JOINT STOCK COMPANY VEF (Unified registration number 40003001328)

NON- AUDITED FINACIAL STATEMENTS For the period ended on March 31, 2011

General information

Report on tne Management Board's responsibility

Balance sheet

Income statement

Cash flow statement

Statement of changes in equity

Notes to the financial statement

Report on the Management Board's responsibility to the non-audited financial statement of JSC "VEF" for the three months of 2011

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 march 31, 2011.

Middle-term financial statements are prepared according to the EU approved International Standards of financial reports and observing principle of continuing business activity. 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 Feņuks Chairman of the Management Board

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, reregistred 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 phone: 7270618, fax: 7552201 Equity capital ¹ : Ls 1 944 637 registered and paid up capital. Core businesses: Power supply - distribution of power; Letting and renting of real-estate property Name of the holder of shares And share capital (% ) ² : As on march 31. 2011 ; VEF KOMUNIKĀCIJU SERVISS SIA- 45.52377 % ; JSC Goldinvest Asset Management – 21.92579 % ; State Social Insurance Agency - 5.01801 % ; Tamāra Kampāne - 9.49529 % ; * Gints Feņuks - 7.01432 % ; *Other shareholders - 11.02282 % . Chief executive officer: Chairman of the Board of the Company: GINTS FEŅUKS Members of the Board: TAMĀRA KAMPĀNE PĒTERIS AVOTIŅŠ Members of the Supervisory Council: AIVARS VĪTOLIŅŠ ANDRIS DENIŅŠ INTS KALNIŅŠ GUNTIS LIPIŅŠ JĀNIS LĀMA Period of account: 01.01.2011. - 31.03.2011. Qualified auditor: Mara Liguta. Certificate Nbr.55

1 Paid-up and registred equity capital

Ls 1 944 137

2 The company`s capital consists of the 623 528 bearer shares and 1 321 109 registrered shares Nominal value of a common share is 1 LVL (one Latvian lat).

ASSETS	Final balance		Beginning balance
	LVL	LVL	EUR	EUR
	31.03.2011	31.03.2010	31.03.2011	31.03.2010
			0.702804	0.702804
LONG-TERM INVESTMENTS
Intangible assets
Concessions,patents,licences	273	338	388	481
Total intangible assets	273	338	388	481

Fixed Assets
Land,buildings and other property	4 140 830	4 181 865	5 891 870	5 950 258
Equipment and machinery
Other fixed assets and inventory	42 184	13 287	60 021	18 906
Advance payments for fived assets

Total fixed assets	4 183 014	4 195 152	5 951 891	5 969 164

Total long-term investments	4 183 287	4 195 490	5 952 280	5 969 645

Current assets
Inventory
Goods for sale		221		314
Total inventory	0	221	0	314

Debtors
Customers and client debts	49 937	56 490	71 054	80 378
Other debtors	11 778	13 864	16 760	19 727
Future period
Future period expenses	620	3 457	881	4 919
Total debtors	62 335	73 811	88 695	105 024

Cash	2 899	6 911	4 125	9 833

Total Current assets	65 234	80 943	92 820	115 171



TOTAL ASSETS	4 248 521	4 276 433	6 045 100	6 084 816

LIABILITIES	Final balance		Beginning balance
	LVL	LVL	EUR	EUR
	31.03.2011	31.03.2010	31.03.2011	31.03.2010
			0.702804	0.702804
Stockholder's Equity
Common stock	1 944 637	1 944 637	2 766 969	2 766 969
Long-term investments revaluation reserve	438 390	438 390	623 773	623 773

Total accumulation
Retained earnings from the previous years	-860 928	-883 184	-1 224 990	-1 256 658
Retained earnings of the financial years	10 661	15 941	15 169	22 682

Total stockholder's equity	1 532 760	1 515 784	2 180 921	2 156 766

PROVISIONS
Other provisions	9 122	7 522	12 979	10 703
Total provisions	9 122	7 522	12 979	10 763

LIABILITIES

Long-term liabilities
Borrowings from credit institutions	2 294 490	2 388 695		3 398 807
Prepayments from buyers	25 103	33 766		48 045
Other liabilities Deferred tax liability	150 492	27 705 144 309		39 421 205 333

