Supervisory bodies

Pursuant to item 9.2 art. 9 of the charter of jsc lenenergo the audit commission is a supervisory body over financial and business activities of the company.

Audit Commission

Audit Commission of JSC Lenenergo is the permanent body of control independent of the officials of governing bodies and the executive office of the Company. Powers of the Audit Commission are set forth by the Federal Law “About joint stock companies”, the Charter and the Regulations on the Audit Commission of JSC Lenenergo approved by the General meeting of shareholders of the Company on 23.05.2002 (Minutes # 1).

In accordance with the Charter of the Company, the Audit Commission is elected by the General shareholders meeting in the quantity of 5 members for a one-year term (before the date of the next Annual General Meeting). Members of the Audit Commission may not simultaneously be members of the Board of Directors or hold other positions in the governing bodies of the Company.

Revisions (audit) of financial and business activities of JSC Lenenergo are carried out by results of operations for the year (planned check) or at any time upon decisions or demands of the bodies or persons possessing the right to initiate such revisions (audit). Revisions are possible following decisions of the Audit Commission, decisions of the General shareholders meeting, or the Board of Directors, upon the request of a shareholder (shareholders) owning in aggregate not less than 10% of the Company’s voting shares.

By results of the revisions conclusions about financial and business activities, annual accounting statements and reliability of the data presented in the annual report were prepared.

In accordance with the Charter of the Company the competence of the Audit Commission includes:

  • confirmation of reliability of the data presented in the annual report, annual balance sheet, and the profit and loss statement of the Company;
  • analysis of financial state of the Company, identification of reserves, improvement of the Company’s financial condition and development of recommendations for the Company governing bodies;
  • organization and implementation of revisions (audit) of financial and business activities of the Company.

In 2013 the Audit Commission of JSC Lenenergo held revisions of:

  • financial and business activities of JSC Lenenergo for 2012;
  • organization of procurement activity of JSC Lenenergo for 1H 2013;
  • execution by JSC Lenenergo of the requirements of regulatory legal acts approved by federal executive authorities in response to the plan of measures of the road map Increase of Power Infrastructure Availability;
  • financial and business activities of JSC Lenenergo for 9 months 2013.
In 2013 the following compositions of the Audit Commission of the Company carried out their work:Place of work and positions are specified at the moment of election.

From 01.01.2013 up to 20.06.2013

From 20.06.2013 up to 31.12.2013

Full name

Position

Full name

Position

1

Alimuradova Izumrud Aligadzhiyevna

Director for internal audit and risk management of JSC Rosseti (previous name – JSC IDGC Holding)

1

Adler Yury Veniaminovich

Head of division of standards and methodology of Department of corporate governance and interaction with shareholders of JSC Rosseti

2

Arkhipov Vladimir Nikolayevich

Head of Department of security of JSC Rosseti (previous name – JSC IDGC Holding)

2

Kabizskina Elena Aleksandrovna

Deputy Head of Department of control and audits of JSC FGC UES

3

Danilov Maxim Nikolayevich

Head of Department of internal audit of CJSC Integrated Energy Systems

3

Kim Svetlana Anatolyevna

Head of control of investments of Department of control and audits of JSC FGC UES

4

Kozelskiy Vladislav Vilorgovich

Head of division of the Committee on city property management of the Government of St. Petersburg

4

Kozelskiy Vladislav Vilorgovich

Head of Department of the Committee on city property management

5

Kormushkina Lyudmila Dmitriyevna

Head of division of auditing revisions and expertise of Department of internal audit and risk management of JSC Rosseti (previous name – JSC IDGC Holding)

5

Uskov Valery Evgenyevich

Head of division of the Committee on power and engineering support

The current members of the Audit Commission

Were elected by the annual general meeting of shareholders on 20.06.2013 (minutes # 1/2013 of 21.06.2013).

Kim Svetlana Anatolyevna
Chairperson of the Audit Commission

Year of birth: 1981

Education: Moscow State University of Railway Engineering, commerce, specialist of commerce, 2004.

2013–2014: Head of auditing activity and internal audit of Department of control and audits of JSC Rosseti.

2008–2013: Head of control of investments of Department of control and audits of JSC FGC UES.

Share in the authorized capital of the Company: no

Adler Yury Veniaminovich
Member of the Audit Commission

Year of birth: 1975

Education: Ural State Legal Academy, law, 2000.

2008 up to now: Head of division of standards and methodology of Department of corporate governance and interaction with shareholders of JSC Rosseti.

Share in the authorized capital of the Company: no

Kabizskina Elena Aleksandrovna
Member of the Audit Commission

Year of birth: 1964

Education: Far East Technical Institute of Fishing Industry, engineering economics department, engineer-economist.

2005 up to now: Head of Department of internal control and risk management of JSC FGC UES.

