In accordance with the strategic tasks assigned to ROSSETI by the Government, and given the current trends and challenges affec­ting the electric grid sector, the goals and objectives of the ROSSETI Group are in the following main areas:

1. Secure a reliable and uninterrupted power supply and ensure energy security
2. Improve service quality and increase customer satisfaction
3. Maintain the accessibility of infrastructure and create the conditions for economic growth
4. Enhance the operating efficiency of electric grids
5. Keep a balance between the interests of different key stakeholders

The Company’s principal goals are to secure a reliable and uninterrupted electricity supply, modernize and improve network reliability, promote innovative development, optimize operational performance, and ensure effective investment.

The ROSSETI Group is one of the most significant infrastructure companies in Russia and one of the world’s largest electric grid companies in terms of the number of customers and the length of power lines. The Company is engaged in the operation of electric grid facilities in all Russian regions.

The Group holds Russia’s main electric grid assets: 70% of distribution grids and 90% of transmission grids. The length of power lines is more than 2.3 million kilometers, the transformer capacity of 480,000 substations is over 751 GVA. In 2014, the ROSSETI Group’s electricity transmission and distribution services generated 715 billion kWh.

ROSSETI SDCs operate in natural monopoly conditions and account for over 70% of all electricity transmission and distribution generated in the Russian Federation. For most electricity consumers in Russia, they provide services throughout the downstream process: from transmission from generation companies to distribution to customers’ power-receiving equipment.

ROSSETI has shareholdings in 43 subsidiaries and dependent companies. As at the end of 2014, the ROSSETI Group held stakes in one transmission grid company, 11 interregional distribution grid companies, five distribution grid companies, seven regional retail companies, seven R&D and design companies, and 12 construction, procurement, and service organizations.

The share capital of ROSSETI is one hundred sixty-three billion, one hundred fifty-four million, two thousand, six hundred ninety-four (163,154,002,694) rubles and consists of one hundred sixty-three billion, one hundred fifty-four million, two thousand, six hundred ninety-four (163,154,002,694) shares, each with a par value of 1 ruble.

The largest shareholder is the Russian Federation represented by the Federal Agency for State Property Management (85.31%). Residents of the Russian Federation hold 95.7% of shares, while the remaining 4.3% of shares are distributed among corporate entities and individuals from 45 countries.

Goals and Principles of Governance

ROSSETI’s governance system is in accordance with the Russian applicable laws, the Articles of the Association, and internal regulatory documents. The Company also applies global best practices.

The principal goals and objectives of the Company’s governance are as follows:

• protect the legitimate rights and interests of all shareholders of ROSSETI;
• constantly improve the mechanisms for relations between ROSSETI and shareholders, securities holders, and potential investors;
• enhance the transparency of governance bodies’ decision-making, maximize the disclosure of information about the Company’s activities, and improve the governance system.

The following principles underlie the Company’s governance:

• accountability;
• fairness;
• transparency;
• responsibility.

On February 13, 2014, the Government of the Russian Federation approved the Corporate Governance Code as a recommendatory document. The Code was approved by the Board of Directors of the Bank of Russia on March 21, 2014, and recommended by the Bank of Russia (Letter No. 06-52 of April 10, 2014) for implementation by joint-stock companies whose shares are admitted to regulated trading.

In 2014, the Company compared its governance practices and the key provisions of the Corporate Governance Code. Based on the comparison, ROSSETI prepared a road map (the action plan to introduce the key provisions of the Code). The results of this work were submitted to the Ministry of Energy of the Russian Federation and the Federal Agency for State Property Management of the Russian Federation. In March 2015 (after the reporting date), the Board of Directors approved the action plan (road map) to introduce the Code into the Company’s activities.

Governance Structure

The Company’s highest governance body used by shareholders to exercise their right to participate in the Company’s governance is the General Meeting of Shareholders. The procedure for convening and holding the General Meeting of Shareholders of ROSSETI is go­verned by the Regulations for the General Meeting of Shareholders approved by the Annual General Meeting of Shareholders on June 30, 2014.

Board of Directors

The Board of Directors is the collegial body in charge of the general management of ROSSETI’s activities. The Board of Directors is responsible for defining the Company’s strategy, supervises executive bodies, and protects the rights and legitimate interests of shareholders. The Board of Directors is composed of 15 members elected by the General Meeting of Shareholders at the suggestion of shareholders holding an aggregate of 2% of voting shares.

In 2014, the composition of the Board of Directors of ROSSETI was changed: the members elected by the General Meeting of Shareholders on June 28, 2013, served until June 30, 2014; the members elected on June 30, 2014, served after June 30, 2014.

Management Board

The Management Board of ROSSETI is responsible for managing the Company’s day-to-day activities, developing long-term plans, and submitting them and performance results for consideration by the Board of Directors.

During the reporting year, ROSSETI’s successful activities received several awards and prizes. In addition, the Company was granted awards in 2014 for its achievements in 2013.

• ROSSETI won in the category “Fuel and Energy Sector” of the Annual National Award “Company of the Year 2013.”
• The Company received an award from the Russian Government in science and engineering for 2013 for developing and commercializing hydrogen and superconductor technology for the creation of the energy industry’s crucially new MW capacity systems and for prototyping equipment for the generation, transportation, and accumulation of energy.
• In the 2013 National Procurement Transparency Rating of Contrac­ting Public Entities, ROSSETI received the highest award.
• As a winner of the annual contest “Leader in Competitive Procurement 2013,” the Company was recognized as “Company of the Year in Competitive Procurement.”
• The Company won in the category “Procurement Transparency” of the annual contest “Leader in Competitive Procurement 2013.”
• ROSSETI received the “High Procurement Management Quality” ra­ting from Expert RA Rating Agency.
• As part of the 10th Annual Russian Big Business Forum “Expert 400,” the ROSSETI Group won in the category “Investment Activity” for 2013.
• The Ministry of Education and Science of the Russian Federation granted two awards to ROSSETI’s project to organize and hold the international youth forum of the electric power industry:
  – the winner’s prize in the category “Russian World” for the best project of a Russian company promoting national values and cooperation principles abroad;
  – an award in the category “Technologies of the Future” for the development of strategic competencies of young specialists who will be leaders in the Russian electricity industry in the 2nd All-Russian Contest Among Employers’ Best Practices “Creating the Future” for human resource development.
• In 2014, the media relations department of ROSSETI was recognized as the best in the electricity industry in the KonTEKst 2015 contest.
• The Company won a prize of the 17th annual nationwide contest of annual reports and corporate websites organized by the Moscow Exchange and RCB Media Group for the best disclosure.
• The ROSSETI Group received the “Guaranteed Transparency” rating (National Procurement Transparency Rating).