A statement of management's responsibility for the preparation and approval of the consolidated financial statements for the year ending 31 December 2012 of

Management of Open Stock Holding Power Company Barki Tojik (hereinafter – “the Company”) and its subsidiaries (hereinafter – “the Group”) is responsible for the preparation of the consolidated financial statements that present fairly the financial position of the Group as at 31 December 2012, and the results of its operations, cash flows and changes in shareholder’s equity for the year then ended, in compliance with International Financial Reporting Standards (“IFRS”).

In preparing the consolidated financial statements, management is responsible for:

· properly selecting and applying accounting policies;

· presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· providing additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's consolidated financial position and financial performance;

· making an assessment of the Group's ability to continue as a going concern.

Management is also responsible for:

· designing, implementing and maintaining an effective and sound system of internal controls, throughout the Group;

· maintaining adequate accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the consolidated financial position of the Group, and which enable them to ensure that the consolidated financial statements of the Group comply with IFRS;

· maintaining statutory accounting records in compliance with the legislation of the Republic of Tajikistan and IFRS;

· taking such steps as are reasonably available to them to safeguard the assets of the Group; and

· detecting and preventing fraud and other irregularities.

The consolidated financial statements of the Group for the year ended 31 December 2012 were approved by management on 5 August 2013.

On behalf of the Management:

______________________________ ______________________________

Nazarov A.G.                                                      Khasanov B.

Chairman                                                            Chief Accountant

5 August 2013                                                      5 August 2013

Dushanbe                                                              Dushanbe

Republic of Tajikistan                                         Republic of Tajikistan

Independent auditors' report

To the Shareholder of Open Stock Holding Power Company Barki Tojik:

We were engaged to audit the accompanying financial statements of Open Stock Holding Power Company Barki Tojik (“the Group”), which comprise the statement of financial position as at 31 December 2012, and the statement of comprehensive income, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on conducting the audit in accordance with International Standards on Auditing. Because of the matters described in the Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

Basis for disclaimer of opinion

As at 31 December 2012, inventories are carried in the consolidated statement of financial position at 818,884 thousand Somoni. This amount includes inventories that were received from other state entities in barter operations. We were not able to obtain sufficient appropriate audit evidence that the value of these inventories was estimated at the date of transaction based on IFRS.

As at 31 December 2012, property, plant and equipment are carried in the consolidated statement of financial position at 4,811,585 thousand Somoni. In 2010 the Group performed valuation of these assets in accordance with state valuation methodology. As a result of this revaluation the book value of the property, plant and equipment increased by 1,802,319 thousand Somoni. We were not able to obtain sufficient appropriate audit evidence that this valuation was performed in accordance with the International Valuation Standards, as required by IFRS.

As at 31 December 2012, trade and other receivables and payables are carried in the consolidated statement of financial position at 316,784 thousand Somoni and 663,863 thousands Somoni respectively. We did not receive confirmations for certain part of these accounts. We were unable to satisfy ourselves by alternative means concerning the balances of these trade and other accounts receivable and payable at 31 December 2012.

For the year ended 31 December 2012, revenue is recorded in the consolidated statement of comprehensive income at 1,099,377 thousand Somoni. We were not able to receive detailed breakdowns and test revenue from sales to population in some of the subsidiaries of the Group where automated billing systems are not installed and accordingly were not able to obtain sufficient appropriate audit evidence that this amount appropriately presents the results of the operations of the Group.

Disclaimer of opinion

Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the consolidated financial statements.

