Moscow. 14 October 2004. At its regular meeting, the Audit Committee under the Board of Directors of RAO "UES of Russia" heard and noted the report of the Business and Tax Accounting Department of RAO "UES of Russia" on the progress made in the preparation of the audited financial statements in accordance with the IFRS by the subsidiaries and dependent companies ("SDCs") of Russia.

The Committee noted that the IFRS financial statements for 2003 had been prepared by 17 SDCs of RAO "UES of Russia". The Audit approved the Fundamentals of Accounting Policy for Enterprises of the Electricity Industry in Accordance with the IFRS, which are mandatory for use by the SDCs when preparing their financial statements. Currently, 44 SDCs of RAO "UES of Russia" are preparing IFRS financial statements for year 2004. The Committee recommended that the management of RAO "UES of Russia" carry out measures relating to the need for these SDCs to prepare IFRS financials in accordance with the approved Fundamentals, and to draft the managerial standard for the selection of auditors and control of their activities in the subsidiaries of RAO "UES of Russia". This standard should also set the criteria for the selection of subsidiaries of RAO "UES of Russia" in which the preparation of the IFRS financial statements is to become mandatory.

The Committee considered the issue of creation of a system for users of audited IFRS financials at RAO "UES of Russia". The Committee supported the initiative of RAO UES management for the SDCs to prepare IFRS financials, saying that it is necessary to create such a system to facilitate managerial decision taking and ensure control functions in the system for RAO "UES of Russia". It was recommended that heads of the Business-Units of RAO "UES of Russia" work out their own procedures for using audited IFRS financials prepared by the SDCs under their control. Besides, the Committee suggested developing a procedure for rechecking the key efficiency figures of the SDCs of RAO "UES of Russia" with the help of audited IFRS financials of these companies.

The Audit Committee heard a report containing analysis of the draft of the audited financial statements of the Group of RAO "UES of Russia" for the first six months of 2003. The Committee submitted this report to the Financial Director of RAO "UES of Russia", recommending to provide more details on certain parts of the notes to the financial statements.

Further, the Audit Committee considered the Caloria project. Within the framework of this project, the management of RAO "UES of Russia" and the Audit Committee are to jointly develop and implement the modern mechanisms for internal control of fuel supply to the Holding Company's thermal power plants. In particular, the internal control system is to cover the fuel procurement procedures relating to the selection of suppliers, determining the price and terms of supply, organizing the inventory management and working capital financing used in the fuel procurement system.

The Committee recommended to create a working group to develop such internal control system for fuel procurement system. The Committee suggested that the Working Group should comprise representatives of the Corporate Center, Business Units of RAO "UES of Russia", and members of the Audit Committee. The Committee intends to approve the recommendations for implementation of new internal control mechanisms for the fuel procurement system at RAO "UES of Russia" not later than April 2005.