Akciju sabiedriba "VEF" — Audit Report / Information 2015

Mar 23, 2016

(Latvian Unified registration number 40003001328) Joint Stock Company VEF

Financial Statement

for year 2015 in accordance with the Law of the Republic of Latvia

Audited

2016 Riga

CONTENTS

		Lpp.
Information about the company		3
Management report		4
Report on the Management Board's responsibility		5
Profit and loss calculation		6
Balance : Assets Liabilities		7 8
Cash Flow		9
Report of changes in Equity Capital		10
Financial report appendixes:	Accounting policy Profit and loss calculation Balance	11 14 17
Auditors opinion		24

INFORMATION ABOUT THE COMPANY

Company name Legal status Registration number, place and date	Joint Stock Company "VEF" Joint Stock Company 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
Legal address Post address NACE code Chairman of the Board	Brivibas str.8, Riga, LV-1039, Latvia Brivibas str.8, Riga, LV-1039, Latvia 68.20; 35.13; Gints Fenuks
Member of the Board	Martins Cauna Tamara Kampane
Members of the Council	Gints Lipins Andris Denins Ints Kalnins Modris Zommers Arnis Zekunde
Financial year Information about shareholders	from till 2015.01.01 2015.12.31 Fixed capital in amount of 1.944.637 LVL (registered payment 31.12.2014)
Information about shareholders	VEF Komunikaciju Serviss Ltd. - 45,52 %; Laila Liduma - 6.31 %); Tamara Kampane - 10,16 %) Gints Fenuks - 24.50 % ; Other shareholders together - 13.51 %.
Auditor:	Qualified (sworn) auditor Aleksejs Litvinovs Certificate No. 190 Qualified auditors company Ltd. "DOMA AUDITS " 166 Licence No.

MANAGEMENT REPORT

JSC VEF is a publicly traded joint stock venture that is involved in property and facility management, and real estate rental businesses, also providing electricity distribution services to end-customers at the VEF territory.

JSC net revenues in the twelve months of 2015 reached 1 135 245 EUR that is for 2% lower against the previous reported period. Despite lower net revenues, during the reported period JSC management has managed to optimize costs and as the result the JSC ended the year with the unaudited income of 34 947 EUR. Management proposes to use this income and cover losses from previous years. Currently the JSC continues to provide services at the full exlent.

The company's capital is 2 722 492 EUR. That consists of the 623.528 bearer shares and 1.321.109 registered shares. Nominal value of a common share is 1.40 EUR .

JSC VEF management follows the annual strategic plans of the company according to the economic situstion in the State and also following developments in the real estate tental and energy resource distribution markets.

Gints Feņuks Chairman of the Management Board

Tamara Kampane Member of the Management Board

Martins Cauna Member of the Management Board

The annual report was approved at the Shareholders' meeting on 25 april, 2016

Report on the Management Board's responsibility to the audited financial statement of JSC "VEF" for the twelve months of 2015

Management Board of JSC "VEF" (hereinafter – the Company) is responsible for preparation of the financial statements of the Company. The financial statements audited.

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 December 31, 2015.

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

Gints Feņuks Chairman of the Management Board

Tamara Kampane Member of the Management Board

Martins Cauna Member of the Management Board

PROFIT AND LOSS CALCULATION FOR THE PERIOD, WHICH ENDS ON THE 2015.12.31 (turnover method)

	Appendix	2015	2014
		EUR	EUR
Net turnover	2	1 135 245	1 160 451
Production costs	3	-799 676	-848 220
Gross profit		335 569	312 231
Administration costs	4	-100 752	-102 287
Other income from operating activity	5	6 095	10 947
Other operating expenses	6	-25 712	-17 332
Interest payable and similar charges	7	-124 246	-150 452
Profit or loss from economic activity before taxes		90 954	53 107
Deferred tax	8	-34 085	-48 269
Other taxes	9	-21 922	-16 981
Profit or loss of the financial year		34 947	-12 143

Appendix from 11 till 23 page is an integral part of this financial statement.