5 August 2013

Dushanbe

Republic of Tajikistan

Consolidated statement of financial position

	Notes	31 December 2012	31 December 2011 (restated1)	31 December 2010
ASSETS
Non-current assets
Property, plant and equipment	8	4,811,585	4,636,683	3,993,681
Intangible assets	9	237	267	16
Biological assets		30	-	-
Long-term accounts receivable	10	49,012	58,362	350,304
Long-term investments	11	182,512	182,427	31,631
Deferred tax assets	23	69,597	86,873	30,392
Total non-current assets		5,112,973	4,964,612	4,406,024
Current assets
Inventory	12	818,884	618,386	432,613
Trade and other receivables	13	267,772	187,303	563,831
Prepayments	14	101,347	67,489	4,580
Current income tax assets	23	2,682	-	-
Cash and cash equivalents	15	9,412	19,525	13,561
Total current assets		1,200,097	892,703	1,014,585
TOTAL ASSETS		6,313,070	5,857,315	5,420,609
EQUITY
Share capital	16	383,836	383,836	367,030
Foreign exchange differences from translation of foreign subsidiaries		(9)	(9)	5
Retained earnings		608,660	940,230	1,334,167
Reserves		24,302	24,302	24,302
Total equity		1,016,789	1,348,359	1,725,504
LIABILITIES
Long-term liabilities
Deferred revenue	21	1,803,099	1,817,519	1,761,220
Long-term liabilities	22	1,078,580	966,886	542,909
Deferred tax liabilities	23	-	-	10
Total long-term liabilities		2,881,679	2,784,405	2,304,139
Current liabilities
Short-term debt	17	691,912	403,363	254,996
Short-term accrued liabilities	18	946,494	560,781	416,736
Current income tax payable	23	-	65,608	51,510
Trade and other payables	19	663,863	601,476	658,159
Prepayments received and other accounts payable	20	112,333	93,323	9,565
Total short-term liabilities		2,414,602	1,724,551	1,390,966
Total liabilities		5,296,281	4,508,956	3,695,105
TOTAL EQUITY AND LIABILITIES		6,313,070	5,857,315	5,420,609

¹ As restated, see Note 4.

On behalf of the Management:

______________________________ _____________________________

Nazarov A.G.                                                      Khasanov B.

Chairman                                                           Chief Accountant

5 August 2013                                                     5 August 2013

Dushanbe                                                             Dushanbe

Republic of Tajikistan                                          Republic of Tajikistan

The notes on pages 9-52 form an integral part of these consolidated financial statements.

Consolidated statement of comprehensive income

	Notes	Year ended 31 December 2012	Year ended 31 December 2011 (restated1)
Revenue	24	1,099,377	964,975
Cost of sales	25	(519,045)	(398,713)
Gross profit		580,332	566,262
Selling expenses	26	(479,645)	(477,162)
General and administrative expenses	27	(161,146)	(166,635)
Net foreign exchange gain		12,907	8,672
Other expenses	28	(25,264)	(42,816)
Finance income	29	118,845	233,875
Finance cost	29	(346,879)	(154,707)
Loss before tax		(300,850)	(32,511)
Income tax (expense)/benefit	23	(30,720)	34,083
Net (loss)/profit		(331,570)	1,572
Exchange differences on translating foreign operations		-	(15)
Total comprehensive (loss)/income		(331,570)	1,557

¹ As restated, see Note 4.

On behalf of the Management:

______________________________ _____________________________

Nazarov A.G.                                                     Khasanov B.

Chairman                                                           Chief Accountant

5 August 2013                                                      5 August 2013

Dushanbe                                                              Dushanbe

Republic of Tajikistan                                          Republic of Tajikistan

The notes on pages 9-52 form an integral part of these consolidated financial statements.

Consolidated statement of changes in equity

	Notes	Share capital	Reserves	Retained earnings	Foreign exchange differences from translation of foreign subsidiaries	Total
Balance at 1 January 2011		383,836	24,302	938,658	6	1,346,802
Profit for the year and total comprehensive income for the year (restated1)		-	-	1,572	(15)	1,557
Balance at 31 December 2011 (as restated1)		383,836	24,302	940,230	(9)	1,348,359
Profit for the year and total comprehensive income for the year		-	-	(331,570)	-	(331,570)
Balance at 31 December 2012		383,836	24,302	608,660	(9)	1,016,789

¹ As restated, see Note 4.

On behalf of the Management:

______________________________ _____________________________

Nazarov A.G.                                                 Khasanov B.

Chairman                                                       Chief Accountant

5 August 2013                                                  5 August 2013

Dushanbe                                                          Dushanbe

Republic of Tajikistan                                      Republic of Tajikistan

The notes on pages 9-52 form an integral part of these consolidated financial statements.

