JOINT STOCK COMPANY VEF (Unified registration number 40003001328)

NON- AUDITED FINACIAL STATEMENTS For the period ended on December 31, 2013

That has been prepared according to the legislation standards of the Republic of Latvia

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

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
Taxpayers' Reg. Nbr.	On April 14, 2004 registered in the Commercial Register, Nbr. 40003001328
Legal address	LV 40003001328
	Brīvības gatve 214, Rīga, LV-1039, Republic of Latvia phone: 67270618
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, 2013:
and share capital (%)	*VEF KOMUNIKĀCIJU SERVISS SIA	- 45.52 % ;
	*Laila Līduma	– 6.31 % ;
	* Tamāra Kampāne	- 9.50 % ;
	* Gints Feņuks	- 24.44 % ;
	*Other shareholders	- 14.23 %.
Chief executive officer:	Chairman of the Board of the Company:
	GINTS FEŅUKS
Members of the Board:	TAMĀRA KAMPĀNE
	MĀRTIŅŠ CAUNA
	GUNTIS LIPIŅŠ
Members of the Supervisory Council:	ANDRIS DENIŅŠ
	INTS KALNIŅŠ
	MODRIS ZOMMERS
	ARNIS ZEKUNDE
Period of account:	01.01.2013. - 31.12.2013.
Qualified auditor:	ALEKSEJS ĻITVINOVS. Certificate Nbr. 190
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 2013

Management Board of JSC "VEF" (hereinafter – the Company) is responsible for preparation of the 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, 2013.

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.

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

Gints Feņuks 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.

According to the balance statement of the Company, the revenue from the economic activity in 12 months of 2013 makes LVL 793 825 ( 1 129 511 EUR ), which is less than 72 590 LVL ( 103 286 EUR) over the previous reporting period.

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 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 .

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

Gints Fenuks Chairman of the Management Board

ASSETS	Final balance		Beginning balance
	LVL	LVL	EUR	EUR
	31.12.2013	31.12.2012	31.12.2013	31.12.2012
			0.702804	0.702804
LONG-TERM INVESTMENTS
Intangible assets
Concessions,patents,licences	631	927	898	1 319
Total intangible assets	631	927	898	1 319

Fixed Assets
Land,buildings and other property	3 943 529	3 983 467	5 611 136	5 667 963
Other fixed assets and inventory	96 984	88 763	137 996	126 298

Total fixed assets	4 040 513	4 072 230	5 749 132	5 794 261

Total long-term investments	4 041 144	4 073 157	5 750 030	5 795 580


Debtors
Customers and client debts	28 124	23 440	40 018	33 352
Other debtors	4 397	11 115	6 256	15 815
Future period	34 650	34 068	49 303	48 474
Future period expenses	1 164	1 505	1 656	2 141
Total debtors	68 336	70 128	97 233	99 783

Cash	5 974	10 259	8 500	14 597

Total Current assets	74 310	80 387	105 733	114 380



TOTAL ASSETS	4 115 454	4 153 544	5 855 763	5 909 961

LIABILITIES	Final balance		Beginning balance
	LVL	LVL	EUR	EUR
	31.12.2013	31.12.2012	31.12.2013	31.12.2012
			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	563 341	563 341	801 562	801 562

Total accumulation
Retained earnings from the previous years	-768 646	-793 982	-1 093 685	- 1 129 735
Retained earnings of the financial years	1 477	25 336	2 102	36 050

Total stockholder's equity	1 740 809	1 739 332	2 476 948	2 474 846

PROVISIONS
Other provisions	8 845	10 193	12 585	14 503
Total provisions	8 845	10 193	12 585	14 503

LIABILITIES

Long-term liabilities
Borrowings from credit institutions	2 066 781	2 151 118	2 940 764	3 060 765
Prepayments from buyers	22 564	25 103	32 106	35 718
Deferred tax	78 743	35 954	112 041	51 158
Other borrowing	38 102		54 215
Total long-term liabilities	2 206 190	2 212 175	3 139 126	3 147 641

Current liabilities
Borrowings from credit institutions Other borrowing	84 336 18 510	84 336 15 787	119 999 26 337	119 999 22 463
Accounts payable	32 659	34 861	46 470	49 603
Taxes and social security payments	10 431	17 037	14 842	24 241
Other liabilities	6 860	4 983	9 761	7 090
Prepayments from buyers	6 814	34 840	9 695	49 573
Total current liabilities	159 610	191 844	227 104	272 969


Total liabilities	2 365 800	2 404 019	3 366 230	3 420 611


TOTAL LIABILITIES&STOCKHOLDER'S	4 115 454	4 153 544	5 855 763	5 909 961

EQUITY

PROFIT AND LOSSES ACCOUNT FOR YEAR, WHICH ENDS ON DECEMBER 31.2013.

