Akciju sabiedriba "VEF"

Interim / Quarterly Report • Aug 31, 2017

JOINT STOCK COMPANY VEF (Unified registration number 40003001328)

NON- AUDITED FINACIAL STATEMENTS For the period ended on June 30, 2017

CONTENTS

General information

Report on the Management Board's responsibility

Management report

Balance sheet

Income statement

Cash flow statement

Statement of changes in equity

Notes to the financial statement

1

GENERAL INFORMATION
Title of enterprise	Joint stock company VEF
Legal type of enterprise	Public joint stock company
Registred:	On April 15, 1991 in the Register of Enterprises of the Republic of Latvia, re registred on December 7, 2000 with Nbr. 000300132
	On April 14, 2004 registered in the Commercial Register, Nbr. 40003001328
Taxpayers' Reg. Nbr.	LV 40003001328
Legal address	Brīvības gatve 214, Rīga, LV-1039, Republic of Latvia
Equity capital 1 :	EUR 2 722 492 paīd and registered equity capital.
Core businesses:
	Power supply - distribution of power; Letting and renting of real-estate property
Name of the holder of shares	As on June 30, 2017:
and share capital (%)	*VEF KOMUNIKĀCIJU SERVISS SIA- 45.52 % ;
	*Laila Līduma	– 6.31 % ;
	* Tamāra Kampāne	-10.41 % ;
	* Gints Feņuks *Other shareholders	- 24.50 % ; - 13.26 %.
Chief executive officer:	Chairman of the Board of the Company: GINTS FENUKS
Members of the Board:	TAMĀRA KAMPĀNE
	MĀRTINŠ CAUNA
	MODRIS ZOMMERS
Members of the Supervisory Council:	LAILA LĪDUMA
	ERVINS KAMPĀNS
	GUNTIS LIPIŅŠ
	EGILS ARAJS
Period of account:	01.01.2017. - 30.06.2017.
Qualified auditor:	GUNTA DARKEVICA . Certificate Nbr.165

Paid-up and registred equity capital 2 722 492 EUR common shares

The company's capital consists of the 623 528 bearer shares and 1 321 109 registered shares Nominal value of a common share is EUR 1 .40 .

Report on the Management Board's responsibility to the non-audited financial statement of JSC "VEF" for the six months of 2017

Management Board of JSC "VEF" (hereinafter – the Company) is responsible for preparation of the middle-term financial statements of the Company. The middle-term financial statements are not audited.

Middle-term financial statements are prepared based on justifying documents and represent true and clear overview on the Company's Assets and Equity and Liabilities, its financial standing and results of activity as well as cash flows within the reporting period ended on June 30, 2017.

Accounting principles used in preparation of the middle-term financial statements have not been changed comparing to the previous reporting period. During preparation of the middle-term financial statements decisions taken by the Management Board and estimations made have been cautious and well-founded. The information included in the middle-term management's report is true.

The Management Board of the Company is responsible for ensuring the corresponding accounting system, securing the assets of the Company, as well as for prevention and exposure of fraud and other violation within the Company.

On behalf of the Management Board of JSC "VEF",

Gints Fenuks Chairman of the Management Board

Management report

Joint stock venture VEF is a publicly traded company that is doing business by managing it own real estate property, renting business spaces, and also providing electricity distribution services for business located in the VEF territory. Net cash flow/turnover of the joint venture within the reported year reached 625 511 EUR that is

higher by 1.44 % in comparison with the last period reported.

Currently the Company continues to provide full set of services and is executing the planned renovation of its real estate that is required since buildings are in use for more than fifteen years. Renovation works have been started and the necessary substantial investments the Company is covering from own reserves.

The Company is preparing to reconstruct premises previously used for production and convert these premises into office spaces to successfully attract new customers. To cover investments required for these activities the Company is also planning to use its own resources - only in the case of necessity bank financing will be attracted. As of planned works for the next reporting period the Company is planning to invest in improving roads and energy efficiency that are important for existing and new potential customers.

The Board of JV VEF holds to the strategic plans of the company according to economic developments in the country and following to the trends of the real estate rent and energy markets.

Company's operations are impacted by different financial risks including credit risks, volatility of interest rates. Company's management tries to minimize negative effects of potential financial risks to Company's financial results. Company's management strongly believes that the Company will have enough financial resources in order not to jeopardize its liquidity.

Equity capital of the Company is 2 722 492 EUR. The Company's equity capital consists of 623 528 bearer shares and 1 321 109 nominal shares. Nominal value of each share is 1.40 EUR.