	Notes	Year ended 31 December 2012	Year ended 31 December 2011
CASH FLOWS FROM OPERATING ACTIVITY:
Sales proceeds		820,535	728,206
Other income from operations		28,623	281,337
TOTAL CASH INFLOW FROM OPERATING ACTIVITY		849,158	1,009,543
Cost of sales		(524,478)	(129,049)
Payroll and social tax		(190,661)	(293,595)
Payment for services		(39,790)	(390,761)
Interest payment		(40,227)	(11,345)
Income tax payment		(52,684)	-
Other taxes payment		(143,930)	(151,592)
Other operating payments		(124,528)	(49,528)
TOTAL CASH OUTFLOW FROM OPERATING ACTIVITY		(1,116,298)	(1,025,870)
CASH OUTFLOW FROM OPERATING ACTIVITY		(267,140)	(16,327)
CASH FLOWS FROM INVESTING ACTIVITY:
Proceeds from sale of property, plant and equipment		-	38
Other proceeds from investment activities		-	18,554
TOTAL CASH INFLOW FROM INVESTING ACTIVITY		-	18,592
Acquisition of property, plant and equipment		(2,106)	(1,035)
Purchase of securities		-	-
Other payments for investing activities		-	-
TOTAL CASH OUTFLOW FROM INVESTING ACTIVITY		(2,106)	(1,035)
NET CASH (OUTFLOW)/INFLOW FROM INVESTING ACTIVITY		(2,106)	17,557

	Notes	Year ended 31 December 2012	Year ended 31 December 2011
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings		372,180	22,689
Repayment of borrowings		(112,898)	(34,452)
Other payments for financing activities		-	(2,040)
NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITY		259,282	(13,803)
Realized gains and losses on foreign exchange		(149)	(14,647)
Net change in cash and cash equivalents		(10,113)	(27,220)
CASH AND CASH EQUIVALENTS at the beginning of the year	15	19,525	46,745
CASH AND CASH EQUIVALENTS at the end of the year	15	9,412	19,525

On behalf of the Management:

______________________________ _____________________________

Nazarov A.G.                                                   Khasanov B.

Chairman                                                         Chief Accountant

5 August 2013                                                    5 August 2013

Dushanbe                                                            Dushanbe

Republic of Tajikistan                                         Republic of Tajikistan

The notes on pages 9-52 form an integral part of these consolidated financial statements.

1. GENERAL INFORMATION

Open Stock Holding Power Company Barki Tojik (hereinafter the “Company”) was registered in the Ministry of Justice of the Republic of Tajikistan on 3 June 1999. The Company and its subsidiaries (the “Group”) carry out its activity in the Republic of Tajikistan. The Group is a stock company and was established in accordance with the legislation of the Republic of Tajikistan.

Group's principal activity is the generation, transmission and distribution of electricity and heat in the Republic of Tajikistan. The Group also sells electricity to neighboring countries due to its operational needs. Electricity is generated on six hydropower stations, which are the structural units of the Group. Operating activity of the Group is regulated by the Law of the Republic of Tajikistan “On natural monopolies” (hereinafter the “Law”), as the Group is the sole provider of electricity and entity, dominant in the generation of electric power in the Republic of Tajikistan. In accordance with the Law, tariffs of the Group must be coordinated and agreed with the Agency for regulation of natural monopolies of the Republic of Tajikistan (hereinafter the “Agency”). The main customers are SUE Tajik Aluminum Company, OJSC Azot, Tojikazot, Tojikkimiesanoat, OJSC Pamir Energy Company and the population of the Republic of Tajikistan.

Company’s Head office is located at: Republic of Tajikistan, Dushanbe, I. Somoni ave, 64.

As at 31 December 2012 and 2011, the sole shareholder of the Company is the Government of the Republic of Tajikistan. Ultimate control of the Group is carried out by the Government of the Republic of Tajikistan.

Property of the Group was formed from the assets which were on the books of State Joint-Stock Holding Company Barki Tojik. The Group is the owner of the property transferred to it by the founder, other than the property of legal entities listed as joint-stock companies, state enterprises, organizations and institutions under the management of the Group.

Open Stock Holding Power Company Barki Tojik is the holder of shares of joint-stock companies, granted by the Government of the Republic of Tajikistan, operating in the electricity sector and performs the right of possession, use and disposition of property, businesses and institutions, given for management in accordance with the article 232 of the Civil Code of the Republic of Tajikistan.