		LVL 31.12.2013	LVL 31.12.2012	EUR 31.12.2013 - 0.702804	EUR 31.12.2012 - 0.702804
1	2	4	5	4	5
Net turnover	1	793 825	866 415	1 129 511	1 232 797
Cost of goods sold	2	-574 472	-617 372	-817 400	-878 441
Gross profit		219 353	249 043	312 111	352 921
Administrative expenses	3	-72 301	-61 749	-102 875	-87 861
Other income from operations	4	31 891	1 924	45 377	2 738
Other expenses from operations	5	-11 681	-7 407	-16 621	-10 539
Financial services income	6	0	2	0	3
Finansial services expenses	7	-112 902	-124 297	-160 645	-176 859
Profit before taxes		54 360	57 516	77 347	81 838
Other taxes	8	-10 094	-14 219	-14 362	-20 232
Deferred tax		-42 789	-17 961	-60 883	-25 556
Net profit		1 477	25 336	2 102	36 050
Earnings per share (EPS) EPS on 31.12.2013 -0.001 LVL- 0.001 EUR
Chairman of the Board		G.Feņuks	Member of the Board	T.Kampāne

CASH FLOW STATEMENT FOR YEAR THAT ENDS ON DECEMBER 31, 2013

		2013 31.12.	2012 31.12.	2013 31.12.	2012 31.12.
		LVL	LVL	EUR 0.702804	EUR 0.702804
I.	CASH FLOW FROM OERATING ACTIVITIES
	Profit before outstanding items and taxes (+) Adjustments:	54 360	57 516	77 347	87 408
	fixed assets depreciation ( +)	84 285	75 907	119 927	108 006
	intangible assets depreciation (+)	295	295	420	420
	increase/decrease in provisions	-1 348	1 108	-1 918	1 434
	profit or losses from exchange rates fluctuation
	(+/-)	676 0	1 121 -2	962 0	1 595 -3
	finansial service income long-term investment increase in the amount of revaluation reserve (+/-)
	finacial services income	112 902	124 297	160 645	176 859
	Profit or losses before adjustments from current assets and liabilities	251 170	260 142	357 383	370 149
	Adjustments:
	debtors : increase (-); decrease (+)	1 792	-1 330	2 550	-1 892
	inventory: increase (-); decrease (+)	0	0	0	0
	liabilities: increase (-); decrease (+)	-40 495	-37 395	-57 619	-53 208
	Gross cash provide by operating activities	212 467	221 417	302 313	315 048
	Payments for financial Net cash provided by operating activities before	-112 902	-124 297	-160 645	-176 859
	outstanding items:	99 565	97 120	141 668	138 189
	Received insurance compensation	1 246		1 773
	Cash flow from outstanding items (-/+)
	Net cash provided by operating activities :	100 811	97 120	143 441	138 189
II.	CASH FLOWS FROM INVESTING ACTIVITIES :
	Fixed assets purchase	-826	-17 134	-1 175	-24 379
	Interest received	0	2	0	3
	Net cash used in investing activities :	-826	-17 132	-1 175	-24 377
III.	CASH FLOWS FROM FINANCING ACTIVITIES:
	Expenses for borrowings repayment	-84 336	-73 494	-119 999	-104 573
	Paid finance lease liabilities	-19 258	-13 104	-27 402	-18 645
	Net cash provided by financing activities :	-103 594	-86 598	-147 401	-123 218
IV.	Exchange rate fluctuation result :	-676	-1 121	-962	-1 595
	Net cash flom	-4 285	-7 731	-6 097	-11 000
	CASH AT BEGINNING OF YEAR	10 259	17 990	14 597	25 597
	CASH AT END OF YEAR	5 974	10 259	8 500	14 597

STATEMENT OF CHANGES IN EQUITY FOR YEAR THAT ENDS ON DECEMBER 31, 2013

		31.12.2013 LVL	31.12.2012 LVL	31.12.2013 EUR 0.702804	31.12.2012 EUR 0.702804
Stockholder's eguity
	Balance at the beginning of the
	financial year	1 944 637	1 944 637	2 766 969	2 766 969
	Increase from
	Decrease from
	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	563 341	563 341	801 562	801 562
	Increase from
	Decrease from
	Balance at the end of the financial year	563 341	563 341	801 562	801 562
	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	-768 646	-793 982	-1 093 685	-1 229 735
	Profit or losses of the finacial year	1 477	25 336	2 102	36 050
	Balance at the end of the financial year	-767 169	-768 646	- 1091 583	-1 093 685
Stockholder's eguity (total)
	Balance at the beginning of the
	financial year	1 739 332	1 713 996	2 475 133	2 438 797
	Balance at the end of the financial year	1 740 809	1 739 332	2 476 948	2 475 133

JSC VEF FINANCIAL STATEMENTS' APPENDIXES FOR YEAR, WHICH ENDS ON DECEMBER 31, 2013

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.

