The Board of Directors of RAO "UES of Russia" approved the draft of the Company's Annual Report, and the annual financial statements of the Company for 2003, and submitted them for approval to the AGM of shareholders of RAO "UES of Russia".

The Board has approved the Amended Methodology for Dividends Calculation of RAO "UES of Russia", which establishes the procedure for determining dividends on preferred and ordinary shares of the Company. The changes to the Methodology have been made in connection with approval by Order of the Ministry of Finance of the Russian Federation No.67n dated 22 July 2003 of the new forms of accounting statements, and the alterations to the procedure of determining companies' net assets value in accordance with Order of the Ministry of Finance of the Russian Federation No. 10n and the FCSM of Russia No.03-6/PZ of 29 January 2003. Under the Methodology, the amount of dividend on ordinary shares is to be calculated based on the adjusted EBITDA (earnings before interest, tax, depreciation and amortization) which is multiplied by the correction factor K1. The value of K1 is set every year by the Board of Directors of RAO "UES of Russia" on the proposal of the Company's Management Board based on the analysis of the financial and business activities of the Company for the first 9 months of the reporting year. The Board of Directors resolved that it would be more appropriate to determine the value of the K1 factor based on the analysis of the Company's financial and business performance as at the end of the reporting year. This should help achieve a greater accuracy in calculating the dividend amount.

The Board of Directors of RAO "UES of Russia" approved the correction factor K1 at 0.081 (zero point zero eight one) to be used for the calculation of dividend on the Company's ordinary shares in respect of 2003. The factor was determined based on the Company's financial results in 2003. With this value of K1, the total dividend payments will be RUB2,398,134,000 (up 20.6% on 2002), including RUB1,091,749,000 on the shares held by the State (up 36% on 2002).

Also, the Board of Directors recommended that the AGM of shareholders of the Company approve the following dividend amounts in respect of 2003:

• ordinary shares: RUB1,924,858,261.85 , or RUB0.0469 per share;
• preferred shares: RUB473,756,604.37, or RUB0.2283 per share.

The Board of Directors of RAO "UES of Russia" set 1 December 2004 as the deadline for the payment of dividends of ordinary and preferred shares.

Besides, the Board of Directors resolved to recommend that the AGM of shareholders of RAO "UES of Russia" approve the appointment of ZAO KPMG the Company Auditor to audit the financial statements of RAO "UES of Russia" for 2004 in accordance with the Russian Accounting Standards (RAS) and the International Financial Reporting Standards (IFRS). Pursuant to Resolution of the Government of the Russian Federation No. 409 dated 12 June 2002 "On measures to ensure performance of statutory audits" and the resolution of the Board of Directors of RAO "UES of Russia" of 6 April 2004, the Auditor to perform an annual statutory audit of the Company's financials was selected through an open tender. On 21 May 2004, the Tender Commission of the Board of Directors for the selection of an audit organization to conduct the annual statutory audit of the Company named ZAO KPMG winner of the tender.

The Board of Directors of RAO "UES of Russia" approved the form and wording of the ballots for voting at the AGM and instructions on the voting procedure prepared in accordance with the Federal Law "On Joint Stock companies" and the Regulation on additional requirements to the procedure for preparation, convocation, and conduct of a general meeting of shareholders approved by Resolution of the FCSM of Russia No. 17/ps dated 31 May 2002.

Pursuant to Paragraph 2 of Article 56 (1) of the Federal Law "On Joint Stock Companies", the Board of Directors resolved to entrust the functions of the Counting Commission of the AGM to the Registrar of RAO "UES of Russia", OAO "Moscow Central Depository", based in Moscow.

Having considered the question of the AGM working bodies, the Board approved the appointment of the Presidium of the AGM of shareholders of RAO "UES of Russia" consisting of the members of the Company's Board of Directors and the AGM Secretariat consisting of members of the Company's executive staff.

* * *

The Board of Directors of RAO "UES of Russia" approved the restructuring plan of OAO "Lenenergo".

The energy company will be restructured in accordance with the "basic" scenario through spin-off of the following companies from OAO "Lenenergo" (with the current ownership structure preserved):

• OAO "North-West Energy Management Company", which will receive a 50% stake in ZAO "LEIVO" and a 21.6% stake in OAO "Petroenergobank";
• OAO "St-Petersburg Generation Company", which will receive a 13.8% stake in ZAO "Severo-Zapadnaya CHPP", a 3.46% stake in OAO "Power Machines – Turbine Blades Plant (ZTL), Leningradsky Metallichesky Zavod (LMZ), Energosila, Energomashexport", and a 100% stake in OAO "CPRP-Energoservice";
• OAO "St.-Petersburg Energy Retail Company";
• OAO "Petersburg Trunk Grids", whose only asset is shares in North-West ITC.

