Akciju sabiedriba "VEF"

Quarterly Report • Feb 26, 2010

JSC VEF, Brīvības gatve 214,Rīga,LV-1039

JOINT STOCK COMPANY VEF (Unified registration number 40003001328)

NON-AUDITED FINACIAL STATEMENTS For the period ended on December 31, 2009

CONTENTS

General information

Report on tne Management Board's responsibility

Management report

Balance sheet

Income statement

Cash flow statement

Statement of changes in equity

Notes to the financial statement

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
	phone: 7270618, fax: 7552201
Equity capital 1 :	Ls 1 944 637 paid 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 december 31, 2009:
and share capital (%)	*VEF KOMUNIKĀCIJU SERVISS SIA- 45.52377% ;
	*Komunikāciju Centrs" SIA – 21.92579% ;
	*State Social Insurance Agency - 5.01801 %;
	* Tamāra Kampāne - 9.43334% ;
	* Gints FeĦuks - 7.01432% ;
	*Other shareholders - 11.08475%.
Chief executive officer:	Chairman of the Board of the Company:
	GINTS FEĥUKS
Members of the Board:	TAMĀRA KAMPĀNE
	PĒTERIS AVOTIĥŠ
	AIVARS VĪTOLIĥŠ
Members of the Supervisory Council:	ANDRIS DENIĥŠ
	INTS KALNIĥŠ
	GUNTIS LIPIĥŠ
	JĀNIS LĀMA
Period of account:	01.01.2009. - 31.12.2009.
Qualified auditor:	Mara Liguta. Certificate Nbr.55
1

Paid-up and registred equity capital 1 944 637 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 1 LVL (one Latvian lat).

Report on the Management Board's responsibility to the non audited financial statement of JSC "VEF" for the twelve months of 2009

Management Board of JSC "VEF" (hereinafter – the Company) is responsible for preparation of the middle-term financial statements of the Company. The financial statements non 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, 2009.

Financial statements are prepared according to the approved International Standards of financial reports and observing principle of continuing business activity. 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 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 FeĦuks Chairman of the Management Board

Management Report

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, as well as trading in ferrous and non-ferrous scrap metal.

According to the balance statement of the Company, the revenue from the economic activity in 12 months of 2009 makes LVL 817 179, which is 88 129 LVL less than over the previous reporting period.

Having in view the overall national and global economic situation in the recession, a year ago the Company focused its business to the preservation and optimization of the existing volumes of cash flow and followed this target over the previous year.

The Company continues to provide a full scope of its services, while maintaining the jobs and implementing the fund-saving programme, by reducing the outsourcing volumes and prices, as well as diversifying markets and risks. At the end of 2009, the Company obtained a license and started the trade operations with ferrous and non-ferrous metals.

The Board of Joint Stock Company "VEF" follows the Company's strategic plans of the previous year, guiding from the economic situation in the country and in particular from the situation in the space rental market. This year the plan is to enhance the monitoring of the market in the rental segment and to react to the changes of the situation, to take also an active tenant attraction for the free spaces within the property of the Company, through enlargement and renovation of the area without any additional fund borrowing, as well as to increase the turnover of the ferrous and non-ferrous metal trading.

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

Gints FeĦuks Chairman of the Management Board

ASSETS		Final balance		Beginning balance
	LVL	LVL	EUR	EUR
	31.12.2009	31.12.2008	31.12.2009	31.12.2008
			0.702804	0.702804
LONG-TERM INVESTMENTS
Intangible assets
Concessions,patents,licences	354	79	504	112
Total intangible assets	354	79	504	112
Fixed Assets
Land,buildings and other property	4 192 124	4 233 193	5 964 855	6 023 291
Equipment and machinery	2 473	12 943	3 519	18 416
Other fixed assets and inventory	15 237	14 940	21 680	21 258
Advance payments for fived assets		62 301		88 646
Total fixed assets	4 209 834	4 323 377	5 990 054	6 151 611
Total long-term investments	4 210 188	4 323 456	5 990 558	6 151 723
Current assets
Inventory
Goods for sale	3 690		5 250
Total inventory	3 690	0	5 250	0
Debtors
Customers and client debts	41 687	30 916	59 315	43 990
Other debtors	20 773	23 400	29 557	33 295
Future period	25 954	29 758	36 929	42 342
Future period expenses	3 729	10 322	5 306	14 687
Subscribed but not paid-up amount of equity
capital		338 463		481 589
Total debtors	92 143	432 859	131 107	615 903
Cash	2 406	61 757	3 424	87 872
Total Current assets	98 239	494 616	139 781	703 775
TOTAL ASSETS	4 308 427	4 818 072	6 130 339	6 855 499

