Sovcomflot

Quarterly Report • Sep 30, 2012

OAO SOVCOMFLOT AND ITS SUBSIDIARY CORPORATIONS

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30 September 2012

Contents

	Condensed Consolidated Income Statement	2
	Condensed Consolidated Statement of Comprehensive Income	3
	Condensed Consolidated Statement of Financial Position	4
	Condensed Consolidated Statement of Changes in Equity	5
	Condensed Consolidated Statement of Cash Flows	6
	Notes to the Condensed Consolidated Financial Statements
1.	Organisation, Basis of Preparation and Accounting Policies	7
2.	Segment Information	8
3.	Fleet	9
4.	Vessels Under Construction	10
5.	Finance Lease Receivables	10
6.	Trade and Other Receivables	10
7.	Cash and Bank Deposits	11
8.	Non-Current Assets Held for Sale	11
9.	Dividends	11
10.	Secured Bank Loans	11
11.	Finance Lease Liabilities	11
12.	Derivative Financial Instruments	12
13.	Income Taxes	12
14.	Contingent Asset	13
15.	Related Party Transactions	13
16.	Events After the Reporting Period	13
17.	Date of Iss ue	13

Condensed Consolidated Income Statement For the period ended 30 September 2012

		Nine months		Three months		Year ended
		30/09/02012	30/09/2011	30/09/2012	30/09/2011	31/12/2011
	Note	\$'000	\$'000	\$'000	\$'000	\$'000
Freight and Hire revenue		1,114,277	1,075,619	336,610	343,037	1,438,926
Voyage expenses and commissions		(394,115)	(381,039)	(116,908)	(130,070)	(511,651)
Time charter equivalent revenues		720,162	694,580	219,702	212,967	927,275
Direct operating expenses
Vessels' running costs		253,074	243,322	85,498	84,363	332,317
Vessels' drydock cost amortisation	3	27,155	26,960	9,101	9,311	35,268
Charter hire payments		26,323	25,088	6,809	10,833	38,349
		(306,552)	(295,370)	(101,408)	(104,507)	(405,934)
Profit on vessels' trading		413,610	399,210	118,294	108,460	521,341
Other operating expenses
Depreciation and amortisation
Vessels' depreciation		176,563	163,786	57,869	55,639	223,726
Vessels' impairment provision	3 & 8	28,351	15,998	21,251	11,654	7,602
Other depreciation		3,750	3,849	1,221	1,367	5,092
Intangible assets' amortisation		8,923	6,297	3,298	2,100	8,397
		217,587	189,930	83,639	70,760	244,817
Allowance for / (reversal) of credit losses		57	(68)	(213)	(132)	2,710
General and administrative
expenses		65,727	63,796	20,538	18,263	93,125
Total other operating expenses		283,371	253,658	103,964	88,891	340,652
Profit from vessels' operations		130,239	145,552	14,330	19,569	180,689
(Loss) / gain on sale of assets		(236)	10,597	(168)	6,307	12,190
Gain on disposal of investments		28	286	4	628	283
Other operating revenues		76,580	38,994	29,033	17,735	52,423
Other operating expenses		(66,870)	(32,838)	(25,611)	(15,341)	(44,030)
(Increase) / release of provision		(123)	-	15	-	3,317
Share of profits / (losses) in
associated undertakings		209	(7,020)	4,433	(7,947)	(10,873)
Operating profit		139,827	155,571	22,036	20,951	193,999
Other (expenses) / income
Interest expense		(105,003)	(106,996)	(35,649)	(35,332)	(142,117)
Financing costs		(2,249)	(3,329)	(643)	(918)	(4,400)
Interest income		17,401	16,968	5,478	6,323	22,027
Other non-operating income		1,059	1,792	149	(704)	8,565
Other non-operating expenses Loss on ineffective hedging		(8,595)	(3,682)	(2,888)	3,361	(12,837)
instruments Gain on derivative financial	12	(90)	(1,748)	(52)	(1,625)	(1,512)
instruments held for trading Loss on investments held for	12	9,072	3,113	3,002	130	8,566
trading		-	(3)	-	-	(3)
Foreign exchange differences		(1,027)	(2,825)	1,190	(5,414)	(1,086)
Net other expenses		(89,432)	(96,710)	(29,413)	(34,179)	(122,797)
Profit before income taxes		50,395	58,861	(7,377)	(13,228)	71,202
Income taxes	13	(8,076)	(11,493)	(1,182)	(3,630)	(17,526)
Profit for the period		42,319	47,368	(8,559)	(16,858)	53,676
Profit attributable to:
Owners of the parent		42,320	46,375	(7,350)	(16,872)	52,256
Non-controlling interest		(1)	993	(1,209)	14	1,420
		42,319	47,368	(8,559)	(16,858)	53,676