The restructuring plant provides for pro-rata distribution of shares in North-West ITC held by OAO "Petersburg Trunk Grids" among the latter's shareholders using the procedure of winding-up of OAO "Petersburg Trunk Grids" or its merger with and into North-West ITC. The power distribution networks that are not part of the Unified National (All-Russian) Power Grid (UNPG) are to remain the property of OAO "Lenenergo".

According to the plan, the functions of the one-man executive bodies (i.e. CEOs) of the following companies are to be transferred to OAO "North-West Energy Management Company":

• OAO "St.-Petersburg Generation Company";
• OAO "St.-Petersburg Energy Retail Company";
• OAO "Lenenergo".

The Board instructed RAO UES representatives to vote for the approval of all items of business of board meetings and shareholder meeting of OAO "Lenenergo" and shareholder meetings of the newly established companies, so as to ensure implementation of the restructuring plan of OAO "Lenenergo".

* * *

On the proposal of RAO UES minority shareholders, the Board considered the situation at OAO "Sayano-Shusheskaya HPP".

The Board of Directors of RAO "UES of Russia" noted the information on the resolution approved by the General Meeting of shareholders of OAO "Sayano-Shushenskaya HPP named after P.S. Neporozhny" ("OAO "Sayano-Shushenskaya HPP") held on 21 May 2004 to make amendments to the Charter of OAO "Sayano-Shushenskaya HPP", including the change of the Company's location (place of registration).

The Board of Directors decided to make a request to the Government of the Russian Federation to take part in considering the so-called "supervisory appeal" to the Supreme Arbitration Court of the Russian Federation for the purpose of preventing deprivatization of OAO "Sayano-Shushenskaya HPP" and infringement of shareholders' rights.

The Board of Directors also instructed the Management Board of RAO "UES of Russia" to continue its efforts to protect the interests of shareholders of RAO "UES of Russia" and OAO "Sayano-Shushenskaya HPP".

* * *

The Board of Directors of RAO "UES of Russia" considered the proposed acquisition of shares in OAO "Federal Grid Company" (OAO "FGC") and approved the purchase of 3,360,081,624 ordinary shares of OAO "FGC", which represents 1.3229% of the authorized capital of OAO "FGC".

The ownership of these shares was transferred to OAO "FGC" as a result of failure by RAO "UES of Russia" to make payment [of consideration for the shares]. Under the provisions of the Russian laws, in this case the price of the shares being acquired may not be lower than their par value. Accordingly, the Board of Directors set the price of the shares being purchased at RUB1,680,040,812, with the par value of RUB0.50 per share.

Also, the Board considered the question of alienation of its property comprising fixed assets, intangible assets, construction projects in progress intended for electricity transmission, and approved the alienation of said property through direct sale to OAO "FGC" at a price not lower than the value determined by independent appraisers.

The independent appraiser accredited by RAO "UES of Russia", the Consortium of Ernst & Young (CIS), ZAO "International Appraisal Center", ZAO "ENPI Consult", evaluated the property being alienated at RUB1,680,040,812.

In view of the fact that the members of the Board of Directors of RAO "UES of Russia" V.B. Khristenko, A. B. Chubais, G. O. Gref, I. A. Yuzhanov, I. Kh. Yusufov are also members of the Board of Directors of OAO "FGC", the contract of purchase and sale of shares of OAO "FGC" has been declared an interested party transaction pursuant to Article 81 of the Federal Law "On Joint Stock Companies". The independent members of the Company's Board of Directors voted for this transaction before it was concluded. It should be noted that the following members of the Board of Directors of RAO "UES of Russia" did not take part in the voting on the matter: A.B. Chubais and I.A. Yuzhanov.

The Board of Directors of RAO "UES of Russia" set the value of the 3,360,081,624 ordinary shares in OAO "FGC", RUB0.50 par value, at RUB1,680,040,812 and approved the conclusion of the contract of purchase/sale of shares of OAO "FGC".