The property of the Group includes the following branches and representative offices:

Nurek branch	Nurek hydropower station
Baipaza branch	Baipaza hydropower station
Varzob branch	Cascade and Varzob hydropower stations
Vakhsh branch	Cascade and Vakhsh hydropower stations
Kairakkum branch	Kairakkum hydropower station
Dushanbe branch	Central electric networks
Chkalovsk branch	Leninabad electric networks
Khujand branch	Khujand electric networks
Rasht branch	Rasht electric networks
Kurgan Tube branch	Kurgan Tube city electric networks
Representation of OSHPC Barki Tojik in the Russian Federation	Chkalovsk city electric networks

The following organizations are under control of the Group:

OJSC Shabakahoi barkii Istaravshan

OJSC Shabakahoi barkii Panjakent

OJSC Shabakahoi barkii shahri Dushanbe

OJSC Shabakahoi barkii shahri Kulob

OJSC Shabakahoi barkii Kulob

OJSC Shabakahoi barkii Tursunzoda

OJSC Shabakahoi barkii Janubi

OJSC Dushanbinskiy heat station

OJSC Shabakahoi barkii Yavon

OJSC Remontno-mekhanicheskiy zavod

OJSC Shabakahoi barkii Janubi

OJSC Shabakahoi barkii Isfara

OJSC Yavanskaya heat station

Logistical Utility Tajikenergosnab

The Group has a subsidiary – Limited Liability Company Bark Kimgan. Share of the Group in the share capital o the subsidiary is 100%.

Number of Group’s personnel for 2012 and 2011 in average was 13,328 and 12,886 respectively.

These consolidated financial statements were authorized for issue by the Group’s management on
5 August 2013.

2. CURRENT ECONOMIC ENVIRONMENT

Emerging markets such as Tajikistan are subject to different risks than more developed markets, including economic, political and social, and legal and legislative risks. Laws and regulations affecting businesses in Tajikistan continue to change rapidly, tax and regulatory frameworks are subject to varying interpretations. The future economic direction of Tajikistan is heavily influenced by the fiscal and monetary policies adopted by the government, together with developments in the legal, regulatory, and political environment.

3. SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for revaluation of property, plant and equipment and certain financial instruments. The principal accounting policies applied in preparation of the consolidated financial statements are set out below. These accounting policies were consistently applied in all periods covered in this consolidated financial statements, unless otherwise stated (see Note 4)

These consolidated financial statements have been prepared on the historical cost basis except for the following lines:

· Long term financial liabilities at amortized cost;

· Fixed assets and construction in progress are based on historical cost basis, which includes the revaluations performed based on Decree of the Government of the Republic of Tajikistan based on coefficients and instructions, prepared by the Government of the Republic of Tajikistan, aimed to reflect inflation.

Going concern

These consolidated financial statements have been prepared on the assumption that the Group is a going concern and will continue its operation for the foreseeable future. The management and shareholder have the intention to further develop the Group’s activities in the Republic of Tajikistan. The Management believes that the going concern assumption is appropriate for the Group due to its sufficient capital and continuing financing from the sole shareholder of the Group – the Government of the Republic of Tajikistan.

Functional and presentation currency

The functional currency of each of the Group’s consolidated entities is the currency of the primary economic environment in which the entity operates. The functional currency of the Company and the Group’s presentation currency is national currency of the Republic of Tajikistan Tajik Somoni (“Somoni”).

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries), which are recorded as branches for the purpose of the consolidated financial statements as at 31 December 2012 and 2011.

The subsidiary is consolidated from the date of acquisition, which is the date when control is achieved over the subsidiary, and discontinued from consolidation when the control is transferred. The Consolidated financial statements of the subsidiaries is prepared for the same period as Parent’s Company, based on consistently applied accounting policy for all branches of the Company.

Changes in ownership of subsidiaries without loss of control are treated as transactions equity. If the Group transfers the control over the subsidiary the following is reflected:

· discontinues recognition of assets and liabilities of the subsidiary;

· records the fair value of proceeds received in exchange;

· records fair value of outstanding portion of the investment;

· records gains or losses in statement of comprehensive income;

· reclassifies interest of Parent Company in subsidiaries, recognized in other comprehensive income before to statement of comprehensive income or retained earnings in accordance with particular requirements.