LIABILITIES	Final balance		Beginning balance
	LVL	LVL	EUR	EUR
	31.12.2009	31.12.2008	31.12.2009	31.12.2008
			0.702804	0.702804
Stockholder's Equity
Common stock	1 944 637	2 281 921	2 766 969	3 246 881
Long-term investments revaluation reserve	438 390	438 390	623 773	623 773
Total accumulation
Retained earnings from the previous years	-901 554	-928 449	-1 282 796	-1 321 064
Retained earnings of the financial years	7 603	26 895	10 818	38 268
Total stockholder's equity	1 489 076	1 818 757	2 118 764	2 587 858
PROVISIONS
Other provisions	7 522	10 168	10 703	14 468
Total provisions	7 522	10 168	10 703	14 468
LIABILITIES
Long-term liabilities
Borrowings from credit institutions	2 273 743	2 385 903	3 235 245	3 394 834
Prepayments from buyers	66 911	66 232	95 206	94 240
Other liabilities	13 689	44 731	19 477	63 646
Deferred tax liability	153 289	138 331	218 111	196 827
Total long-term liabilities	2 507 632	2 634 967	3 568 039	3 749 220
Current liabilities
Borrowings from credit institutions	162 684	213 207	231 479	303 366
Accounts payable	42 567	67 035	60 567	95 382
Taxes and social security payments	54 107	5 531	76 987	7 597
Other liabilities	44 259	54 153	62 975	77 053
Future period income		13 836		19 687
Prepayments from buyers	580	418	825	595
Total current liabilities	304 197	354 180	432 833	503 953
Total liabilities	2 811 829	2 989 147	4 000 872	4 253 173
TOTAL LIABILITIES&STOCKHOLDER'S	4 308 427	4 818 072	6 130 339	6 855 499
EQUITY

PROFIT AND LOSSES ACCOUNT FOR YEAR, WHICH ENDS ON DECEMBER 31.2009.

		LVL 31.12.2009	LVL 31.12.2008	EUR 31.12.2009 - 0.702804	EUR 31.12.2008 - 0.702804
1	2	4	5	4	5
Net turnover		794 076	898 082	1 129 868	1 277 856
Cost of goods sold	1	-558 843	-590 034	-795 162	-839 543
Gross profit		235 233	308 048	334 706	438 313
Selling expenses
Administrative expenses	2	-57 730	-77 493	-82 142	-110 263
Other income from operations	3	23 103	7 226	32 873	10 320
Other expenses from operations	4	-12 385	-19 399	-17 622	-27 602
Finansial services income	5	144	19 155	205	27 255
Finansial services expenses	6	-137 794	-174 470	-196 063	-248 248
Profit before taxes		50 571	63 094	71 956	89 775
Other taxes	7	-28 010	-28 536	-39 855	-40 604
Deferred tax		-14 958	-7 663	-21 283	-10 903
Net profit		7 603	26 895	10 818	38 268
Earnings per share (EPS) EPS on 31.12.2009-0.0039 LVL- 0.0039 EUR
Chairman of the Board		G.FeĦuks	Member of the Board		T.Kampane