Condensed Consolidated Statement of Comprehensive Income For the period ended 30 September 2012

		Nine months		Three months		Year ended
		30/09/02012	30/09/2011	30/09/2012	30/09/2011	31/12/2011
	Note	\$'000	\$'000	\$'000	\$'000	\$'000
Profit for the period		42,319	47,368	(8,559)	(16,858)	53,676
Other comprehensive income:
Share of associates' other comprehensive income		(570)	1,275	(1,062)	2,396	1,149
Exchange differences on translation of foreign operations		5,198	(2,548)	5,822	(10,451)	(4,570)
Derivative financial instruments recycled and debited to the income statement	12	25,702	24,271	6,764	5,684	30,709
Fair value movement of derivative financial instruments debited to other comprehensive income	12	(32,379)	(74,012)	(9,379)	(50,187)	(75,398)
Other comprehensive income for the period, net of tax		(2,049)	(51,014)	2,145	(52,558)	(48,110)
Total comprehensive income for the period		40,270	(3,646)	(6,414)	(69,416)	5,566
Total comprehensive income attributable to:
Owners of the parent		39,740	(4,376)	(5,761)	(68,223)	4,629
Non-controlling interest		530	730	(653)	(1,193)	937
		40,270	(3,646)	(6,414)	(69,416)	5,566

Condensed Consolidated Statement of Financial Position – 30 Se ptember 2012

	Note	30/09/2012 \$'000	30/09/2011 \$'000	31/12/2011 \$'000
Assets
Non-current assets
Fleet	3	5,488,424	5,511,882	5,460,390
Vessels under construction	4	489,836	284,637	334,977
Other fixed assets		72,174	60,404	65,380
Investment property		3,952	4,792	4,565
Other fixed assets under construction		16,130	8,639	9,866
Intangible assets		12,890	14,019	12,273
Investments in associates		1,145	864	1,273
Available-for-sale investments		1,381	1,646	1,381
Finance lease receivables	5	89,874	92,877	92,162
Trade and other receivables	6	14,932	30,989	33,525
Deferred tax assets		2,940	1,823	5,164
		6,193,678	6,012,572	6,020,956
Current assets Inventories		80,806	73,213	76,317
Trade and other receivables	6	281,686	215,233	237,563
Finance lease receivables	5	3,003	2,600	2,697
Current tax receivable		3,623	3,551	2,332
Cash and bank deposits	7	302,456	334,821	389,742
		671,574	629,418	708,651
Non-current assets held for sale	8	13,095	11,667	9,800
		684,669	641,085	718,451
Total assets		6,878,347	6,653,657	6,739,407
Equity and liabilities Capital and reserves Share capital Reserves Equity attributable to owners of the parent		405,012 2,547,085 2,952,097	405,012 2,503,266 2,908,278	405,012 2,520,171 2,925,183
Non-controlling interest		158,354	170,764	159,989
Total equity		3,110,451	3,079,042	3,085,172
Non-current liabilities Trade and other payables		-	5,346	-
Secured bank loans	10	1,919,542	1,834,766	1,903,423
Finance lease liabilities	11	204,268	224,107	221,688
Derivative financial instruments	12	128,460	128,135	120,826
Retirement benefit obligations		8,594	8,301	7,997
Other loans		797,469	796,756	797,005
Tax payable		-	3,990	-
Deferred tax liabilities		5,494	6,390	7,318
		3,063,827	3,007,791	3,058,257
Current liabilities
Trade and other payables		256,934	221,724	245,276
Secured bank loans	10	362,415	258,042	258,776
Finance lease liabilities	11	19,838	9,201	9,363
Current tax payable		6,952	7,162	12,219
Derivative financial instruments	12	57,930	70,695	67,263
Amount due to non-controlling interest		-	-	3,081
		704,069	566,824	595,978
Total equity and liabilities		6,878,347	6,653,657	6,739,407

The accompanying notes are an integral part of the condensed consolidated financial s tatements.

