the activities directed to their elimination, detection and mobilization of the internal industrial possibilities and reserves of the profit acquisition and the rendering of the assistance to the management of the Company in the productive implementation of the administrative functions.

The internal control is directed to the implementation of the following goals:

- support of the investors confidence to the Company and its management bodies, protection of capital investments of the shareholders and assets of the Company;

- Provision of the completeness, reliability and sufficiency of the financial, accounts, statistical and administrative information and the reporting of the Company;

- Provision of meeting of the normative and legal acts of the Russian Federation, decisions of the management bodies of the Company and the internal documents of the Company.

- provision of the assets good condition and the productive use of the Company’s resources.

- provision of the implementation of the settled strategic goals of the development by more productive ways.

- Provision of the timely detection and the analysis of the financial and the operating risks which can considerably influence (negatively influence) the Company’s meeting of the goals connected with the industrial activity.

Management bodies and subdivisions of the Company responsible for the internal control

Board of Directors of the Company determines the policy of the internal control and carries out the assessment of the productivity of the internal control procedures.

The Audit Committee under the Board of Directors carries out the general assessment of the productivity of the internal control procedures in the Company (including on the basis of the announcements and reports of the subdivision of the Company authorized to carry out the internal control/audit).

The General Director of the Company bears the responsibility for the functioning of the procedures of the internal control of the Company.

Internal control is carried out by the major directions of the financial and industrial activity of the Company, including:

- financial activity;

- economic activity;

- investment activity;

- by other directions of the activity of the Company;

The direct assessment of the adequacy, sufficiency and productivity of the procedures of the internal control as well as the control over the meeting of the internal control procedures is carried out by the separate structural subdivision of the executive body of the Company - subdivision of the Company authorized to carry out the internal control/audit.

Within the goals of provision of the system character of the financial and industrial activity of the Company the carrying out of the internal control procedures is carried out by the subdivisions of the Company authorized to carry out the internal control/audit in interaction with other bodies and subdivisions of the Company.

Internal control procedures

Company’s internal control includes the following procedures:

- carrying out of the control of forming and implementation of the business plan approved by the Board of Directors;

- detection of violations by means of the check ups carrying out as well as monitoring and analysis of the results of the checkups of the activity of branches, representative offices and the structural subdivisions;

- preventive work directed to the prevention of the violations by means of information about the detection of the considerable violations and drawbacks bringing to the notice of the structural subdivisions of the Company ;

- detected violations elimination control;

- detection and the analysis of the risks of the financial and industrial activity of the Company;

- monitoring and the development of the activities directed to the decrease of risks of the financial and industrial activity;

- organization of the gathering, processing and transition of operation, financial and other information including the forming of the reports containing the operative, financial and other information about the activity of the Company as well as the settlement of the productive channels and the communication means providing the vertical and horizontal connections inside the Company

- determination and bringing information concerning their obligations in the sphere of the internal control to the notice of the personnel of the Company;

- provision of implementation of the internal control procedures approved in the Company.

- proper documentation of the internal control procedures.

Functions of the internal control subjects

1. Company’s subdivisions authorized to carry out the internal control/audit carriey out the following functions in the sphere of the internal control in accordance with their competence:

- the check up of the accounting and financial information presented to the subdivisions of the executive office, branches and representatives of the Company including the expertise of means and ways used for the identification, assessment and classification of such information and compiling of the reporting on its basis as well as the special study of the separate parts of the reporting including the detailed check ups of the operations, balances of the accounting sheets;

- check up of meeting of the legislation and internal normative documents of the Company as well as fulfillment of the decisions of the management bodies and the requests of the Management of the Company;

- check up of the presence, condition and provision of the good condition and use of the property of the Company;

- special check ups of the separate cases, for example, misuse suspicion;

- development and the presentation in the determined order to the management bodies of the Company of the conclusions by the results of the check ups as well as the suggestions concerning the violations, drawbacks and recommendations of the management productivity increase detected during the check ups.