The consolidated financial statements of the subsidiaries is prepared for the same period as Parent’s Company, based on consistently applied accounting policy for all branches of the Company.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Significant accounting policies

The significant accounting policies applied by the Group in preparation of the consolidated financial statements are stated below:

Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value at the date of transaction. Acquisition-related costs are generally recognised in profit or loss as incurred.

The Group classifies the acquisition of the financial assets and liabilities depending of terms of agreement and economic situation and related conditions at the date of acquisition.

Foreign currency transactions

The functional currency of the Company and the Group’s presentation currency is national currency of the Republic of Tajikistan Tajik Somoni (“Somoni”). The Group applies direct method of consolidation, and upon disposal of foreign investment performs the reclassification of gains and losses from translation differences to statement of comprehensive income.

	31 December 2012		31 December 2011
USD / Somoni	4.7644		4.7585
EUR / Somoni	6.3009		6.1565
Russian Rouble / Somoni	0.1571		0.1474

Transactions and balances

Transactions in foreign currency are initially recognized by the companies of the Group in functional currency at exchange rate at the date of transaction.

Monetary assets and liabilities denominated in foreign currency are revalued at spot rate of functional currency effective at the reporting date.

All foreign currency differences are transferred to statement of comprehensive income.

Non-monetary lines at historical cost in foreign currency, are recognized at exchange rate effective at the date of initial transaction. Non-monetary lines at revalued method in foreign currency are recognized at the exchange rate effective at the date of consideration of fair value. Gains and losses arising from non-monetary items are treated same as gains and losses from foreign currency transactions (foreign exchange differences on lines, gains and losses for which are recognized in other comprehensive income and added to other comprehensive income, for lines of gains and losses, which are recorded in gains and losses – in gains and losses).

Group’s companies

Assets and liabilities in foreign investments are translated to Somoni at the exchange rate effective at the reporting date, and statement of comprehensive income of such subsidiaries, are recorded at the rate effective on the date of transaction. Translation differences arising from such treatment are recorded in other comprehensive income. Upon disposal of foreign investment the component of other comprehensive income, related to this foreign investment are transferred to consolidated statement of comprehensive income.

Before 1 January 2010, date of adoption of IFRS, the Group recorded differences of fair value assets and liabilities arising from at acquisition as assets and liabilities of the Parent Company. Therefore such assets and liabilities are non-monetary components, which are recorded at functional currency of the Parent Company, and as a result no additional translation differences arise.

Revenue recognition

Revenue is recognized only if inflow of economic benefits to the Group is probable, and if revenue can be reliably measured, despite of the timing of cash proceeds. The revenue is measured at fair value of the consideration received or receivable, in accordance with contractual terms of payments. The revenue is recognized when the following conditions are satisfied:

Sale of goods

Revenue from sale of goods is recognized upon delivery of goods and when significant risks and benefits from ownership are transferred to the customer.

Rendering of services

Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract. The stage of completion of the contract is determined as percentage of labor time at the reporting date compared to overall estimated labor hours on each contract. In case when profit on the agreement cannot be reliably measured, the revenue is recognized within amount of incurred expenses, which are subject for reimbursement.

Interest income

Interest income and expense on financial instruments held at amortized cost, and interest bearing financial assets, classified as held-for-sale are recognized based on effective interest rate method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition. The interest income is added to finance income in the consolidated statement of comprehensive income.

Dividends

Revenue is recognized upon existence of right of the Group to receive dividend.

State subsidies

State subsidies are recognized if the inflow is probable, and all related terms will be conducted. If the subsidy is issued to finance particular expenses, than related income in the same periods to be recognized. If the subsidy is provided to finance the asset, than related deferred income is recorded, which is transferred to revenues with equal installments during the period of useful of life of the asset.

In cases, when Group receives subsidies in non-monetary form, the assets and subsidy is recorded in gross amount, based on nominal value and reflected in the consolidated statement of comprehensive income on an annual basis with equal installments during the useful life of the asset.