Condensed Consolidated Statement of Changes in Equi ty For the period ended 30 September 2012

	Sh are ita l ca p	Sh are mi pre um	Re cti tru co ns on res erv e	He dg ing res erv e	Cu rre nc y res erv e	Re tai d ne rni ea ng s	Att rib ble uta to f th ow ne rs o e t pa ren	No n oll ing ntr co int st ere	To tal
	\$ '00 0	\$ '00 0	\$ '00 0	\$ '00 0	\$ '00 0	\$ '00 0	\$ '00 0	\$ '00 0	\$ '00 0
As Ja at 1 20 11 nu ary	5, 40 01 2	5 81 8, 84	( 0) 83 4, 49	( 75 3) 97 ,	( 3) 1, 84	2, 64 6, 92 6	2, 93 6, 69 7	18 6, 32 4	3, 12 3, 02 1
fit f Pro or t he rio d pe	-	-	-	-	-	46 37 5 ,	46 37 5 ,	99 3	47 36 8 ,
Ot he reh siv e in r co mp en co me	-	-	-	( 1) 49 74 ,	( 0) 1, 01	-	( 1) 50 75 ,	( 3) 26	( 4) 51 01 ,
To tal reh siv e in co mp en co me	-	-	-	( 1) 49 74 ,	( 0) 1, 01	46 37 5 ,	( 6) 4, 37	73 0	( 6) 3, 64
Div ide nd s ( No ) te 9 f no Re rch tro llin inte t in pu as e o n-c on g res	-	-	-	-	-	( 8) 35 61 ,	( 8) 35 61 ,	( 3) 96	( 1) 36 58 ,
JS C N hip by JS C N hip ov os ov os	-	-	-	-	( ) 33	11 60 8 ,	11 57 5 ,	( 7) 15 32 ,	( 2) 3, 75
As at 3 0 S be r 20 11 tem ep	40 5, 01 2	81 8, 84 5	( 83 4, 49 0)	( 14 49 4) 7,	( 2, 88 6)	2, 66 9, 29 1	2, 90 8, 27 8	17 0, 76 4	3, 07 9, 04 2
Pro fit f he rio d or t pe	-	-	-	-	-	5, 88 1	5, 88 1	34 1	6, 22 2
Ot he reh siv e in r co mp en co me	-	-	-	5, 05 2	( 8) 1, 92	-	3, 124	( ) 134	2, 99 0
To tal reh siv e in co mp en co me	-	-	-	5, 05 2	( 8) 1, 92	5, 88 1	9, 00 5	20 7	9, 21 2
Re rch f no llin inte t in tro pu as e o n-c on g res JS C N hip by JS C N hip ov os ov os	-	-	-	-	( ) 38	7, 93 8	7, 90 0	( 2) 10 98 ,	( 2) 3, 08
As at 3 1 D be r 20 11 ec em	40 5, 01 2	81 8, 84 5	( 0) 83 4, 49	( 2) 14 2, 44	( 2) 4, 85	2, 68 3, 11 0	2, 92 5, 18 3	15 9, 98 9	3, 08 5, 17 2
fit f Pro or t he rio d pe	-	-	-	-	-	42 32 0 ,	42 32 0 ,	( 1)	42 31 9 ,
Ot he reh siv e in r co mp en co me	-	-	-	( 6, 67 7)	4, 09 7	-	( 2, 58 0)	53 1	( 2, 04 9)
To tal reh siv e in co mp en co me	-	-	-	( 7) 6, 67	4, 09 7	42 32 0 ,	39 74 0 ,	53 0	40 27 0 ,
Div ide nd s ( No ) te 9	-	-	-	-	-	( 6) 12 82 ,	( 6) 12 82 ,	( ) 2, 165	( 1) 14 99 ,
As at 3 0 S be r 20 12 tem ep	40 5, 01 2	81 8, 84 5	( 83 4, 49 0)	( 14 9, 11 9)	( 75 5)	2, 71 2, 60 4	2, 95 2, 09 7	15 8, 35 4	3, 11 0, 45 1

Notes

Hedging reserve: The hedging reserve contains the eCurrency reserve: The currency reserve is used to rsubsidiary company JSC Novoship

ffective portion of the cash flow hedge relationshi ps incurred as at the reporting date. ecord exchange differences arising from the transla

tion of the financial statements of foreign subsidi aries. During the period ended 31 December 2011 the Group's changed its functional currency from the US dollar to the Russian Rouble, due to the cessation of US Dollar denominated operations.

The accompanying notes are an integral part of the condensed consolidated financial statements.