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.

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 01.01.2013 to 31.12.2013.

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

Fixed assets are presented in the acquisition or revaluation cost less depreciation. Depreciation is calculated on a straight-line 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:

	(% in the
	year)
Buildings and structures	1
Other fixtures and fittings, tools and vehicles	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.

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.

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.

Currency risk

The Company has no currency fluctuation risk, because all transactions are made in euro's or lats. And since 1st January 2005 lats have been fixed to euro by the Bank of Latvia with official rate of exchange 0.702804. Thereby future profit or losses of the Company from currency rate fluctuations shall be insignificant, as long as Bank of Latvia keeps the mentioned fixed exchange rate.

Interest rate risk

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

Credit risk

Liquidity risk

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

(1) Net turnover

Turnover consists of revenues that the Company gained in the first twelve months of 2013 from its core business-service provision without VAT

Type of commercial operations	2013.12.31	2012.12.31	2013.12.31	2012.12.31
	LVL	LVL	EUR	EUR

power supply, distribution and servicing	175 520	149 865	249 742	213 238
rental income	427 994	409 337	608 981	582 434
utility services	190 296	186 905	270 767	265 942
ferrous an non-ferrous waste and scrap
sales revenue	15	120 308	21	171 182
Total	793 825	866 415	1 129 511	1 232 797

Distribution of net turnover by geographical markets	2013.12.31	2012.12.31	2013.12.31	2012.12.31
Country	LVL	LVL	EUR	EUR
Latvia	793 825	866 415	1 129 511	1 232 797

Cost of sales

	2013.12.31	2012.12.31	2013.12.31	2012.12.31
	LVL	LVL	EUR	EUR

labor and social payments	123 639	112 150	175 922	159 575
depreciation	84 285	75 907	119 927	108 006
transport	9 451	7 550	13 448	10 742
residential services (electricity, water )	276 091	243 103	392 842	345 904
travel expenses	0	378	0	538
personnel training	199	156	283	222
telecommunication service	993	1 108	1 413	1 577
other costs tied to commercial operations	71 401	76 537	101 594	108 902
insurance (buildings)	3 678	3 730	5 233	5 307
land rent to LPA	4 235	5 250	6 026	7 470
depreciation of license	295	295	420	420
bank service	192	194	273	276
ferrous an non-ferrous waste and scrap
selling cost	13	91 014	19	129 501
Total	574 472	617 372	817 400	878 441

Costs of administration 2013.12.31 2012.12.31 2013.12.31 2012.12.31

	LVL	LVL	EUR	EUR

labor and social payments	53 467	44 852	76 047	63 819
telecommunication service	994	1 108	1 414	1 577
office supplies	1 324	1 174	1 884	1 670
transport expenses for administrative needs	9 450	7 550	13 446	10 747
representative expenses	29	81	41	115
legal assistance or raid	2 037	1 084	2 898	1 542
RFB annual fee	5 000	5 000	7 114	7 114
auditor cost	0	900	0	1 281
Total	72 301	61 749	102 875	87 861

Other revenues from commercial operation

	2013.12.31 LVL	2012.12.31 LVL	2013.12.31 EUR	2012.12.31 EUR

Provisions for vocation decrease	1 348	0	1 918	0
fines	1 697	1 239	2 415	1 763
other revenues	27 600	644	39 271	916
income from currency conversion	0	0	0	0
insurance recompense	1 246	41	1 773	58

Total	31 891	1 924	45 377	2 738

Other costs of commercial

operations

(ર)

	2013.12.31 LVL	2012.12.31 LVL	2013.12.31 EUR	2012.12.31 EUR

losses from changes in currency rates	676	1 121	962	1 595
60% of representative costs	53	144	75	205
donations to Latvian orphans fund	253	467	360	665
allowances and bonuses	907	701	1 291	997
late payment penalty on taxes	101	3 190	144	4 539
fines	1 443	625	2 053	889
other costs	8 248	1 159	11 736	1 649
Total	11 681	7 407	16 621	10 539

	Other revenues from interests or similar sources
(6)		2013.12.31	2012.12.31	2013.12.31	2012.12.31
		LVL	LVL	EUR	EUR

	interest from balances of accounts	0	2	0	3
	Total	0	2	0	3
	Payments of interest and similar expenses
(7)		2013.12.31	2012.12.31	2013.12.31	2012.12.31
		LVL	LVL	EUR	EUR

	SEB Līzings	980	264	1 394	376
	credit interests	111 379	123 851	158 478	176 224
	Swedbank līzings	543	182	773	259

	Total	112 902	124 297	160 645	176 859

	Other taxes	2013.12.31	2012.12.31	2013.12.31	2012.12.31
(8)		LVL	LVL	EUR	EUR

	real estate tax (buildings,land)	10 094	14 219	14 362	20 232


	Total	10 094	14 219	14 362	20 232

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