The Board of Directors of RAO "UES of Russia" determined the price of the property being alienated at RUB1,680,040,812. Under the resolution of the Board of Directors, the payment is to be made in cash before the transfer of ownership of the assets, but no later than 14 days after the transfer deeds are signed.

* * *

The Board discussed the system of incentives for managers engaged in the purchase and management of foreign assets of RAO "UES of Russia".

It was noted that it is necessary to develop a mechanism to motivate the management of the Company and its subsidiaries and dependent companies (SDCs) to work towards achieving higher effectiveness of transactions involving purchase and running of foreign assets.

The Board of Directors commissioned the Company's Management Board to prepare proposals on the system of incentives for managers engaged in the purchase and operation of foreign assets.

* * *

The Board of Directors heard and noted the report on the Company's Public Relations policy and the costs of information actions in the mass media.

* * *

The Board of Directors considered the question of bringing the system of incentives for the management of RAO "UES of Russia" into line with the principles of motivating the management of the SDCs of RAO "UES of Russia" so as to incentivize the Company's senior management and personnel to efficiently implement the reform in the electricity industry and the Company.

The Board noted the presented information and commissioned the Management Board of RAO "UES of Russia" to make adjustments to the system of indicators and criteria for the assessment of personal contribution of each staff member to the final results, and to determine the source of funds for stock options granted to the management of RAO "UES of Russia". It was decided to re-consider these issues at the June meeting of the Board of Directors of RAO "UES of Russia".

* * *

The Board of Directors considered the proposed participation of RAO "UES of Russia" in OAO "Test Bed of Ivanovskaya TPP" and approved the Company's participation in this project on the following conditions:

• at the time of establishment, the Company will issue 360,164,012 shares, par value RUB1 per share; the procedure for payment of the shares is determined by the Russian laws regulating the activities of joint-stock companies; payment of the shares will be made in form of property that is jointly owned by RAO "UES of Russia", OAO "Ivenergo", OAO "Konakovskaya TPP", OAO "Kirovenergo", OAO "Belgorodenergo", OAO "Vologdaenergo", OAO NPO "Saturn" at the market value of RUB360,164,012 (three hundred and sixty million one hundred and sixty-four thousand twelve Russian Rubles), which value has been determined by an independent appraiser. Accordingly, the authorized capital of OAO "Test Bed of Ivanovskaya TPP" will be RUB360,164,012 (three hundred and sixty million one hundred and sixty-four thousand twelve Russian Rubles);
• the founders of OAO "Test Bed of Ivanovskaya TPP":

1. RAO "UES of Russia" – 300,830,113 (three hundred million eight hundred and thirty thousand one hundred and thirteen) shares, or 83.53%;
2. OAO "Ivenergo" – 5,010,476 (five million ten thousand four hundred and seventy-six) shares, or 1.39%;
3. OAO "Konakovskaya TPP" – 6,520,474 (six million five hundred and twenty thousand four hundred and seventy-four) shares, or 1.81%;
4. OAO "Kirovenergo" – 1,213,493 (one million two hundred and thirteen thousand four hundred and ninety-three) shares – 0.34%;
5. OAO "Belgorodenergo" – 931,496 (nine hundred and thirty-one thousand four hundred and ninety-six) shares – 0.26%;
6. OAO "Vologdaenergo" – 1,821,075 (one million eight hundred and twenty-one thousand seventy five) shares – 0.50%;
7. OAO NPO "Saturn" – 43,836,885 (forty-three million eight hundred and thirty-six thousand eight hundred and eighty-five) shares – 12.17%;

The Board of Directors of RAO "UES of Russia" also set the value of the property of RAO "UES of Russia" to be transferred as contribution to the authorized capital of OAO "Test Bed of Ivanovskaya TPP" at RUB300,830,113 based on the valuation report made by an independent appraiser.

The construction of the test bed for gas turbines GTG-110 at Ivanovskaya TPP was carried out within the framework of the Joint Construction Agreement among RAO "UES of Russia", OAO "Ivenergo", OAO "Konakovskaya TPP", OAO "Kirovenergo", OAO "Belgorodenergo", OAO "Vologdaenergo", OAO NPO "Saturn", and the Administration of Ivanovo Region.

The test bed for gas turbines GTD-110 is intended for full-scale testing of gas turbines that are part of a gas turbine power unit GTE-110 along with electricity generation for the purpose of confirming the technical and economic characteristics and further organization of serial production of such generating units to be used in power plants as part of PGU-325.