Condensed Consolidated Statement of Cash Flows For the period ended 30 September 2012

		Nine months ended		Year ended
		30/09/2012	30/09/2011	31/12/2011
	Note	\$'000	\$'000	\$'000
Operating Activities
Cash received from freight and hire of vessels		1,116,108	1,031,307	1,375,485
Other cash receipts		37,995	36,542	49,821
Cash payments for voyage and running costs		(696,975)	(667,221)	(883,438)
Other cash payments		(100,743)	(96,097)	(139,139)
Cash generated from operations		356,385	304,531	402,729
Interest received		6,194	20,351	20,725
Income tax paid		(16,917)	(14,576)	(17,666)
Net cash inflow from operating activities		345,662	310,306	405,788
Investing Activities
Acquisition of joint ventures net of cash acquired		(25,727)	-	-
Expenditure on fleet		(1,858)	(280,085)	(284,481)
Expenditure on drydock		(23,959)	(23,091)	(25,310)
Expenditure on vessels under construction		(309,645)	(276,570)	(324,680)
Interest capitalised		(4,517)	(4,742)	(6,944)
Expenditure on other fixed assets		(16,322)	(12,262)	(17,235)
Proceeds from sale of vessels		9,800	37,802	36,956
Proceeds from sale of other fixed assets		664	8,634	9,952
Proceeds from disposal of investments		-	886	927
Capital element received on finance leases		721	550	709
Interest received on finance leases		6,052	3,216	4,355
Bank term deposits	7	932	6,562	5,630
Claims receipts		-	40,187	41,086
Other receipts		133	1,031	1,072
Net cash outflow used in investing activities		(363,726)	(497,882)	(557,963)
Financing Activities
Proceeds from borrowings		246,239	426,489	551,229
Repayment of borrowings		(174,897)	(209,707)	(265,525)
Repayment to joint venture partner		(17,047)	(53,932)	(53,932)
Financing costs		(4,225)	(4,621)	(5,678)
Repayment of finance lease liabilities		(7,149)	(7,190)	(9,515)
Security and restricted deposits	7	(4,671)	2,398	19,278
Funds in retention bank accounts	7	3,404	2,441	(6,094)
Interest paid on borrowings and other loans		(85,429)	(81,576)	(122,880)
Interest paid on finance leases		(11,459)	(12,171)	(16,038)
Dividends paid		(14,802)	(35,618)	(37,141)
Buy back of shares		(3,171)	(3,752)	(3,753)
Net cash (outflow) / inflow from financing activities		(73,207)	22,761	49,951
Decrease in Cash and Cash Equivalents		(91,271)	(164,815)	(102,224)
Cash and Cash Equivalents at 1 January	7	339,812	443,428	443,428
Net foreign exchange difference		3,650	(1,135)	(1,392)
Cash and Cash Equivalents at 30 September / 31 December	7	252,191	277,478	339,812

Non – cash transactions

During the period ended 31 December 2011 the Group did not exercise its option for the acquisition of one oil product Handymax tanker and consequently both the finance lease liability and the carrying value of the vess el were derecognised on expiry of the time charter agreement (see Notes 3 and 11).

Notes to the Condensed Consolidated Financial Statement s – 30 September 2012

1. Organisation, Basis of Preparation and Accounting Po licies

OAO Sovcomflot ("Sovcomflot" or "the Company") is an open joint stock company organised under the laws of t he Russian Federation and was registered in Russia on 18 Decembe r 1995, as the successor undertaking to AKP Sovcomf lot, in which the Russian Federation holds 100% of the issued shares.

The Company's registered office address is 3A, Moika River Embankment, Saint Petersburg 191186, Russian Federation and its head office is located at 6 Gasheka Street, Moscow 125047, Russian Federation.

The Company, through its subsidiaries and joint venture s (the "Group"), is engaged in ship owning and operating on a world-wide basis with a fleet of 147 vessels at the period end, comprising 135 tankers, 1 chartered in seismic ves sel, 8 gas carriers, 1 bulk carrier and 2 ice breaking supply vessels. For major changes in the period in relation to the fleet see also Notes 3 and 4. In addition the Group through its subsidiaries owns 9 escort tug vessel s which have been chartered out on bareboat charter to an associate undertaking (see Note 5).

Statement of compliance

The condensed consolidated financial statements are u naudited and have been prepared in accordance with I nternational Financial Reporting Standard (IFRS) - IAS 34 "Interim Financia l Reporting". They do not include all of the information required for ful l annual financial statements and should be read in conjunction with the audited consolidat ed financial statements of the Group for the year ended 31 December 2011.

Significant Accounting Policies

Except as described below, the accounting policies applied by the Group in thes e condensed consolidated financial statements are the same as those applied by the Group in its consolidated financial st atements for the year ended 31 December 2011.

During the period the Group has adopted all of the new and rev ised Standards and Interpretations issued by the In ternational Accounting Standards Board (the IASB) and the Inter national Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for ac counting periods beginning on 1 January 2012.

Seasonality of Operations

Although some of the Group's operations may sometime s be affected by seasonal factors such as general we ather conditions, management does not feel this has a material effect o n the performance of the Group when comparing the inter im results to those achieved in the last quarter of the year.