Share in the authorized capital of the Company: no

Kozelskiy Vladislav Vilorgovich
Member of the Audit Commission

Year of birth: 1976

Education: Engineering and Economic Academy, state and municipal management, 1998.

2004 up to now: Head of Department of the Committee on city property management of St. Petersburg.

Share i n the authorized capital of the Company: no

Uskov Valery Evgenyevich
Member of the Audit Commission

Year of birth: 1979

Education: St. Petersburg State Agrarian University, electrification and automation of agriculture, electrical engineer.

2010 up to now: Head of division of the Committee on power and engineering support of the Government of St. Petersburg.

2006–2010: Engineer of 1 category of division of construction of power industry facilities of St. Petersburg state institution “Management of the customer on construction and major overhaul of facilities of the engineering-energy complex”.

Share in the authorized capital of the Company: no

Data on remuneration and compensation paid to members of the Audit Commission

Payment of remuneration and compensation to members of the Audit Commission is carried out in a monetary form pursuant to the Regulations on payment of remuneration and compensation, approved by the Annual general shareholder meeting on 30.05.2008. The member of the Audit Commission is compensated for expenses associated with participation in the meeting of the Audit Commission and carrying out a revision under the norms of travel expenses reimbursement in force at the time of the meeting or the revision.

Single compensation is paid to the member of the Audit Commission of the Company for participation in revisions (audit) of financial and business activities in the amount equivalent to twenty three minimum monthly tariff rates of an employee of the first category set by the industry tariff agreement in the power grid complex of the Russian Federation for the period of the revision including indexation defined by the agreement. The payment is made within one week after the report on results of the revision. The size of remunerations paid to the Chairperson of the Audit Commission is increased by 50%. Payment of remuneration and compensation to the specialists (experts) involved by the Audit Commission who are not members of the Audit Commission of the Company, is made on the basis of concluded contracts the provisions of which are approved by the Board of Directors of the Company.

The total amount of remuneration and compensation paid to the members of the Audit Commission of the Company, including involved experts, in 2013 was RUB 1,113,556 including taxes.

In the reporting year no transactions were made between the members of the Audit Commission and the Company. Claims were not presented to the members of the Audit Commission by the Company.

Internal control system

JSC Lenenergo organizes internal and external control of its activity. The internal control bodies are the Committee on audit of the Board of directors, the Audit Commission and Department of internal audit and risk management.

The Board of Directors, the Management Board, the Director General, heads of structural divisions and all egoless of the Company also enter the system of internal control. External control is carried out by auditors.

The Company’s activities in the field of internal control are directly linked to risk management and regulated by the following legal acts:

  • The policy of risk management in JSC Lenenergo (Minutes # 22 of 18.06.2010) defines basic principles of organization, implementation and control of the risk management processes in JSC Lenenergo and provides for the priority actions to develop the risk management system;
  • The policy of internal control of JSC Lenenergo (Minutes # 8 of 27.08.2012) defines basic principles of organization of the internal control system of JSC Lenenergo obligatory to observance and formation of a uniform approach to implementation of the internal control processes in the Company;
  • Methodical recommendations about risk management coordinated by the Committee on audit of the Board of Directors of JSC Lenenergo (Minutes # 17 of 20.04.2011).
Improvement of the internal control and risk management system is carried out at all levels of the Company management in three key areas

Preventive control

  • Development and optimization of processes (activities) with the formation of the minimum required control procedures, worked out taking into account costs and effect of their implementation;
  • formalization (regulation) of activity – processes of the Company are described in the internal documents; participants, their powers and responsibilities are fixed documentary, milestones and actions are identified;
  • risk management activities – the Company performs monitoring, identification and assessment of the risks, and insures development and implementation of risk management activities.

Current control

  • Implementation of control procedures by the processes owners (heads of divisions) and employees of the Company within performance of their basic functional duties;
  • monitoring achievement of quantitative and qualitative indicators of the Company and individual activities (monitoring of efficiency of the current processes). By results of the monitoring corrective actions are carried out.

Subsequent control

Internal audit is carried out by conducting:

  • revisions of structural divisions, processes, projects and activities in the Company and SDCs;
  • assessment of reliability and efficiency of functioning of the internal control system in the Company and SDCs;
  • participation in special (office) investigations on the facts of abuses (fraud), causing of a damage to the Company and SDCs, inappropriate and ineffective use of resource.

External audit is performed by the external auditor of the Company by the audit of the annual statements of the Company under RAS and assessment of the state of the Company’s internal control system.

Audits are carried out by the Audit Commission of the Company by means of control over financial and business activities of the Company for compliance with Russian Federation legislation, the Charter and internal documents of the Company.

Self-evaluation is carried out by the heads of structural units, or by the Company’s management, including assessment of effectiveness, efficiency and productivity of supervised processes and compliance with applicable legislation and internal documents of the Company.