Gints Feņuks 23.March 2016 Chairman of the Management Board

Tamara Kampane 23.March 2016 Member of the Management Board

Martins Cauna

BALANCE SHEET ON THE

2015.12.31

ASSETS	Appendix	2015	2014
		EUR	EUR
Fixed assets
Intangible assets
Concessions, patents, licences,		172	507
Intangible assets total	10	172	507
Tangible (fixed) assets
Land and buildings		5502253	5554307
Other fixtures and fittings, tools and equipment		29905	72690
Tangible assets costs		31400
Total tangible assets	11	5563558	5626997
Fixed Assets total		5562730	5627504
Current assets
Debtors
Trade debtors	12	12901	31236
Other debtors	13	31337	9683
Deferred expenses	14	1806	1796
Accrued income		52107	53573
Total debtors		98151	96288
Cash funds	15	83634	93619
Current Assets total		181785	189907
Total assets		5744515	5817411

BALANCE SHEET ON THE 2015.12.31

LIABILITIES	Appendix	2015	2014
		EUR	EUR
Equity capital
Company capital	16	2722492	2766969
Long term investment adjustment reserve	17	805396	801562
Other reserves		44477	0
Undistributed profit/losses:	18
a) losses from prior years		-1104359	-1092216
b) profit of financial year		34947	-12143
Equity capital total		2502953	2464172
Provisions
Other provisions	19	13056	12401
Provisions total		13056	12401
Creditors
Long term creditors
Borrowings from credit institutions	20	2713298	2853641
Advance payments from customers	23	39608	38118
Other borrowings	27	24823	43021
Deferred income tax liabilities	21	193783	159698
Long term creditors total		2971512	3094478
Short term creditors
Borrowings from credit institutions	20	140343	140343
Other borrowings	27	18197	18956
Debts to supliers of goods and services	22	52026	54908
Advance payments from customers	23	13995	5921
Taxes and contributions to social security	24	22102	15929
Other creditors	25	10331	10303
Short term creditors total		256994	246360
Creditors total		3228506	3340838
Total liabilities		5744515	5817411

Appendix from 11 till 23 page is an integral part of this financial statement.

Gints Feņuks
Chairman of the Management Board	23 march, 2016
Tamara Kampane
Member of the Management Board	23 march, 2016

Martins Cauna

CASH FLOW FOR THE PERIOD, WHICH ENDS ON THE 2015.12.31 (indirect method)

Cash flow from operating activities 90 954 53 107 Profit or loss from operating activity before extraordinary items and taxes Adjustments: tangible asset depreciation and amortization (+) 11 99 673 119 518 10 335 392 intangible asset depreciation (+) correction of mistakes for fixed assets 655 -184 increase in provision (except provision for doubtful accounts) (+) profit or loss from currency rate fluctuations (-/+) 0 0 124 246 150 452 interest payable and similar charges 7 income from sales of fixed and intangible assets 0 -7 666 Profit or loss before adjustments of current assets and short term 315 863 315 619 liabilities Adjustments: adjustments of debtors: increase (-); decrease (+) -1 863 950 adjustments of creditors: increase (-); decrease (+) 12 882 -18 234 Cash flow from operating activities 326 882 298 335 7 Interest paid -124 246 -150 452 Real estate tax paid -21 922 Cash flow before extraordinary items 180 714 147 883 Net operating cash flow 180 714 147 883 Investing cash flow (expenses "-"): Acquisition of fixed and intangible assets 11 -31 400 0 income from sales of fixed and intangible assets 0 10 283 Received insurance compensation 0 128 Net investing cash flow -31 400 10 411
Financing cash flow (expenses "-"):
Repaid borrowigs -140 343 -66 781
Expenditure on lease liabilities -18 956 -6 394
Net financing cash flow -159 299 -73 175
Result from exchange rate flunctuations 0 0
Net cash flow of financial year -9 985 85 119
Cash and its equivalents at beginning of period 93 619 8 500
15 Cash and its equivalents at end of period 83 634 93 619

Appendix from10 till 22 page is an integral part of this financial statement.