On behalf of the Management Board of JSC "VEF",

Gints Fenuks Chairman of the Management Board

ASSETS
	EUR	EUR	EUR
	30.06.2017	30.06.2016	31.12.2016
LONG-TERM INVESTMENTS
Intangible assets
Concessions,patents,licences	52	59	56
Total intangible assets	52	59	56
Fixed Assets
Land,buildings and other property	5 440 431	5 499 344	5 469 001
Other fixed assets and inventory	23 078	18 252	32 621
Advance payments for fived assets	0	31 400	0
Total fixed assets	5 463 509	5 548 996	5 501 622
Total long-term investments	5 463 561	5 549 055	5 501 678
Current assets
Debtors
Customers and client debts	47 348	49 830	73 367
Other debtors	30 048	11 346	9 144
Future period expenses	4 324	1 793	4 085
Future period income	0	0	0
Total debtors	81 720	62 969	147 546
Cash	204 509	107 226	120 368
Total Current assets	286 229	170 195	267 914
TOTAL ASSETS	5 749 790	5 719 250	5 796 592

LIABILITIES

	EUR	EUR	EUR
	30.06.2017	30.06.2016	31.12.2016
Stockholder's Equity
Common stock	2 722 492	2 722 492	2 722 492
Rezerve	44 477	44 477	44 477
Long-term investments revaluation reserve	673 774	805 396	673 774
Total accumulation
Retained earnings from the previous years	-570 644	-1 069 412	-875 629
Retained earnings of the financial years	89 109	24 448	304 985
Total stockholder's equity	2 959 208	2 527 401	2 870 099
PROVISIONS
Other provisions	0	13 056	0
Total provisions	0	13 056	0
LIABILITIES
Long-term liabilities
Borrowings from credit institutions	2 572 955	2 713 298	2 572 955
Prepayments from buyers	30 547	39 608	30 547
Other liabilities	0	24 823	0
Deferred tax liability	0	231 309	0
Total long-term liabilities	2 603 502	3 009 038	2 603 502
Current liabilities
Borrowings from credit institutions	70 172	70 172	140 343
Accounts payable	34 322	38 883	54 625
Taxes and social security payments	22 731	27 269	27 297
Other liabilities	10 132	11 398	10 083
Prepayments from buyers	16 380	12 836	20 472
Accrued liabilities	19 501	0	19 501
Other loans	13 842	9 197	23 670
Total current liabilities	187 080	169 755	295 991
Total liabilities	2 790 582	3 178 793	2 899 493
TOTAL LIABILITIES&STOCKHOLDER'S EQUITY	5 749 790	5 719 250	5 769 592

PROFIT AND LOSSES ACCOUNT FOR YEAR, WHICH ENDS ON JUNE 30.2017.

		EUR 30.06.2017 -	EUR 30.06.2016 -
Net turnover	1	625 511	616 626
Cost of goods sold	2	-435 868	-427 328
Gross profit		189 643	189 298
Administrative expenses	3	-52 949	-57 315
Other income from operations	4	1 950	1 239
Other expenses from operations	5	-949	-1 349
Finansial services income
Finansial services expenses	6	-48 586	-61 881
Profit before taxes		89 109	69 992
Other taxes	7	0	-8 018
Deferred tax		0	-37 526
Net profit		89 109	24 448
Earnings per share (EPS)		0 .05	0.001