Department of internal audit and risk management

Department of internal audit and risk management of JSC Lenenergo was created in 2008. The department submits directly to the Director General and is functionally accountable to the Committee on audit of the Board of Directors. Department of internal audit and risk management operates on the basis of:

  • the policy of risk management of JSC Lenenergo approved by the decision of the Board of Directors of 18.06.2010 (Minutes # 22 of 18.06.2010);
  • the policy of internal control of JSC Lenenergo approved by the decision of the Board of Directors of 24.08.2012 (Minutes # 8 of 27.08.2012);
  • methodical recommendations about risk management of JSC Lenenergo approved by the decision of the Board of Directors of 31.05.2011 (Minutes # 19 of 31.05.2011).

The main tasks of department are:

  • evaluation of the effectiveness of the internal control system of the Company, monitoring of compliance with internal control procedures
  • monitoring the company’s compliance with requirements of current legislation, internal regulations of the Company, and effective use and safekeeping of assets (property) of the Company;
  • organization and support functioning of the risk management process of the Company, coordination of activity of subdivisions participating in this process, evaluation of the effectiveness of the risk management process of the Company, regular monitoring of risk management activities, and submission of recommendations to improve the efficiency and productivity of risk management.

Auditors of the Company

CJSC KPMG

For carrying out the audit of accounting and financial (accounting) statements of JSC Lenenergo for 2013, prepared in accordance with Russian accounting standards, Annual General Shareholders Meeting of the Company approved CJSC KPMG (Minutes of AGMS # 1/2013 of 21.06.2013).

The candidacy of the auditor CJSC KPMG was reviewed by the Committee on audit of the Board of Directors of JSC Lenenergo on 26.04.2013 (Minutes # 33). Based on the recommendation of the Committee the Board of Directors made the decision to nominate the candidacy of the auditor CJSC KPMG for its approval at the Annual General meeting of shareholders (Minutes of the meeting of the Board of Directors # 31 of 06.05.2013).

LLC Ernst & Young

JSC Ernst & Young performs audit of the annual statements and review of interim (half-yearly) consolidated financial statements for 2013, prepared in accordance with International financial reporting standards (IFRS).

After the necessary procurement procedures the auditor candidacy for the audit of consolidated financial statements in accordance with IFRS is assessed and approved by the Committee on audit of the Board of Directors. Approval of the auditor candidacy by the General shareholder meeting is not required.

The Company held open competitive negotiations to select the audit company, by results of which the auditor company LLC Ernst & Young was elected. The Committee on audit of the Board of Directors approved the auditor candidacy of LLC Ernst & Young to perform audit of the consolidated statements of JSC Lenenergo group for 2013 according to IFRS (Minutes of the Committee # 35 of 13.06.2013).

Fee of auditors

Pursuant to item 22.8 of Art. 22 of the Charter, the amount of fee paid to the auditor is defined by the Board of Directors. According to the decision of the Board of Directors of 18.10.2013, the amount of fee of the auditor CJSC KPMG was RUB 1,324,187, including VAT (Minutes of the Board of Directors # 10 of 22.10.2013).

The amount of fee paid to LLC Ernst & Young is defined by the Committee on audit of the Board of Directors. According to the contract of auditor services, concluded between JSC Lenenergo and LLC Ernst & Young, in 2013 compensation was RUB 8,098,860, including VAT (Minutes of the Committee # 35 of 13.06.2013).

Protection of insider information

JSC Lenenergo as a public company whose shares are included in quotation lists of the Russian stock exchange pays special attention to insider information that can have a significant effect on the value of financial tools of the Company. JSC Lenenergo is guided by the requirements of Federal Law # 224-FZ of July 27, 2010 «About counteracting improper use of insider information and market manipulation» (hereinafter - Federal Law # 224). The Company takes measures on countering improper use of insider information in compliance with the best Russian and international practices in the field of prevention of insider trading.

Department of internal audit and risk management exercises control over compliance with requirements of the Federal Law # 224 and laws and regulations approved thereof. A report on observance of the requirements is quarterly submitted to the Board of Directors.

With a view of further improvement of the internal control system and protection of insider information in June 2013, the Company introduced the Regulations on insider information of JSC Lenenergo in the new edition, approved by the Board of Directors. In particular, the Regulations:

  • define the terms of «insider» and «insider information»,
  • define the list of insider information of the Company and the procedure of compilation of the list of insiders,
  • establish the procedure of access to insider information, the rules of protection of its confidentiality and control over compliance with the requirements of Federal Law # 224 and normative legal acts approved thereof,
  • set the rules for implementation by insiders of transactions with insider financial tools, including restrictions on trade in securities within the so-called closed period.
The Company performs current and subsequent compliance control in the field of insider information protection:
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