If borrowings and same type of subsidies are provided by the government and its related institutions at the rate below market, the impact of such favorable rate is considered as state subsidy.

Taxes

Current income tax

Current tax assets and liabilities for the current period as measured at recoverable from or payable to taxation authorities. The tax rates and tax legislation applied for calculations are the rates and legislation accepted or factually adopted as at reporting date in the countries, where the Group performs its activities and has taxable income.

Deferred taxes

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are recognized for all taxable temporary differences, except for cases when:

· Deferred tax liabilities arising at initial recording of goodwill, asset or liability as a result of transaction other than business combination, and at transaction date does not impact accounting profit nor taxable profit or loss;

· Taxable temporary differences in respect of investments in subsidiaries, associates, as well as interest in joint ventures, and if possible to control distribution by periods related to recoverability of temporary differences, and there is high probability of recovery of temporary difference in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, unused tax incentives and unused tax losses, to the extent of highly probable upcoming profits, against which the recovery of deductible temporary differences, unused tax incentives and unused tax losses will take place, except for:

· Deferred tax asset, related to temporary difference as a result of initial recognition of asset or liability arising from business combinations, which at the date of transaction does not impact accounting nor tax profit or losses;

· Deductible temporary differences as a result of investments in subsidiaries, associated companies, as well as interest in joint venture where the deferred tax assets are recognized to the extend of highly probable upcoming profits, against which the recovery of deductible temporary differences, unused tax incentives and unused tax losses will take place.

The book value of deferred tax assets is reviewed at each reporting date and decreased to the extent of sufficient profits, which will allow to use all or part of the deferred tax assets, are assessed as unlikely. Deferred tax assets not recognized in the statements are reviewed at each reporting date and are recognized to the extent, when there is high probability of upcoming profits, allowing to recover such tax assets.

Deferred tax assets and liabilities are valued at tax rates, which are expected to be applied in the period, when such asset will be recovered or liability settled at tax rates (tax regulation), which were accepted or factually adopted at the reporting date.

Deferred tax, related to the components other than statement of comprehensive income, as also not recorded in statement of comprehensive income. The deferred taxes are recognized in accordance with underlying transactions or in as a component of other comprehensive income, or directly on equity.

Deferred tax assets and deferred tax liabilities are offset only if there are legal right for offset of current income tax assets and liabilities, and deferred taxes are related to the same company and tax authority.

VAT

Revenues, expenses and assets are recognized net of VAT, except for the following cases:

· VAT arising from acquisition of assets or services not subject for recovery by the tax authorities. In this case the VAT is recognized as a cost of the asset or expense incurred;

· Accounts receivables and accounts payables include the VAT amount.

The net amount of VAT, recoverable by or payable to tax authorities is included in accounts receivables or payables in the consolidated statement of financial position.

Property, plant and equipment

The equipment is held at revalued amount less accumulated depreciation and/or accumulated loss from impairment, if any. This cost includes cost of replaced spare parts, as well as borrowing costs, in case of long term construction projects, when certain criteria are met. When there is a need for significant component replacement within defined period the Group disposes the replaced component and recognizes new components in accordance with useful life and depreciation. Expenses related to major technical check are included to the cost of the asset, as replaced equipment, when related criteria are met. All other expenses for maintenance are included in the consolidated statement of comprehensive income as incurred.

The buildings are held at revalued amount less accumulated depreciation and impairment losses.

Depreciation is charged at straight line method during the useful life of the asset:

Property, plant and equipment group	Useful life (years)
1. Building	80-100
2. Constructions
- Transmission equipment	50-80
3. Machinery and equipment
- Hydro turbines	50-80
- Electronic equipment	10-50
- Production equipment	10-80
4. Other fixed assets
- Vehicles	5-15
-.Office equipment	5-10
-.Furniture and appliances	10-15
- Leasehold improvements	5-20
- Land improvements	5-20
- Social needs assets
- Buildings and constructions	20-80
- Equipment for social needs	5-30
- Furniture and equipment for social needs	5-20

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss, and presented in the consolidated statement of comprehensive income for the period, when derecognition took place.

The useful life term and depreciation method are annually reassessed, and adjusted if needed.