Changes in estimates

The preparation of the condensed consolidated financial statements requires management to make estimates an d assumptions that affect the reported amounts of assets and liabilitie s, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates under different assumptions and condition s. The critical accounting judgements and key sourc es of estimation uncertainty were the same as those applied to the consolidated f inancial statements for the year ended 31 December 2 011.

Notes to the Condensed Consolidated Financial Statements – 30 September 2012 (Continued)

2. Segment Information

For management purposes, the Group is organised into business units based on the main types of activitie s and has five reportable operating segments. Management considers the global market as one geographical segment and does not there fore analyse geographical segment information on revenue from cu stomers or non-current segment assets.

Period ended 30 September 2012

	Crude Oil \$'000	Oil Product \$'000	Gas \$'000	Offshore \$'000	Other \$'000	Total \$'000
Freight and hire revenue	524,070	321,220	64,051	154,357	50,579	1,114,277
Voyage expenses and commissions	(241,026)	(136,278)	(314)	(9,000)	(7,497)	(394,115)
Time charter equivalent revenues	283,044	184,942	63,737	145,357	43,082	720,162
Direct operating expenses Vessels' running costs Vessels' drydock cost	(103,479)	(99,279)	(16,261)	(27,961)	(6,094)	(253,074)
amortisation Charter hire payments	(11,196) -	(8,447) (5,729)	(3,270) -	(3,578) -	(664) (20,594)	(27,155) (26,323)
Profit on vessels' trading Vessels' depreciation Vessels' impairment provision Intangibles assets' amortisation	168,369 (77,757) - -	71,487 (50,891) (28,351) (213)	44,206 (11,042) - (8,710)	113,818 (36,186) - -	15,730 (687) - -	413,610 (176,563) (28,351) (8,923)
Unallocated	90,612	(7,968)	24,454	77,632	15,043	199,773
Other operating expenses Profit from vessels' operations Other expenses Profit before income taxes						(69,534) 130,239 (79,844) 50,395
Carrying amount of fleet	2,547,115	1,425,354	413,466	1,085,988	16,501	5,488,424
Non-current assets held for sale	-	13,034	-	-	-	13,034
Deadweight tonnage of fleet used in operations ('000)	7,487	2,588	282	1,186	73	11,616
Period ended 30 September 2011
	Crude Oil	Oil Product	Gas	Offshore	Other	Total
Freight and hire revenue	\$'000 536,498	\$'000 327,591	\$'000 65,464	\$'000 140,643	\$'000 5,423	\$'000 1,075,619
Voyage expenses and commissions	(236,525)	(137,880)	(428)	(5,877)	(329)	(381,039)
Time charter equivalent revenues	299,973	189,711	65,036	134,766	5,094	694,580
Direct operating expenses Vessels' running costs	(99,331)	(98,211)	(14,727)	(26,671)	(4,382)	(243,322)
Vessels' drydock cost amortisation Charter hire payments	(11,141) (15,243)	(8,473) (7,040)	(3,643) -	(3,067) 231	(636) (3,036)	(26,960) (25,088)
Profit on vessels' trading	174,258	75,987	46,666	105,259	(2,960)	399,210
Vessels' depreciation Vessels' impairment provision Intangible assets amortisation	(71,765) - -	(46,197) (15,998) -	(11,539) - (6,297)	(33,675) - -	(610) - -	(163,786) (15,998) (6,297)
	102,493	13,792	28,830	71,584	(3,570)	213,129
Unallocated Other operating expenses						(67,577)
Profit from vessels' operations Other expenses						145,552 (86,691)
Profit before income taxes						58,861
Carrying amount of fleet	2,519,140	1,410,079	425,459	1,138,957	18,247	5,511,882
Non-current assets h eld for sale Deadweight tonnage of fleet	-	11,667	-	-	-	11,667

Notes to the Condensed Consolidated Financial Statements – 30 September 2012 (Continued)