* * *

The Board resolved to terminate the powers of the Chairman of the Management Board of OAO "UES SO-CDA" Victor Pauli in connection with his change of employment.

On the proposal of the Chairman of the Management Board Anatoly Chubais, the Board of Directors approved the appointment of Boris Ayuyev, member of the Management Board, to the position of the Chairman of the Management Board of OAO "UES SO-CDA".

Boris Ilyich Ayuyev was born in 1957 in Rostov-on-Don. In 1979, he graduated from Uralsky Polytechnic Institute, where he specialized in power plants engineering. In 1978 – 1997, he worked as an engineer, senior engineer, programmer engineer, and head of department in the IDA of Urals. In 1997-2002 Boris headed the FOREM service of the IDA of Urals. In July-October 2002 he served as Acting Deputy Chairman of the Management Board of OAO "UES SO-CDA", and since October 2002, he has been Deputy Chairman of the Management Board of OAO "UES SO-CDA". Candidate of Technical Sciences. Boris was actively involved in the development and implementation of the project to reorganize the UES Central Dispatch Administration into OAO "UES System Operator-Central Dispatch Administration".

The Board of Directors of RAO "UES of Russia" has approved that the member of the Management Board of RAO "UES of Russia" Boris Ayuyev combine his position with that of the Chairman of the Management Board of OAO "UES SO-CDA".

* * *

The Board of Directors of RAO "UES of Russia" made amendments to the restructuring plans of OAO "Kurskenergo" and OAO "Udmurtenergo" approved by the Board on 14 December 2002.

The changes became necessary because the procedure for the establishment of Interregional Transmission Companies on the basis of trunk grids owned by regional energos was determined after the restructuring plans for these energy companies had been approved in 2003.

The amendments provide for the establishment of OAO "Kursk Trunk Grids" (whose only asset is shares in Center ITC) and OAO "Udmurtia Trunk Grids" (whose only asset is shares in Urals ITC) as a result of restructuring of OAO "Kurskenergo" and OAO "Udmurtenergo", respectively. This process will be carried out through spin-off; shares in OAO "Kursk Trunk Grids" and OAO "Udmurtia Trunk Grids" will be distributed pro-rata among the shareholders in the respective energy companies.

The Board of Directors also approved the transfer of the power grid facilities of OAO "Kurskenergo" and OAO "Udmurtenergo" that are part of the Unified National Power Grid (UNPG) and cash to cover the expenses on the additional issuance of shares as consideration for the additional shares in the Interregional Transmission Company of Center (Center ITC) and the Interregional Transmission Company of Urals (Urals ITC).

The Board of Directors of RAO "UES of Russia" decided that payment of the shares in Center ITC to be acquired by OAO "Kurskenergo" and shares in Urals ITC to be acquired by OAO "Udmurtenergo" is to be made in full prior to the completion of restructuring of these energy companies.

The Board of Directors resolved that in the event that OAO "Kurskenergo" fails to transfer the UNPG-related power grid facilities as consideration for the additional shares in Center ITC before the restructuring of OAO "Kurskenergo" is completed, then OAO "Kursk Trunk Grids" is to be spun off from OAO "Kurskenergo" in the course of its restructuring, and the UNPG-related grid facilities are to be transferred to said spin-off company.

The Board of Directors also resolved that in the event that OAO "Udmurtenergo" fails to transfer the UNPG-related power grid facilities as consideration for the additional shares in Urals ITC before the restructuring of OAO "Udmurtenergo" is completed, then OAO "Udmurtia Trunk Grids" is to be spun off from OAO "Udmurtenergo" in the course of its restructuring, and the UNPG-related grid facilities are to be transferred to said spin-off company.

It was decided that pro-rata distribution of shares in Center ITC owned by OAO "Kursk Trunk Grids" among the latter's shareholders in the process of winding up of OAO "Kursk Trunk Grids" or its merger with and into Center ITC.

The Board also decided that pro-rata distribution of shares in Urals ITC owned by OAO "Udmurtia Trunk Grids" among the latter's shareholders in the process of winding up of OAO "Udmurtia Trunk Grids" or its merger with and into Urals ITC.

The Board invalidated Items 2.4. and 6.4. of the resolutions of the Board of Directors of RAO "UES of Russia" of 14 June 2002 (Minutes No. 120) on the items of business "On the Restructuring Plan of OAO "Kurskenergo" and "On the Restructuring Plan of OAO "Udmurtenergo".