CASH FLOW STATEMENT FOR YEAR THAT ENDS ON DECEMBER 31, 2009

		2009 31.12.	2008 31.12.	2009 31.12.	2008 31.12.
				EUR	EUR
		LVL	LVL	0.702804	0.702804
I.	CASH FLOW FROM OERATING ACTIVITIES
	Profit before outstanding items and taxes (+) Adjustments:	50 571	63 094	71 956	89 775
	fixed assets depreciation ( +)	61 218	59 796	87 105	85 082
	intangible assets depreciation (+)	25	5	36	7
	increase/decrease in provisions	-2 646	2 467	-3 765	3 510
	profit or losses from exchange rates fluctuation
	(+/-)	162	321	231	457
	finansial service income	144	19 155	205	27 255
	finacial services income	137 794	174 470	196 063	248 412
	Profit or losses before adjustments from current assets and liabilities	247 268	280 998	351 831	399 824
	Adjustments:
	debtors : increase (-); decrease (+)	339 996	-325 425	483 770	-462 608
	inventory: increase (-); decrease (+)	- 3 960		-5 635
	liabilities: increase (-); decrease (+)	-293 363	401 914	-417 418	571 872
	Gross cash provide by operating activities	290 211	357 487	412 933	508 658
	Payments for financial	-137 794	-174 470	-196 063	-248 248
	Income tax payments
	Net cash provided by operating activities before
	outstanding items:	152 417	183 017	216 870	260 410
	Cash flow from outstanding items (-/+)
	Net cash provided by operating activities :	152 417	183 017	216 870	260 410
II.	CASH FLOWS FROM INVESTING ACTIVITIES :
	Fixed assets purchase	-10 276	-6 672	-14 621	-9 493
	Interest received	144	19 155	205	27 255
	Net cash used in investing activities :	-10 132	12 483	-14 417	17 762
III.	CASH FLOWS FROM FINANCING ACTIVITIES:
	Expenses for borrowings repayment	-162 684	-213 207	-231 478	-303 366
	Payments LPA for long term buy out of land	-40 292	-49 771	-57 330	-70 818
	Common stock issued	1 178	113 551	1 676	161 569
	Net cash provided by financing activities :	-201 798	-149 427	-287 133	-212 615
IV.	Exchange rate fluctuation result :	162	-321	231	-457
	Net cash flom	-59 351	45 752	-84 449	65 099
	CASH AT BEGINNING OF YEAR	61 757	16 005	87 872	22 773
	CASH AT END OF YEAR	2 406	61 757	3 423	87 872

STATEMENT OF CHANGES IN EQUITY FOR YEAR THAT ENDS ON DECEMBER 31, 2009

	31.12.2009 LVL	31.12.2008 LVL	31.12.2009 EUR 0.702804	31.12.2008 EUR 0.702804
Stockholder's eguity
Balance at the beginning of the
financial year	2 281 922	1 829 908	3 246 882	2 603 724
Increase from		452 013		643 158
Decrease from	337 285		479 913
Balance at the end of the financial year	1 944 637	2 281 921	2 766 969	3 246 882
Long-term investments revaluation reserve
Balance at the beginning of the financial year	438 390	438 390	623 773	615 916
Increase from				7 857
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	-901 554	-928 449	-1 282 796	- 1 321 064
Profit or losses of the finacial year	7 603	26 895	10 818	38 268
Dividendes
Included in accumulations
Balance at the end of the financial year	-893 951	- 901 554	- 1 271 978	- 1 282 796
Stockholder's eguity (total)
Balance at the beginning of the financial year	1 818 757	1 339 849	2 587 858	1 906 433
Balance at the end of the financial year	1 489 076	1 818 757	2 118 764	2 587 858

JSC VEF FINANCIAL STATEMENTS' APPENDIXES FOR YEAR, WHICH ENDS ON DECEMBER 31, 2009

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 12 months, from 01.01.2009 to 31.12.2009.

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 2 436 467 LVL (3 466 780 EUR).