Gints Fenuks Chairman of the Board	signature	23 march, 2016
Tamara Kampane		23 march, 2016
Member of the Board	signature

REPORT OF CHANGES IN EQUITY CAPITAL 2015.12.31

for period ending on

	Company capital	Other reserves	Long term investment adjustment reserve	Profit or losses from prior years	Profit or losses of financial year	Equity capital total
	EUR	EUR	EUR	EUR	EUR	EUR
2013.12.31	2 766 969		801 562	-1 093 685	1 466	2 476 312
2012 financial year result moved to profit or losses from prior years	0		0	1 466	-1 466	0
Profit or losses of financial year	0		0	0	-12 143	-12 143
Correction				3		3
2014.12.31	2 766 969		801 562	-1 092 216	-12 143	2 464 172
2014 financial year result moved to profit or losses from prior years	0		0	-12 143	12 143	0
Profit or losses of financial year	0		0	0	34 947	34 947
Increase in adjustment reserve	0		3 834	0	0	3 834
Denomination result of established reserves	-44477	44477
2015.12.31	2 722 492	44 477	805 396	-1 104 359	34 947	2 502 953

Appendix from 11 till 23 page is an integral part of this financial statement.

Gints Fenuks Chairman of the Board	signature	23 march, 2016
Tamara Kampane		23 march, 2016
Member of the Board	signature

ACCOUNTING POLICY

General principles

Annual Report prepared in accordance with generally accepted accounting principles in Latvia, the law "On accountancy", the law "Annual reports law" and Regulations issued by the Cabinet of Ministers on 21.06.2011 No.488 and No.481 and JSC "VEF" regulations "About making year statement".

Profit and loss statement have been prepared in accordance with the turnover cost approach.

The cash flow statement prepared on the operating cash flow as measured by indirect method.

Compared with the previous reporting year, the used accounting and valuation methods are changed. (Year 2012 balance and year 2011 balance are classified according to the principles of year 2012 and are comparable).

Revenue recognition and net sales

Net turnover is the total value of the sold production (services) during the year without discounts and value added tax.

Other revenues are recognized as follows:

revenue from rents - as they were incurred;

revenue from penalties and default fees - at the time of receipt.

Fixed assets

Fixed assets are presented in the acquisition or revaluation cost less depreciation. Depreciation is calculated on a straightline method over the asset's useful period of usage. The following rates of depreciation is set by management, to write down fixed asset value to its estimated residual value at the useful end of period:

	(the year)
Buildings and structures	100
Other fixtures and fittings, tools and vehicles	4

The increase in value because of revaluation is reflected in equity capital item "Long term investment adjustment reserve ", but decrease in value is written-off from the increase of this reserve made in previous years regarding the corresponding fixed asset, the excess is included in profit or loss statement of the period.

Debtors

Accounts receivable in balance sheet are stated in net worth from the initial value minus reserves for doubtful and bad debts. Specific provision for doubtful and bad debts are created when management believes that the recovery of these specialy segregated receivables are doubtful.

Corporate income tax

The year of account corporate income tax expenses are calculated in accordance with Latvia laws and regulations.

Deferred tax is calculated according to the liability method according to all temporary differences between assets and liabilities in the financial statements and their values for the tax calculation purposes. In deferred tax calculations is used the tax rate which is expected during periods when temporary differences levels off. Temporary differences arise mainly from using different rates of depreciation of fixed assets, as well as from the tax losses to be carried over to future tax periods. In cases where the total deferred tax result would be reflected in the balance sheet assets, its included in financial statements only if there is prospective that there will be available taxable profits, which will be subject to the deductible temporary differences that created deferred tax assets.

Estimated time of using fixed assets

Fixed assets are presented in the acquisition or revaluation cost less depreciation. Depreciation is calculated on a straightline method over the asset's useful period of usage. The following rates of depreciation is set by management, to write down fixed asset value to its estimated residual value at the useful end of period.

Provisions

Provision for doubtful debtors is formed as an calculation, applying to each debtor's individual valuation method or use the percentage assessment method depending on when the debt was incurred.

Provision for employee leave is formed as an calculation, based on unused vacation time of the reporting year and norms of social security contributions.

Foreign currency revaluation in lats

Accounting in company is made in lats. All transactions in foreign currencies are revaluated into lats by the Bank of Latvia official exchange rate at the date of the transaction.

