4.1 The Memo of the Controlling Stockholder (PAO Rosseti) with Regard to the Controlled Grid Companies

Goals of stockholding and plans with regard to the controlling stakes

PAOPublic Joint-Stock Company Rosseti is a public holding company, with 88.04% of the charter capital owned by the government. It was incorporated in line with Edict of the Russian President^[45] to enhance efficiency and development of the Russian grid sector and coordinate management of the grids through subsidiaries and affiliate. PAOPublic Joint-Stock Company Rosseti has controlling stakes in 14 regional grid companies[1] (PAOPublic Joint-Stock Company Rosseti Kuban, PAOPublic Joint-Stock Company Rosseti Lenenergo, PAOPublic Joint-Stock Company Rosseti Moscow Region, PAOPublic Joint-Stock Company Rosseti Volga, PAOPublic Joint-Stock Company Rosseti North West, PAOPublic Joint-Stock Company Rosseti North Caucasus, PAOPublic Joint-Stock Company Rosseti Siberia, OAOOpen Joint-Stock Company IDGCInterregional Distribution Grid Company of Urals, PAOPublic Joint-Stock Company Rosseti Center, PAOPublic Joint-Stock Company Rosseti Center and Volga, PAOPublic Joint-Stock Company Rosseti South, PAOPublic Joint-Stock Company TRK, AOJoint-Stock Company Rosseti Tyumen, AOJoint-Stock Company Yantarenergo) and 1 backbone grid company (PAOPublic Joint-Stock Company FGC UESUnited Energy System). PAOPublic Joint-Stock Company Rosseti considers its controlling stakes strategic and does not plan to divest from the assets.

Primary objectives regarding management of the assets

The key objective of PAOPublic Joint-Stock Company Rosseti with regard to the management of the subsidiaries, under the Rosseti Group’s Development Strategy until 2030^[46], is innovation-based development of the grids to the extent that meets the needs of consumers and Russian economy.

PAOPublic Joint-Stock Company Rosseti has outlined the following strategic priorities for the Group’s development:

• provision of reliable, high-quality and easy-of-access electricity supply as well as enforcement of Russia’s energy security;
• promotion of enhanced efficiency of the core business, incl. due to implementation of cutting-edge digital technologies and innovations;
• development of new business lines (non-regulated and consumer services) through digital transformation to ensure sustainability of the Company to industry changes;
• implementation of sustainable development principles.

Corporate governance principles

PAOPublic Joint-Stock Company Rosseti administers the group in compliance with the single corporate standards focused on the efficiency of business processes, quality control, minimization of all types of corporate risks. PAOPublic Joint-Stock Company Rosseti, as a controlling shareholder, fully understands the importance of improving corporate governance in the Group, strives to foster transparency and to implement recommendations of the Corporate Governance Code into business practices. Following the best corporate governance practices, PAOPublic Joint-Stock Company Rosseti ensures that the boards of directors of the Group’s listed companies have as much independent directors as required to comply with the listing rules and corporate governance principles. To ensure independence and neutrality of the boards of directors of the Group’s companies, the number of independent directors in the boards of directors will not be lower than the present number.

Rosseti’s representatives also take part in annual general meetings of stockholders of the Group’s companies to build a dialog with minority stockholders regarding business prospects. PAOPublic Joint-Stock Company Rosseti guarantees compliance of the Group’s operations with market-based principles. PAOPublic Joint-Stock Company Rosseti, as a controlling stockholder, supports initiatives of the Group’s companies on protection of rights and interests of minority stockholders.

In response to Russian Government Decree^[47] PAOPublic Joint-Stock Company Rosseti shall ensure distribution by the Group’s companies of at least 50% of the net income from the IFRSInternational Financial Reporting Standards financial statements as dividends, taking into account net income adjustments, stipulated by the abovementioned decree.