Total long-term liabilities	2 470 085	2 594 475		3 691 605

Current liabilities
Borrowings from credit institutions	59 036	23 866	84 001	33 958
Accounts payable	57 472	34 781	81 775	49 489
Taxes and social security payments	78 150	50 522	111 198	71 886
Other liabilities	5 558	16 915	7 908	24 068
Future period income
Prepayments from buyers	36 338	32 568	51 704	46 340
Total current liabilities	236 554	158 652	336 586	225 741


Total liabilities	2 706 639	2 760 649	3 851 200	3 928 050


TOTAL LIABILITIES&STOCKHOLDER'S	4 248 521	4 276 433	6 045 100	6 084 816
EQUITY

		LVL 31.03.2011	LVL 31.03.2010	EUR 31.03.2011 - 0.702804	EUR 31.03.2010 - 0.702804
1	2	4	5	4	5
Net turnover		221 249	207 779	314 809	295 643
Cost of goods sold	1	-152 796	-131 394	-217 409	-186 957
Gross profit		68 453	76 835	97 400
Selling expenses
Administrative expenses	2	-16 046	-13 974	-22 831	-19 883
Other income from operations	3	828	1 623	1 178	2 309
Other expenses from operations	4	-1 211	-9 303	-1 723	-13 237
Finansial services income	5		3		4
Finansial services expenses	6	-34 570	-31 239	-49 189	-44 449
Profit before taxes		17 454	23 495	24 835	33 430
Other taxes	7	-5 043	-4 990	-7 176	-7 100
Deferred tax		-1 750	-2 564	-2 490	-3 648
Net profit		10 661	15 941	15 169	22 682

PROFIT AND LOSSES ACCOUNT FOR YEAR, WHICH ENDS ON MARCH 31.2011.

Earnings per share (EPS) on 31.03.2011-0.00548 LVL - 0.00576 EUR

31.03.2010 -0.00820 LVL -0.00820 EUR

Chairman of the Board

G.Feņuks Member of the Board T.Kampane

CASH FLOW STATEMENT FOR YEAR THAT ENDS ON MARCH 31, 2011

		2011 31.03.	2010 31.03.	2011 31.03.	2010 31.03.
I.	CASH FLOW FROM OERATING ACTIVITIES	LVL	LVL	EUR 0.702804	EUR 0.702804
	Profit before outstanding items and taxes (+)	17 454	23 495	24 835	33 430
	Adjustments:
	fixed assets depreciation ( +)	13 644	14 682	19 414	20 891
	intangible assets depreciation (+)	16	16	23	23
	increase/decrease in provisions profit or losses from exchange rates fluctuation
	(+/-)	27	116	38	165
	finansial service income		3		4
	finacial services income	34 570	31 239	49 189	44 449
	Profit or losses before adjustments from current assets and liabilities	65 711	69 551	93 498	98 962
	Adjustments:
	debtors : increase (-); decrease (+) inventory: increase (-); decrease (+)	11 476 -221	403 091 221	16 329 -315	573 547 315
	liabilities: increase (-); decrease (+)	-15 319	-419 770	-21 797	-597 279
	Gross cash provide by operating activities	61 647	53 093	87 716	75 545
	Payments for financial	-34 570	-31 239	-49 189	-44 449
	Income tax payments	-5 043		-7 176
	Net cash provided by operating activities before outstanding items:	22 034	21 854	31 352	31 095
	Cash flow from outstanding items (-/+)
	Net cash provided by operating activities :	22 034	21 854	31 352	31 095
II.	CASH FLOWS FROM INVESTING ACTIVITIES :
	Fixed assets purchase
	Interest received		3		4
	Net cash used in investing activities :		3		4
III.	CASH FLOWS FROM FINANCING ACTIVITIES:
	Income from investments in fixed capital
	Borrowings received
	Grants and donations received
	Expenses for borrowings repayment	-14 759	-23 866	-21 000	-33 958
	Expenses on the purchase of land. Net cash provided by financing activities :	-11 260 -26 019	-23 866	-16 022 -37 022	-33 958

IV.	Exchange rate fluctuation result :	-27	-116	-38	-165
	Net cash flom	-4 012	-2 125	-5 708	-3 025
	CASH AT BEGINNING OF YEAR	6 911	9 036	9 833	12 858
	CASH AT END OF YEAR	2 899	6 911	4 125	9 833