Cash and cash equivalents

Cash and cash equivalents in cash flow statement consists of cash in hand, current account balances.

The annual review key points is assessed accounting to principles:

• - The assumption is that the company will operate in the future.
• - Used the same methods as used in the previous year.
• - Assessment carried out with the proper precautions:
  • report includes only the profit on the balance sheet date;
  • is taken into account all the expected risks and the losses incurred in the reporting year or previous years, even if they become known during the period between the annual reports ending date and the date of making the annual report;
  • calculated and taken into consideration any reduction in value and depreciation amounts, regardless of whether the reporting year is closed with profit or losses.
• - Taken into consideration with the current year revenues and related expenses, regardless of the date of payment and receipt of an invoice or the date of the statement. Cost-ordinated with revenues during the reporting period.
• - Active and passive components of items valued separately.
• - Beginning balance for the year coincides with the previous year's closing balance sheet.
• - Listing all items that materially affect the annual general users of the assessment or decision-making, minor items are combined and the detail provided in the annex.
• - Economic transactions in the annual report presented in the light of their economic substance and nature, rather than legal form.

Long-term investments

• - Evaluated according to their initial value, that is the purchase cost or production cost.
• - Acquisition or production costs of the investment object is gradually written off (depreciated) for intended use period, if administration period of object is limited. A plot of land acquisition costs are not subject to write-off (amortization).

Current assets

• - Asset evaluation based on the purchase or production cost.
• suitable for the evaluation of the balance sheet date are evaluated according to the lowest market price or production cost
• - Debt balances on the balance sheet is shown accordingly to appropriate supporting documents and accounting records, and they are coordinated with their own accounts receivable records at the date of making balance sheet. In dispute cases balances in balance sheet is shown according to the records. The accruals is made for a questionable amount of doubtful debts.

Reporting Period

Reporting period is 12 till months from 2015.01.01 2015.12.31

Long-term and short-term positions

Long-term liabilities is recognized if receipt, payment, or retirement shall be the later of one year after the year end. Amounts receivable, payable or depreciable during the year is presented as a short-term positions.

(2) Net turnover

Turnover consists of revenues that the Company gained in the first six months of 2014 from its core business-service provision without VAT

Activity	2015 EUR	2014 EUR
Office rent	585 184	619 801
Facilities management and utilities	250 540	226 250
Electricity distribution and servicing	299 521	314 400
Ferrous and non-ferrous metal trading income		0
Total	1 135 245	1 129 393
Allocation of salesmarkets
State	2015	2014
	EUR	EUR
Latvia	1 135 245	1 129 393
Total	1 135 245	Kļūda

(3) Production costs

	2015	2014
	EUR	EUR
Utility services expenses (energy and other services)	393 631	426 017
Personnel costs and social tax	162 173	173 550
Depreciation	99 673	119 518
Other operating costs	122 654	102 738
Transport expenses	7 836	10 073
Charges for land rent	6 027	6 027
Insurance costs (building)	5 362	5 605
Expenses for telecommunication	1 385	1 594
Depreciation of license	335	392
Bank service	371	249
Travel expenses	0	1 908
Personnel training	229	549
Total	799 676	848 220

(4) Administration costs

	2015	2014
	EUR	EUR
Salaries and social tax for administration	78 079	77 371
Transportation expenses for administration	7 836	10 073
Annual fee RFB	7 114	7 114
Expenses for telecommunication	1 386	1 594
Office expenses	1 042	1 417
Lawyers' service fees	3 768	3 404
Audit costs	1 400	1 281
represent costs (40%)	127	33
Total	100 752	102 287

(5) Other income from operating activity

	2015	2014
	EUR	EUR
Fines	1 623	2 441
Profit from sale of fixed assets: ( 10283-2617)	0	7 666
Received insurance compensation	0	128
Proceeds from creditor write-off	4 436	528
Other income	36	0
Income from savings for vacations reduction	0	184

