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                        UES No. 3 in Behavior Ranking

Twenty-two of 25 top companies by market capitalization violated either the law or shareholders rights at their annual meeting this year, the Institute of Corporate Governance and Law said Tuesday.

Despite the violations, however, companies committed to corporate governance continue to improve, the ICGL concluded in its quarterly report on governance, released Tuesday.

The best-behaved of the 25 companies studied is Vimpelcom, which held on to the top position by scoring 83.71 out of a possible 100 points. Lenenergo was No. 2 with 66.6 points.

The most eye-catching rating was that of Unified Energy Systems, which came in a close third despite vocal and growing concerns of minority investors, who say company CEO Anatoly Chubais is orchestrating under-the-table asset giveaways.

[Governance Rating Table]

New ICLG director Tatyana Ivanova defended the score, saying that although her team found restructuring and asset-stripping risks at UES, improvements in other areas tipped the balance.

"A very strong corporate governance team works at UES and they're taking giant steps to improve the company's transparency," she said. "It's enough just to look at its web site. Shareholders don't even need to request documents."

Ivanova's predecessor, ICLG founder and former Federal Securities Commissioner Dmitry Vasilyev, left the institute last month to become first deputy CEO of UES subsidiary Mosenergo. Ivanova said Mosenergo was removed from the list of companies rated by the ICLG to avoid conflicts of interest.

The ratings are based on transparency, capital structure, shareholder rights, governance history, directors, executive bodies and corporate risk.

"Ratings are good because they allow companies to compare themselves against each other on a more or less objective basis," said William Browder, head of Hermitage Capital Management, a minority UES shareholder and Chubais critic. "But we couldn't possibly agree with any kind of positive rating on UES because of their horrible asset-stripping plans," he added.

Troika Dialog, the only major investment bank in Moscow with a dedicated corporate governance analyst, rates UES in the lower range of the "fair to vulnerable risk" category shared by Aeroflot, MGTS, Severstal and Sibneft.

The ICLG has winnowed its list from 40 companies to the 25 with the highest capitalization -- minus Mosenergo and MTS -- accounting for almost 95 percent of the stock market's value. Thus, the institute did not provide comparative ratings for the previous quarter.

Leading mobile operator MTS was removed from the list because the ICLG, which owns a small stake in all companies it rates, did not receive company information from the U.S. Securities and Exchange Commission in time.

Overall, six companies faired worse, mainly for providing less information about their operations. Oil major TNK lost 7.3 points, although it promised changes after fully changing over to a new data base system. Rosneft subsidiary Purneftegaz came in last, scoring a lowly 33.61 for offering information only to those willing to travel to the city of Gubkinsky, in the Yamal-Nenetsk autonomous region.

Of the violations that occurred at annual shareholder meetings in the first and second quarters, Surgutneftegaz was the worst offender, asking shareholders to approve related party transactions without providing many details.

The most typical violations of shareholders' rights were posing a single question regarding the approval of both privileged and common shares, and not giving "against" or "abstain" options in the board election.

The most improved were Surgutneftegaz, up 10.9 points, and AvtoVAZ, up 9.85 points. Both remained in the lower half of the list, despite earning points for fuller disclosure of financial information.