Chairman of the Board	G.Feņuks	Member of the Board	T.Kampane

CASH FLOW STATEMENT FOR YEAR THAT ENDS ON JUNE 30, 2017

		2017 30.06.	2016 30.06.	2016 31.12.
I.	CASH FLOW FROM OERATING ACTIVITIES	EUR	EUR	EUR
	Profit before outstanding items and taxes (+) Adjustments:	89 109	69 992	304 985
	fixed assets depreciation ( +) intangible assets depreciation (+) increase/decrease in provisions profit or losses from exchange rates fluctuation (+/-)	38 114 4 0 0	40 938 113	-45 085 116 0 0
	finacial services income Profit or losses before adjustments from current assets and liabilities	48 586 175 813	61 881 172 924	120 317 380 333
	Adjustments: debtors : increase (-); decrease (+) liabilities: increase (-); decrease (+)	65 826 -28 912	35 182 -27 322	-49 395 -8 472
	Gross cash provide by operating activities Payments for financial Income tax payments	212 727 -48 586 0	180 784 -61 881 -8 018	322 466 -120 317 0
	Net cash provided by operating activities before outstanding items: Cash flow from outstanding items (-/+)	164 141	110 885	202 149
II.	Net cash provided by operating activities : CASH FLOWS FROM INVESTING ACTIVITIES :	164 161	110 885	202 149
	Fixed assets purchase Interest received	0 0 0	-7 496 0 -7 496	-5 722 0 -5 722
III.	Net cash used in investing activities : CASH FLOWS FROM FINANCING
	ACTIVITIES: Expenses for borrowings repayment Expenses on leasing liabilities	-70 172 -9 828	-70 172 -9 625	-140 343 -19 350
	Net cash provided by financing activities :	-80 000	-79 797	-159 693
	Net cash flom	84 141	23 592	36 734
	CASH AT BEGINNING OF YEAR CASH AT END OF YEAR	120 368 204 509	83 634 107 226	83 634 120 368

STATEMENT OF CHANGES IN EQUITY FOR YEAR THAT ENDS ON JUNE 30, 2017

	30.06.2017 EUR	30.06.2016 EUR	31.12.2016 EUR
Stockholder's eguity
Balance at the beginning of the
financial year	2 722 492	2 766 969	2 722 492
Increase from
Decrease from denomination of		44 477
shares from lats to euro
Balance at the end of the financial year	2 722 492	2 722 492	2 722 492
Long-term investments revaluation
reserve
Balance at the beginning of the
financial year	673 774	805 396	805 396
Increase from
Decrease from			-131 622
Balance at the end of the financial year	673 774	805 396	673 774
Accumulations
Balance at the beginning of the	44 477	0	44 477
financial year
Increase from denomination of shares		44 477
from lats to euro
Decrease from
Balance at the end of the financial year	44 477	44 477	44 477
Retained earnings
Balance at the beginning of the
financial year	-570 644	-1 069 412	-1 069 412
Profit or losses of the finacial year	89 109	24 448	498 768
Dividendes
Included in accumulations
Balance at the end of the financial year	-481 535	-1 044 964	-570 644
Stockholder's eguity (total)
Balance at the beginning of the
financial year	2 870 099	2 502 953	2 502 953
Balance at the end of the financial year	2 959 208	2 527 401	2 870 099

(1) Net turnover

Turnover consists of revenues that the Company gained in the first six months of 2017 from its core business-service provision without VAT

Type of commercial operations	2017.06.30	2016.06.30
	EUR	EUR
power supply, distribution and servicing	165 527	150 999
office renting service	341 871	326 123
utility services	118 113	139 504
Total	625 511	616 626

Distribution of net turnover by geographical markets

	2017.06.30	2016.06.30
Country	EUR	EUR
Latvia	625 511	616 626
Total	625 511	616 626

(2) Cost of sales

	2017.06.30	2016.06.30
	EUR	EUR
personnel	88 821	82 768
depreciation	38 114	40 938
transport	6 169	5 476
other outstanding costs	221 780	219 337
personnel training	78	105
telecommunication service	777	693
other costs tied to commercial operations	58 266	71 488
insurance (buildings)	2 651	2 824
land rent to LPA	3 586	3 586
real estate tax (buildings ,land)	15 445	0
cash turnover expenses	177
depreciation of license	4	113
Total	435 868	427 328

Costs of administration	2017.06.30	2016.06.30
	EUR	EUR
personnel	39 189	42 006
telecommunication service	777	692
office supplies	119	1 066
cash turnover expenses	0	154
transport expenses for administrative needs	6 169	5 476
representative expenses	116	14
legal assistance or raid	3 019	4 347
NASDAQ Rīga annual fee	3 560	3 560
Total	52 949	57 315

Other revenues from commercial

(4) operation

	2017.06.30	2016.06.30
	EUR	EUR
fines	835	435
other revenues	1 115	804
Total	1 950	1 239

Other costs of commercial

(5) operations

	2017.06.30	2016.06.30
	EUR	EUR
60% of representative costs	210	25
donations to Latvian orphans fund	0	200
allowances and bonuses	699	687
fines	40	437
Total	949	1 349

Payments of interest and similar

(6) expenses

		2017.06.30	2016.06.30
		EUR	EUR
	credit interests	48 344	61 360
	līzing	242	521
	Total	48 586	61 881
	Other taxes	2017.06.30	2016.06.30
(7)		EUR	EUR
	real estate tax (buildings,land)	0	8 018
	Total	0	8 018