STATEMENT OF CHANGES IN EQUITY FOR YEAR THAT ENDS ON MARCH 31, 2011

	31.03.2011 LVL	31.03.2010 LVL	31.03.2011 EUR 0.702804	31.03.2010 EUR 0.702804
Stockholder's eguity
Balance at the beginning of the
financial year	1 944 637	2 281 922	2 766 969	3 246 882
Increase from
Decrease from		337 285		479 913
Balance at the end of the financial year	1 944 637	1 944 637	2 766 969	2 766 969
Long-term investments revaluation reserve
Balance at the beginning of the financial year	438 390	438 390	623 773	623 773
Increase from
Decrease from
Balance at the end of the financial year	438 390	438 390	623 773	623 773
Accumulations
Balance at the beginning of the financial year
Increase from
Decrease from
Balance at the end of the financial year
Retained earnings
Balance at the beginning of the financial year	-860 928	-883 184	-1 224 990	- 1 256 658
Profit or losses of the finacial year	10 661	15 941	15 169	22 682
Dividendes
Included in accumulations
Balance at the end of the financial year	-850 267	-867 243	-1 209 821	- 1 233 976
Stockholder's eguity (total)
Balance at the beginning of the
financial year	1 515 784	1 838 453	2 156 766	2 615 883
Balance at the end of the financial year	1 532 760	1 515 784	2 180 921	2 156 766

JSC VEF FINANCIAL STATEMENTS' APPENDIXES FOR YEAR, WHICH ENDS ON MARCH 31, 2011

1. ACCOUNTING AND ASSESSMENT METHODS – COMMON PRINCIPLES

Basis for financial statements preparation

Financial statements are being prepared in compliance with Latvian laws "On bookkeeping" and "On the Annual Accounts of Undertakings".

Profit and losses account is prepared according to the turnover method. Accounting policy provides the financial statements give information that is appropriate for their users to make decisions and conclusions. The policy is reliable. The financial statements correctly reveal the financial condition and operating results of the company – showing not only legal side of transactions, but also their economical matter, and are complete in all essential aspects.

Accounting principles used

The items of the financial statements are valued according to the following accounting principles:

a) it is assumed that the company will operate in the future;
b) assessment methods used are the same as used in the previous financial year;
c) assessment is made with mere caution:
- only profit earned before the date of the annual report is included in the financial statements
- all projected risk amounts and losses that appeared in the financial year or in the previous years are taken into account, even those which became known in the period of time between the date of the annual report and the day when the financial statements are drawn up
- all value decreases and depreciation amounts are calculated and taken into account, regardless of the financial year result (profit or losses)
d) revenues and expenditures connected with the financial year are taken into account, regardless of payment date and invoice receiving or writing out date;
e) assets and liabilities and net worth items have been assessed independently;
f) the initial balance sheet of the financial year coincides with the previous financial year final balance sheet;
g) all items that have an essential influence on the financial statements' users evaluation or decision taking have been taken into account, non-significant items have been combined and they are shown in details in the appendixes to the financial statements;
h) business operations during the financial year are shown by their economical content and nature instead of their legal form.

Financial year

Financial year is 03 months, from 01.01.2011 to 31.03.2011.

Money and foreign currency revaluation

Amounts shown in these financial statements are in Latvian national currency – lats (LVL). All monetary assets and liabilities are recalculated to lats, using the official exchange rate of the Latvian Bank that is set on the last day of the financial year.

Long-term and short-term items

Long-term items include amounts, whose receiving, discarding or payment terms become due more than 1 year after the end of the respective financial year. Amounts that are due to be received, paid or discarded during the next year, are included in short-term items.

Fixed assets and nonmaterial investment depreciation

Fixed assets and non-material investments are shown by purchase price minus depreciation. Depreciation is calculated on the straight-line basis, using as a basis the following rates:

Fixed assets
Property	1%
Equipment and machinery	20%
Other fixed assets	25%

Income tax

Income tax for the financial year consists of calculated tax and deferred tax. Income tax is included in the profit and losses account.

Income tax for the financial year is calculated according to the law" On the income tax of Undertakings", determining taxable income and using 15% rate, set by the law.