Total 6 095 10 947

(6) Other operating expenses

	2015 EUR	2014 EUR
Fines payment of income tax	491	12
Insurance compensation	1 359	1 330
Fines by electric energy distribution networks	990	1 917
Offerings to Latvian orphans fund	851	1 103
Bad debts write-off costs	16 867	12 911
Vacation accrual reserve increase	655	0
Accrual expense for doubtful receivables	3 617	0
Other expenses	651	0
represent costs ( 60%)	231	59
Total	25 712	17 332

(7) Interest payable and similar charges

	2015	2014
	EUR	EUR
Bank interest	122 726	148 233
Leasing interest	1 520	2 219
Total	124 246	150 452

(8) Deferred tax

	2015	2014
	EUR	EUR
Deferred tax at beginning of period	159 698	111 429
Deferred tax at end of period	193 783	159 698
Deferred tax for period	-34 085	-48 269

(9) Other taxes

2015	2014
EUR	EUR
21 922	16 981
21 922	16 981

(10) Intangible assets

	Concessions,	Intangible
	patents,	assets total
	licences, brand
	names and
	other rights
	EUR	EUR
Aquisition cost
2014.12.31	2 207	2 207
2015.12.31	2 207	2 207
Depreciation
2014.12.31	1 700	1 700
Calculated depreciation	335	335
2015.12.31	2 035	2 035
Balance sheet on 2014.12.31	507	507
Balance sheet on 2015.12.31	172	172

(11) Tangible (fixed) assets

		Land and buildings **	Tangible assets costs	Other fixtures and fittings, tools and equipment	Total tangible assets
		EUR	EUR	EUR	EUR
Acquisition cost
2014.12.31		6 126 816	0	239 536	6 366 352
Acquisitions		0	31 400	0	31 400
Overvalued		3 834	0		3 834
2015.12.31		6 130 650	31 400	239 536	6 401 586
Depreciation
2014.12.31		572 509	0	166 846	739 355
Calculated depreciation		56 888 1	0	42 785 -2	99 673 -1
Correction 2015.12.31		629 397	0 0	209 631	839 028
Balance sheet on	2013.12.31	5 554 307	0	72 690	5 626 997
Balance sheet on	2015.12.31	5 501 253	31 400	29 905	5 562 558

Note *

* The Company still uses fixed assets, that have no balance value, but they are in inventory lists. The total acquisition value of such fixed assets is: 16 997 EUR.

** īpašuma kadastrālā vērtība paņemta no paziņojuma par nekustamā īpašuma nodokli 2013.gadu.

(12) Trade debtors

	2015	2014
	EUR	EUR
Trade debtors	12 901	31 236
Balance value	12901	31236

Allocation of currency:	2015	2014
	EUR	EUR
EUR	12 901	31 236
Total	12901	31 236

(13) Other debtors

	2015	2014
	EUR	EUR
VAT on advances	8 229	6 978
Advance purchase of fuel	558	317
Advance services provider	22 550	2 364
URDVN tax overpaid	0	24
Total	31 337	9 683

(14) Deferred expenses

	2015	2014
	EUR	EUR
Ground rent for the 1st quarter in 2015	1 507	1 507
Subscriptions 2015.	299	289
Total	1806	1796

(15) Cash funds (31.12.2015)

Allocation of currency:	2015	2014
	EUR	EUR
EUR	83 634	93 619
Total	83634	93619

(16) Company capital

Company capital is divided on shares	1 944 637
per value each EUR	1,4
	2 722 492

(17) Long term investment adjustment reserve

	2015	2014
	EUR	EUR
Long term investment adjustment reserve	805396	801562
Total	805396	801562

(18) Undistributed profit/losses:

Losses of previous years (2013 including)	-1 104 359 EUR
Profit of financial year	34 947 EUR
Losses of financial year	-1 069 412 EUR

(19) Other provisions

Type of provision	Residual	Increase	Decrease	Residual
	2014.12.31	2015	2015	2015.12.31
	EUR	EUR	EUR	EUR
Provisions for unused vacation	12 401	655	0	13 056
Total	12 585	655	0	13 056

(20) Borrowings from credit institutions

Allocation of currency:		2015		2014
		EUR		EUR
EUR (long term)		2 713 298		2 853 641
EUR (short-term)		140 343		140 343
Total		2 853 641		2 993 984
Main points of agreement/contract
Company name / name, surname	Principal amount, EUR	% rate		Term
SEB Banka	4 466 086	2.146	122 726	22.05.2022.