1. Fleet

	Vessels \$'000	Drydock \$'000	Total Fleet \$'000
Cost
At 1 January 2011	6,259,803	150,750	6,410,553
Expenditure in period	2,725	18,431	21,156
Acquisitions in the period	277,388	4,157	281,545
Transfer from vessels under construction (Note 4)	223,312	4,677	227,989
Derecognition of vessels under finance lease	(59,300)	-	(59,300)
Write-off of fully amortised drydock cost	-	(18,793)	(18,793)
At 30 September 2011	6,703,928	159,222	6,863,150
Expenditure in period	206	5,029	5,235
Write-off of fully amortised drydock cost	-	(5,590)	(5,590)
At 31 December 2011	6,704,134	158,661	6,862,795
Expenditure in period	1,858	23,389	25,247
Acquired on acquisition of joint venture	64,509	1,280	65,789
Transfer from vessels under construction (Note 4)	179,156	2,945	182,101
Transfer to non-current assets held for sale (Note 8)	(38,372)	(1,056)	(39,428)
Write-off of fully amortised drydock cost	-	(33,253)	(33,253)
At 30 September 2012	6,911,285	151,966	7,063,251
Depreciation and amortisation
At 1 January 2011	1,111,873	68,907	1,180,780
Charge for the period	163,786	26,960	190,746
Impairment provision	16,451	-	16,451
Reversal of impairment provision of fleet	(1,409)	-	(1,409)
Derecognition of vessels under fi nance lease	(16,507)	-	(16,507)
Write-off of fully amortised drydock cost	-	(18,793)	(18,793)
At 30 September 2011	1,274,194	77,074	1,351,268
Charge for the period	59,940	8,308	68,248
Reversal of impairment provision of fleet	(11,521)	-	(11,521)
Write-off of fully amortised drydock cost	-	(5,590)	(5,590)
At 31 December 2011	1,322,613	79,792	1,402,405
Charge for the period	176,563	27,155	203,718
Impairment provision	28,351	-	28,351
Transfer to assets held for sale (Note 8)	(26,000)	(394)	(26,394)
Write-off of fully amortised drydock cost	-	(33,253)	(33,253)
At 30 September 2012	1,501,527	73,300	1,574,827
Net book value
At 30 September 2012	5,409,758	78,666	5,488,424
At 30 September 2011	5,441,196	82,353	5,511,882
At 31 December 2011	5,381,521	78,869	5,460,390
	30/09/2012	30/09/2011	31/12/2011
Market value 1 (\$'000)	4,495,926	5,465,360	5,050,570
Current insured values 1 (\$'000)	6,581,310	6,364,170	6, 364,170
Total deadweight tonnage 1 (dwt)	11,611,746	11,202,126	11,202,127

1 Including Group's share in the joint ventures.

Included in the Group's fleet are 4 vessels held under finance leases (2011 – 4) with an aggregate carrying value of \$241.9 million (30 September 2011 - \$247.9 million / 31 December 2011 – \$247.5 mill ion).

Notes to the Condensed Consolidated Financial Statements – 30 September 2012 (Continued)

4. Vessels Under Construction

	30/09/2012 \$'000	30/09/2011 \$'000	31/12/2011 \$'000
Cost
At 1 January	334,977	231,341	231,341
Acquired on acquisition of joint venture	17,050	-	-
Expenditure for the period	319,910	281,285	331,625
Transfer to fleet (Note 3)	(182,101)	(227,989)	(227,989)
At 30 September / 31 December	489,836	284,637	334,977
Total deadweight tonnage 1 (dwt)	1,457,900	1,893,040	1,651,840

¹Includes Group's share in joint ventures

In January 2012 the Group terminated two crude oil Aframax tanker shipbuilding contrac ts without any financial loss to the Group. The Group had not paid for any of the contracted costs of the cancelled contr acts.

In addition to the termination of the shipbuilding contracts referred t o above, the Group entered into new optional agreements for the construction of two crude oil Aframax tankers, declarable by 31 December 2012. The contract price for the optional vessels will be agreed upon the declaration of the options.

In February 2012 the Group acquired through the acquisition of a joint venture the contract for the construction of an oil product Panamax tanker (LR1 type) scheduled for delivery in March 2012.

Moreover in February 2012 the Group signed agreements for the construction of two LNG carriers at a total contracted cost of \$398.4 million.

Vessels delivered during the period comprised the fo llowing:

Vessel Name	Vessel Type	Segment	DWT	Delivery Date
SCF Progress 2	Panamax tanker (LR1)	Oil Product	74,588	18 January 2012
SCF Prudencia 2	Panamax tanker (LR1)	Oil Product	74,565	12 March 2012
Nikolay Zuyev	Aframax tanker	Crude Oil	122,039	31 May 2012
Georgy Maslov	Aframax tanker	Crude Oil	122,018	18 September 2012

²Vessels jointly owned by joint ventures.

Vessels under construction at 30 September 2012 comprised two Multifunctional Ice breaking vessels, two Very Large Crude Carriers ("VLCC"), two oil product Aframax tankers (LR2 type), two Panamax bulk carriers, two LPG carriers and four LNG carriers scheduled for delivery between November 2012 and October 2014 at a total contracted cost to the Group of \$1,516.2 million (See also Note 16). As at 30 September 2012 \$467.7 million o f the contracted costs had been paid for.

