Corporate Governance and Securities of the Company

• 3.1 Principles of Corporate Governance
• 3.2 Information on the Executive Bodies
• 3.3 Information on the Controlling Bodies
• 3.4 Subsidiaries and Dependent Companies
• 3.5 Authorized Capital. Structure of Share Capital
• 3.6 Securities. Capitalization. Indicators for 2010
• 3.7 Profit Distribution and Dividend Policy

Profit Distribution and Dividend Policy

As of 31.12.2010 JSC "Lenenergo" authorized capital amounted to RUR 1,019,285,990.04 (93,264,311 preferred shares and 926 021 679.04 ordinary shares). There were no changes in the authorized capital in 2010.

The Company’s authorized capital was increased upon the results of the year 2008 due to the private placement floatation of additional shares in behalf of the city of St. Petersburg. ¹⁸ The floatation of the shares was completed on October 24, 2008. The official report on the results of the additional issue of shares was registered on December 12, 2008. A total of 234,167,535 and 4/100 ordinary shares were placed, which is equal to 97.6 per cent of the total volume of the additional issue.

The profit distribution in accordance with the decisions of the General Shareholder Meetings over the past three years is given in the table below:

Payment of dividends by JSC "Lenenergo"

When accruing and executing payment of dividends, JSC "Lenenergo" fulfills the requirements of the Federal Law "On Joint-Stock Companies" and the Charter of the Company.

Due to the absence of any net profit, JSC "Lenenergo" did not pay any dividends between 1997 and 2000 and on 2005 results.

The Company’s dividend history for the past three years is given in the tables below.

The dividend policy of JSC "Lenenergo" is determined by the Regulations on dividend policy, approved by the Board of Directors of the Company on 31.08.2010 (Minutes No.4), which are developed according to the current legislation, the JSC "Lenenergo" Charter, recommendations of the Corporate Governance Code of JSC "Lenenergo", and other internal documents. The Regulations specify general principles of the dividend policy of JSC "Lenenergo", the terms and size of dividend payment, sources of funds directed on dividend payment, the order of decision-making on payment of dividends, the list of persons entitled to receive dividends, the procedure, terms and form of dividend payment, disclosure of information on the dividend policy, and responsibility of the Company for nonpayment of dividends.

The dividend policy of JSC "Lenenergo" is a set of principles used by the Company, and methods to determine proportions between the capitalized part of the Company's profit and a part of profit paid as dividends, as well as the system of relations and principles to determine the procedure and terms of dividend payment, and to establish the responsibility of the Company for non-execution of its obligations on dividend payment. It is based on the balance of interests of the Company and its shareholders at determining the size of dividend payments, on the respect and strict observance of the rights of shareholders provided by the current legislation of the Russian Federation, the Charter, and the internal documents of the Company. Furthermore, it is directed at growth of investment appeal of the Company and its market capitalization.

Provisions of the Charter of the Company determining the procedure for announcement and payment of dividends:

• The Company is entitled by results of the first quarter, half-year, nine months of a fiscal year and (or) by results of a fiscal year to make decisions (to declare) on payment of dividends under the placed shares. The decision on payment (announcement) of dividends by the results of the first quarter, half-year and nine months of a fiscal year can be approved within three months following the termination of the corresponding period;
• Decisions on payment (announcement) of dividends, including decisions on the size of the dividend and the form of its payment under shares of each category (type), are approved by the General Meeting of Shareholders of the Company;
• Terms of payment of dividends are determined by the General Meeting of Shareholders of the Company, but not later than 60 (Sixty) days following the decision-making on their payment.

The dividend policy of JSC "Lenenergo" is based on the following principles:

• Calculation of dividends is based on use of profit without influence of revaluation of financial investments;
• Necessity of maintenance of the required level of the financial and technical condition of the Company (accomplishment of the investment program), provision of prospects of development of the Company;
• Conformity of the practice of accrual approved by the Company and payment of dividends to the legislation of the Russian Federation and to the best standards of corporate behavior;
• Optimal combination of interests of the Company and the Company's shareholders;
• Necessity of an increase in investment appeal of the Company and its capitalization;
• Provision of transparency (clearness) of the mechanism for determination of the size of dividends and their payment;
• Dividends on ordinary shares are paid only in case of complete payment of dividends on preferred shares according to the Charter of the Company (in case of placing of preferred shares of the Company).

The recommended sum of dividend payments is determined by the Board of Directors based on the financial performance of the Company, thus the Board of Directors aspires to provide positive dynamics of the size of dividend payments to shareholders from year to year.

The Company provides disclosure of information on dividend policy by publishing the Regulations on the dividend policy of JSC "Lenenergo" and all amendments on the Company’s website at http:// www.lenenergo.ru/ru/vnutrenniedokume/.

¹⁸ As of 01.01.2008 JSC "Lenenergo" authorized capital amounted to RUR 785,118,455, and consisted of 93,264,311 preferred shares and 691,854,144 ordinary shares