(21) Deferred income tax liabilities

2015 2014

	EUR	EUR
Calculated deferred tax	193 783	159 698

Temporary changes	Residual	Increase	Decrease	Residual
	2014.12.31			2015.12.31
	EUR	EUR	EUR	EUR
Fixed assets residual for taxes	1 739 738	0	184 428	1 555 310
Fixed assets residual in finance accounts	-5 138 714	3 834	100 008	-5 042 540
Provisions for unused vacation	12 401	655	0	13 056
Accrual expense for doubtful receivables		3617		3 617
Accrued tax losses	2 321 919	0	143 247	2 178 672
Total	-1 064 656	8 106	427 683	-1 291 885

(22) Debts to supliers of goods and services

Allocation of currency:	2015	2014
	EUR	EUR
EUR	52 026	54 908
Total	52026	54 908

(23) Advance payments from customers

	2015	2014
	EUR	EUR
Long term	39 608	38 118
Short term	13 995	5 921
	53 603	44 039

(24) Taxes and contributions to social security

Type of tax	Residual	Calculated	Paid	Residual
	2014.12.31			2015.12.31
	EUR	EUR	EUR	EUR
Value added tax	7 574	127 894	126 021	9447
Social security contributions	5 108	61 213	60 544	5777
Personal income tax	3 247	39 706	36 081	6872
Real estate tax (buildings,land)	0	21 922	21 922	0
State duties	-24	73	43	6
Company car tax	0	1520	1520	0
Total	15 905		373830	22102

During the financial year has been calculated and paid payment penalty: PIT- 490 EUR.

	Inter alia:	2015		2014
		EUR		EUR
	Tax overpayment	0		24
	Tax debt	22 102		15 929
(25)	Other creditors
			2015	2014
			EUR	EUR
	Salaries for December		10 331	10 303
	Total		10 331	10 303
(27)	Other borrowings		2015	2014
			EUR	EUR
	Swedbanka leasing		8 406	12 911
	long term		4 485	8 406
	short term		3 921	4 505
	SEB Leasing		34 614	49 066
	long term		20 338	34 615
	short term		14 276	14 451
(28)	Employees
			2015	2014
	Average amount of company's emploees during year		17	18

(29) Information about remuneration to Members of the Board and executives

The remuneration of Member of the Board during year 2015 was 13 692 EUR.

(29) Financial risk management

The significant financial tools of Company are borrowings from credit institutions, legal persons and related parties, finance lease, money and short-term deposits. The main task of these financial tools is to provide Company's economic activity with funding. The Company also faces with other financial tools, such as trade debtors, other debtors, debts to suppliers and other creditors, which result directly from economic activity.

Interest rate risk

The Company has interest rate risk mainly because of its borrowings.

Credit risk

The Company has credit risk due to its trade debtors, given short-term loans and money and its equivalents. Company controls its credit risk by evaluating constantly debt repayment history of clients and by setting individual terms for each client. Moreover the Company follows non-stop the rest of debtors debts to diminish the possibility of irrecoverable debt emergence.

Liquidity risk

Company controls its liquidity risk by keeping appropriate amount of money or money equivalents.

(30) Information about off- balance liabilities and pledged assets None.

(31) Details of the lease or rent agreements, mortgages, guarantees and other contracts that have an important role for the Company

The Joint Stock Company "VEF" is a publicly traded company, dealing with management and administration of its real estate, rendering space rental and electrical services to consumers on the VEF territory.

There were signed with the major customers long-term rental agreement.

As well as the Company has rent:

land in the Brivibas str. 214, rental agreement with JSC "Privatizācijas aģentūra" .

Pledge agreement No.KD03702/2 AS SEB banka, registered No.100093834 on 07.07.2015 - the claim secured in amount of EUR 5 386 000.

(32) Information about remuneration to auditor

Concluded agreement with DOMA AUDITS Ltd. for 1 400 EUR (not including VAT).

Gints Fenuks Chairman of the Board signature

Tamara Kampane

Member of the Board signature

23 march, 2016

23 march, 2016