5. Finance Lease Receivables

		30/09/2012 \$'000	30/09/2011 \$'000	31/12/2011 \$'000
	At 1 January	94,859	95,041	95,041
	Finance lease interest receivable	10,596	10,768	14,373
	Finance lease instalments received	(12,578)	(10,332)	(14,555)
	At 30 September / 31 December	92,877	95,477	94,859
	Less current finance lease receivables	(3,003)	(2,600)	(2,697)
	Non-current finance lease receivables	89,874	92,877	92,162
6.	Trade and Other Receivables
		30/09/2012 \$'000	30/09/2011 \$'000	31/12/2011 \$'000
	Non-current assets
	Other receivables	9,821	10,145	10,004
	Accrued income	5,111	20,844	23,521
		14,932	30,989	33,525
	Current assets
	Amounts due from charterers	88,858	88,075	81,482
	Allowance for credit losses	(4,360)	(2,660)	(4,975)
		84,498	85,415	76,507
	Casualty and other claims	9,364	11,620	12,712
	Agents' balances	13,816	11,059	14,459
	Other receivables	40,205	24,933	22,610
	Security deposits	38,152	27,190	31,279
	Amounts due from lessee for finance leases	18,184	9,203	12,128
	Prepayments	17,253	11,814	13,457
	Voyage suspense account	18,314	11,233	17,554
	Accrued income	41,900	22,766	36,857
		281,686	215,233	237,563

Notes to the Condensed Consolidated Financial Statements – 30 September 2012 (Continued)

7. Cash and Bank Deposits

	30/09/2012 \$'000	30/09/2011 \$'000	31/12/2011 \$'000
Cash and bank deposits	302,456	334,821	389,742
Bank deposits accessible on maturity	-	-	(932)
Retention accounts	(23,276)	(18,145)	(26,680)
Security deposits held as counter security for claims (Note 14)	(10,400)	(27,280)	(10,400)
Restricted deposits	(16,589)	(11,918)	(11,918)
Cash and cash equivalents	252,191	277,478	339,812

8. Non-Current Assets Held for Sale

	Building \$'000	Fleet \$'000	Total \$'000
At 1 January 2011	-	46,622	46,622
Impairment provision	-	(956)	(956)
Disposals	-	(33,999)	(33,999)
At 30 September 2011	-	11,667	11,667
Expenditure in period	-	1,258	1,231
Impairment provision	-	(3,125)	(3,125)
At 31 December 2011	-	9,800	9,800
Transfer from fleet (Note 3)	-	13,034	13,034
Transfer from other fixed assets	61	-	61
Disposals	-	(9,800)	(9,800)
At 30 September 2012	61	13,034	13,095
Current insured value at 30 September 2012 (\$'000)	205	22,000	22,205
Total deadweight tonnage at 30 September 2012 (dwt)		24,590

Prior to the end of the reporting period ended 30 Septemb er 2012 the Group made a decision to sell two Asphalt c hemical tankers. An agreement for the disposal of one of the two tanke rs was entered into within the reporting period ended 3 0 September 2012 and following the end of the reporting period the Group en tered into an agreement for the disposal of the seco nd tanker. The two vessels are expected to be delivered to their new owners in D ecember 2012 and January 2013 realising an insignifi cant profit or loss on disposal to the Group.

9. Dividends

Dividends of Rouble 0.21 per share totalling Roubles 420.6 million (2011 - 0.51 Rouble per share totalling Roubles 1,000.0 million), equivalent to \$12.8 million (2011 – \$35.6 million) were declared on 30 June 2012 and were paid on 22 Augu st 2012.

10. Secured Bank Loans

The balances of the loans at the period end, net of direct issue costs, whic h include the Group's share of loans of the joint ventures are summarised as follows:

	30/09/2012 \$'000	30/09/2011 \$'000	31/12/2011 \$'000
Repayable
- within twelve months after the end of the reporting period	362,415	258,042	258,776
- between one to two years	632,485	463,893	538,109
- between two to three years	250,765	211,312	169,390
- between three to four years	232,302	310,891	373,393
- between four to five years	139,645	122,456	112,415
- more than five years	664,345	726,214	710,116
	2,281,957	2,092,808	2,162,199
Less current portion (current liabilities)	(362,415)	(258,042)	(258,776)
Long-term balance (non-current liabilities)	1,919,542	1,834,766	1,903,423

11. Finance Lease Liabilities

	30/09/2012 \$'000	30/09/2011 \$'000	31/12/2011 \$'000
Repayable
- within twelve months after the end of the reporting period	19,838	9,201	9,363
- after one year but not more than five years	121,002	47,805	47,998
- more than five years	83,266	176,302	173,690
	224,106	233,308	231,051
Less current portion (current liabilities)	(19,838)	(9,201)	(9,363)
Long-term balance (non-current liabilities)	204,268	224,107	221,688

The Group did not exercise its option for the acquisition of an ice cla ss Handysize Product tanker and consequently both the outstanding finance lease liability and the carrying value of the vessel were derecognised on expiry of the time charter agreement in February 2011.