Deferred income tax is calculated for the difference between assets and liabilities value in the financial statements and assets and liabilities value for tax purposes. Deferred income tax is calculated using 15% rate, set by the law. The above-mentioned difference mainly comes from the different fixed assets depreciation rates used in the financial and tax accounting. Increase of provisions for bad receivables is not taken into account, calculating deferred income tax, due to mere caution principle.

Credit line

There is a credit JSC "SEB banka". It is included in the long-term and short-term liabilities and the balance at the end of the financial period is 2 353 526 LVL (3 348 765 EUR).

(1) Net turnover

Turnover consists of revenues that the Company gained in the first three months of 2009 from its core business-service provision without VAT

Type of commercial operations	2011.03.31	2010.03.31	2011.03.31	2010.03.31
	LVL	LVL	EUR	EUR

power supply, distribution and servicing	31 522	33 861	44 852	48 180
water supply and sewage services	131	126	186	179
office renting service	102 437	111 358	145 755	158 448
utility services	54 423	49 588	77 437	70 557
black and nonferrous metal scrap and scrap
purchase	32 736	12 846	46 579	18 279
Total	221 249	207 779	314 809	295 643

Distribution of net turnover by geographical markets

	2011.03.31	2010.03.31	2011.03.31	2010.03.31
Country	LVL	LVL	EUR	EUR

Latvia	221 249	202 751	314 809	288 489
Estonia		5 028		7 154
Total	221 249	207 779	314 809	295 643

(2) Cost of sales

	2011.03.31	2010.03.31	2011.03.31	2010.03.31
	LVL	LVL	EUR	EUR

personnel	25 006	19 149	35 580	27 247
depreciation	13 644	14 698	19 414	20 914
transport	1 563	1 886	2 224	2 684
other outstanding costs	61 104	59 787	86 943	85 069
personnel training	193	90	275	128
telecommunication service	223	183	317	260
other costs tied to commercial operations	22 463	20 466	31 962	29 121
insurance (buildings)	1 291	918	1 837	1 306
land rent to LPA	766	3 617	1 090	5 146
costs for the puchase and devilery of
goods	26 527	10 524	37 745	14 974
other cost	16	76	23	108
Total	152 796	131 394	217 409	186 957

Costs of administration	2011.03.31	2010.03.31	2011.03.31	2010.03.31
	LVL	LVL	EUR	EUR

personnel	10 391	9 307	14 785	13 243
telecommunication service	222	183	319	260
office supplies	196	93	279	132
cash turnover expenses	45		64
transport expenses for administrative needs	1 562	1 886	2 223	2 684
representative expenses	13	5	18	7
legal assistance or raid	492		700
RFB annual fee	3 125	2 500	4 446	3 557
audit cost
Total	16 046	13 974	22 831	19 883

Other revenues from commercial

(4) operation

	2011.03.31	2010.03.31	2011.03.31	2010.03.31
	LVL	LVL	EUR	EUR

disposal of fixed assets
fines	828	1 202	1 178	1 710
other revenues		305		434
insurance recompense
revenues from changes in currency rates		116		165

Total	828	1 623	1 178	2 309

Other costs of commercial

(5) operations

	2011.03.31	2010.03.31	2011.03.31	2010.03.31
	LVL	LVL	EUR	EUR


60% of representative costs	21	8	30	11
foreign currency loss	27		38
allowances and bonuses	176	245	251	349
fines	987	157	1 404	223
provisions for bad debtots		8 893		12 654
Total	1 211	9 303	1 723	13 237

Other revenues from interests or similar sources

(6)		2011.03.31	2010.03.31	2011.03.31	2010.03.31
		LVL	LVL	EUR	EUR

	interest from balances of accounts		3		4

	Total	0	3	0	4

	Payments of interest and similar
	expenses
(7)		2011.03.31	2010.03.31	2011.03.31	2010.03.31
		LVL	LVL	EUR	EUR

	credit interests	34 437	30 777	49 000	43 792
	interest to LPA for long term buy-out of land		462		657
	interest to SEB Līzings	133		189
	Total	34 570	31 239	49 189	44 449


	Other taxes	2011.03.31	2010.03.31	2011.03.31	2010.03.31
(8)		LVL	LVL	EUR	EUR

	real estate tax (buildings ,land)	5 043	4 990	7 176	7 100


	Total	5 043	4 990	7 176	7 100

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Akciju sabiedriba "VEF" Interim / Quarterly Report 2011