- fulfills other functions determined by the internal documents of the Company.

1.1. Subdivision of the Company authorized to carry out internal control/audit, carries out the check ups in accordance with the developed by it annual/quarterly plan – schedule of the checkups which is subjected to the coordination with the Audit Committee under the Board of Directors of the Company and shall be approved (corrected) by the General Director of the Company (other person by its order), as well as carry out the unplanned schedules by the decision of the General Director of the Company (person authorized by him/her).

If necessary the personnel of the profile subdivisions of the Company can be involved into the check ups as well as the independent specialists – experts.

By each check up the subdivision of the Company authorized to carry out the internal control/audit forms and approves the program of the check up carrying out.

1.2. Organizational provision and the presentation of the necessary documents for carrying out of the check ups is carried out by the head of the subdivisions of the Company, branches and representative offices in 3 (three-day) term by the requests of the subdivision of the Company authorized to carry out the internal control/audit.

1.3. Results of the check ups carried out by the subdivision of the Company authorized to carry out the internal control/audit, is drawn by the check up act which is signed by the personnel of the Company’s subdivision authorized to carry out the internal audit/control and the heads of the Company’s subdivisions, branches and representative offices which activity was checked up. The act shall be Company’s subdivision going thorough the audit.

1.4. The subdivision of the Company authorized to carry out the internal audit/control by the form according to the appendix to the present Regulation annually informs the Audit Committee under the Board of Directors of the Company about the violations in the financial and industrial activity as well as the facts of the improper fulfillment (non-fulfillment) of the internal documents approved in the Company.

1.5. By the results of Board of Directors consideration of the reports on the results of the checkups carried out by the General Director of the Company they issue the order on the complex of the activities directed to the elimination of the drawbacks and violations detected during the checkup.

The control over the violations elimination detected during the check ups is carried out by the Company’s subdivision authorized to carry out the internal control/audit.

2. Company’s Board of Directors:

- issues the order to the Company’s General Director on carrying out of the check up within the framework of the internal control procedures;

- considers and takes the decisions by the reports presented by the Company’s General Director and/or Audit Committee under the Board of Directors. The report shall concern the procedures of the carried out internal control.

- considers the results of the internal control (reports and other materials of the Company authorized to carry out the internal control/audit);

- carries out the basic risks taken by the Company and settles the appropriate levels of such risks, carries out the control over implementation such measures which are necessary for the measuring and control of such risks;

- carries out the assessment of productivity of the internal control procedures and the constant improvement of the internal control procedures.

3. Audit committee under the Board of Directors of the Company carries out the observance of :

- the procedures of the Company’s internal control in the sphere of accounting and finances;

- for the timely preparation of the reporting by the executive bodies of the Company of the Company and for the objectivity of this reporting;

- for the procedures of the Company’s control over the meeting of the legislation and normative acts;

- carries out other functions determined by the Regulation on the Audit Committee, under the Board of Directors of the Company.

Within the framework of its functions carrying out the Audit Committee under the Board of Directors of the Company:

- considers information presented by the subdivisions of the Company authorized to carry out the internal control/audit, as well as information about the results of the checkups carried out through the year;

- carries out the analysis of the annual financial (accounts) reporting before its putting to the consideration of the Board of Directors of the Company and the intermediary financial (accounts) reporting before its disclosure.

Additional information:

4. CEO of the Company:

- organizationally carries out the procedure of the internal control realization;

- is responsible for the development and the implementation of the system directed to the detection, measuring, observance and control of risks the Company is facing;

- approves (corrects) the plan schedule of the check ups carried out by the subdivision of the Company authorized to carry out the internal control/audit (entitles the other person with the right of approval);

- considers check ups results information presented to the subdivisions of the Company authorized to carry out the internal audit/ control;

- reports to the Board of Directors of the Company on the elimination of the violations detected during the carrying out of the procedures of the internal control;

- brings out the suggestions concerning the improvement of the internal control procedures to the Board of Directors discussion.