Notes to the Condensed Consolidated Financial Statements – 30 September 2012 (Continued)

12. Derivative Financial Instruments

Derivative financial instruments are classified in the statement of financial position as follows:

	30/09/2012 \$'000	30/09/2011 \$'000	31/12/2011 \$'000
Non-current liability	128,460	128,135	120,826
Current liability	57,930	70,695	67,263
	186,390	198,830	188,089

Derivative financial instruments are analysed as follows:

Hedging instruments

		30/09/2012 \$'000	30/09/2011 \$'000	31/12/2011 \$'000
	At 1 January	153,218	107,017	107,017
	Acquired on acquisition of joint venture	606	-	-
	Recycled during the period and credited to the income statement	(25,702)	(24,271)	(30,709)
	Fair value movement during the period shown in other comprehensive income	32,379	74,012	75,398
	Fair value movement during the period debited to the income statement	90	1,748	1,512
	At 30 September / 31 December	160,591	158,506	153,218
	Classified at fair value through profit or loss	30/09/2012 \$'000	30/09/2011 \$'000	31/12/2011 \$'000
	At 1 January	34,871	43,437	43,437
	Fair value movement during the period credited to the income statement	(9,072)	(3,113)	(8,566)
	At 30 September / 31 December	25,799	40,324	34,871
13.	Income Taxes	30/09/2012	30/09/2011	31/12/2011

	\$'000	\$'000	\$'000
Russian Federation profits tax	6,260	11,631	19,492
Overseas income tax expense	1,133	1,258	1,642
Income tax expense	7,393	12,889	21,134
Deferred tax	683	(1,396)	(3,608)
Total income tax expense	8,076	11,493	17,526

The income tax expense for the period is reconciled to the expected tax expense based on the Russian Fed eration tax rate as follows:

	30/09/2012 \$'000	30/09/2011 \$'000	31/12/2011 \$'000
Profit before income taxes	50,395	58,861	71,202
Income tax using Russian Federation income tax rate of 20% (2011 – 20%)	10,079	11,772	14,240
Effect of tax on profits taxable under income tax in other jurisdicti ons Effect of tax on profits taxable in other jurisdictions under other tax	10,780	17,383	15,745
regimes	(17,645)	(24,932)	(26,958)
Tax effect of intercompany dividends	1,631	4,634	5,984
Tax effect of intercompany fees	2,839	3,239	4,444
Tax effect of non-deductible expenses and non-taxable income	1,684	(652)	942
Difference in tax rate of dividends received	(2)	(113)	(113)
Tax on exchange gain on repatriation of investment Tax arising from the utilisation of prior and current period unused tax	-	-	3,709
losses	(829)	162	(451)
Tax overprovision related to previous years	(461)	-	(16)
Income tax expense	8,076	11,493	17,526

Notes to the Condensed Consolidated Financial Statements – 30 September 2012 (Continued)

14. Contingent Asset

Appeal in London starting on 4 March 2013.

On 2 November 2011 the London's Court of Appeal (Civi l Division) granted the Group leave to appeal against certain important elements of the previous Judgement handed down on 10 D ecember 2010. The Claimants' appeal will be heard by the Court of

The trial for the claims filed in London in December 2006 against former management of Novoship (UK) Ltd and joined further defendants, commenced at the Commercial Court in London on 16 May 2012 and conclude d on 5 July 2012. Judgement is expected to be delivered in the last quarter of 2012. The claims are no w in the region of \$172.0 million plus interest.

15. Related Party Transactions

The Group enters into related party transactions with other Russian State owned and State controlled organ isations in the normal course of business. There were no new or material chang es to the related party transactions presented in t he audited consolidated financial statements of the Group for the year ended 31 December 2011.

16. Events After the Reporting Period

An agreement was concluded in October 2012 for the disposal of a chemical Asphalt t anker classified as held for sale at the end of the financial reporting period referred to in Note 8. The vessel is expected to be delivered to her new owners in December 2012.

On 19 November 2012 the Group took delivery from the shipyard of a Panamax bul k carrier, the m/v NS Energy.

17. Date of Issue

These condensed consolidated financial statements we re issued on 19 November 2012.