(1) Net turnover

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

Type of commercial operations	2009.12.31	2008.12.31	2009.12.31	2008.12.31
	LVL	LVL	EUR	EUR
power supply, distribution and servicing	120 954	163 063	72 102	232 018
water supply and sewage services	785	10 710	1 117	15 239
office renting service	477 517	557 195	679 445	792 817
utility services	156 179	167 114	222 223	237 782
other	38 641		54 981
Total	794 076	898 082	1 129 868	1 277 856

Distribution of net turnover by geographical markets

	2009.12.31	2008.12.31	2009.12.31	2008.12.31
Country	LVL	LVL	EUR	EUR
Latvia	759 741	898 082	1 081 014	1 277 856
Estonia	34 335		48 854
Total	794 076	898 082	1 129 868	1 277 856

(2) Cost of sales

	2009.12.31	2008.12.31	2009.12.31	2008.12.31
	LVL	LVL	EUR	EUR
personnel	86 991	90 336	123 777	128 537
depreciation	61 218	59 796	87 105	85 082
transport	9 567	10 075	13 655	14 335
other outstanding costs	198 792	230 674	282 856	328 220
personnel training	360	127	512	181
telecommunication service	1 327	1 721	1 888	2 449
other costs tied to commercial operations	76 723	104 329	109 167	148 445
insurance (buildings)	4 761	4 337	6 774	6 171
maintenance of buildings 1 and 1a	67 106	71 292	95 483	101 439
land rent to LPA	14 994	17 342	21 335	24 675
depreciation of license	25	5	36	7
other cost	36 949		52 574
Total	558 843	590 034	795 162	839 543

(3)	Costs of administration	2009.12.31	2007.12.31	2009.12.31	2008.12.31
		LVL	LVL	EUR	EUR
	personnel	41 281	55 388	58 738	78 810
	telecommunication service	1 327	1 722	1 888	2 450
	office supplies	1 323	1 419	1 882	2 019
	cash turnover expenses		221		314
	transport expenses for administrative needs	9 597	10 076	13 655	14 337
	representative expenses	155	214	220	304
	legal assistance or raid	647	2 553	921	3 633
	RFB annual fee	2500	5 000	3557	7 114
	audit cost	900	900	1 281	1 281
	Total	57 730	77 493	82 142	110 263

Other revenues from commercial

(4) operation

	2009.12.31	2008.12.31	2009.12.31	2008.12.31
	LVL	LVL	EUR	EUR
disposal of fixed assets
fines	2 724	1 362	3 876	1 938
1/5 of revenue from writing-off PS
purchase	4 310	1 077	6 133	1 532
1/5 from financial support given for Gold
equipment	9 526	2 382	13 554	3 389
other revenues	5 475	1 405	7 790	1 999
insurance recompense	1 068	1 000	1 520	1 423
Total	23 103	7 226	32 873	10 282

Other costs of commercial

(5) operations

	2009.12.31	2008.12.31	2009.12.31	2008.12.31
	LVL	LVL	EUR	EUR
losses from changes in currency rates	47	321	67	457
40% of representative costs	112	143	159	203
donations to Latvian orphans fund	555	603	790	858
allowances and bonuses	2 135	3 116	3 038	4 314
fines	3 207	220	4 563	171
other costs	6 329	14 969		21 299
Total	12 385	19 372	17 622	27 564

Other revenues from interests or

(6) similar sources

		2009.12.31	2008.12.31	2009.12.31	2008.12.31
		LVL	LVL	EUR	EUR
	interest from balances of accounts	144	19 155	205	27 255
	Total	144	19 155	205	27 255
	Payments of interest and similar
(7)	expenses
		2009.12.31	2008.12.31	2009.12.31	2008.12.31
		LVL	LVL	EUR	EUR
	credit interests	133 519	167 091	189 980	237 749
	interest to LPA for long term buy-out of
	land	4 275	7 379	6 083	10 499
	Total	137 794	174 470	196 063	248 248
(8)	Other taxes	2009.12.31	2008.12.31	2009.12.31	2008.12.31
		LVL	LVL	EUR	EUR
	real estate tax (buildings,land)	28 010	28 536	39 855	40 604
	Total	28 010	28 536	39 855	40 604