Leasing

The assessment of classification of lease, or whether transaction contains a lease based on substance of the transaction. At the inception of the agreement there is a need to determine whether the asset will be used by lessee, or right to use is transferred as a result of the agreement.

In accordance with requirements of IFRS 1 the agreements concluded before 1 January 2010, inception of lease conditionally is 1 January 2010.

The Group as lessee

Payments under operating lease are recorded as operating expenses incurred in the consolidated statement of comprehensive income on a straight line method during the period of lease.

The Group as lessor

Lease agreements which retain all risks and benefits from asset ownership are classified as operating lease. Initial transaction costs, incurred at negotiation of the operating lease agreement are included in the cost of the leased asset and recorded during the period of lease based on same method as revenues from lease. Conditional payments under lease are recognized as revenues in the period when revenue was earned.

Government grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognised in profit or loss on a systematic basis over the periods in which
the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the consolidated statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable.

The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognized as expenses, in the period when such expenses incurred. Borrowing costs include the payment for interest and other expenses, incurred by the Group in respect of borrowings.

The Group capitalizes borrowing costs to the assets, which are in compliance with criteria, construction of which was launched from 1 January 2010 or after.

Intangible assets

Intangible assets with finite useful lives that are acquired separately are carried at cost. Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date. Subsequent to initial recognition, intangible assets acquired are recorded at cost less accumulated amortization and accumulated impairment losses (if any). Internally generated intangible assets, except for development costs included to the cost of an asset, and related expenses included in the consolidated statement of comprehensive income in the period, when incurred.

The useful life of intangible assets can be definite or indefinite.

Intangible assets with definite useful life are amortized during the period of this period and subject for impairment assessment if such indicators exist. The period and amortization method for all intangible asset with definite useful life are reassessed at least at each reporting date. Changes in estimated useful life or structure of inflow of future benefits inherent to the asset are added to the consolidated financial statements as changes in period and method of amortization, depending on situation, and disclosed as changes in estimates. The amortization expenses for intangible assets with definite useful life recognized in the consolidated statement of comprehensive income in the category, which relates to the function of the intangible asset.

Intangible assets with indefinite useful life are not amortized, rather tested separately for impairment on an annual basis. The useful life term of intangible assets with indefinite useful life is reviewed on an annual basis in order to determine whether it is reasonable to continue classify the asset as intangible asset with indefinite useful life. If it is not acceptable, the change in useful life of an asset is prospectively changed from indefinite to definite.

Gains and losses from disposal of intangible assets are measured as difference from proceeds and book value of the asset and recognized in the consolidated statement of comprehensive income at the date of disposal of use asset.

Patents and licenses

Patents are issued for the period of 10 years by the relevant state body with a right to prolong. License on right for intellectual property issued from 5-10 years, depending on type of license.

Licenses can be prolonged in the end of the term, if the Group will comply with preset conditions. Prolongation can be maid for notional fee or free of charge. Therefore the useful life of these licenses is treated as indefinite.

Financial instruments – initial recognition and subsequent measurement

(а) Financial assets

Initial recognition and measurement

Financial assets within the scope of IAS 39 are classified into the following specified categories: financial assets ‘at fair value through profit or loss' (FVTPL), financial assets and ‘loans and receivables', ‘held-to-maturity' investments, ‘available-for-sale' (AFS). The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Financial assets initially recognized at fair value plus, in case of investments not at fair value through profit or loss, the transaction costs.

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. Financial assets of the Group includes the cash and short term deposits, trade and other receivables, loans and other amounts receivables and unquoted financial instruments.

Subsequent measurement

Subsequent measurement of financial assets is subject of its classification in a following way:

Financial assets at FVTPL

The classification ‘at fair value through profit or loss' includes the financial assets, held-for-trade and financial assets initially classified at FVTPL. Financial assets are classified as held-for-trade if were purchased with the intention to sell in the short term period. Financial assets at FVTPL are recorded in the consolidated financial statements at fair value, and changes in fair value are added to the finance income or finance cost in the consolidated statement of comprehensive income.

The Group does not have financial assets classified at acquisition as at fair value through profit or loss.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment. Amortized cost includes the discounts and premiums at acquisition, as well as commissions or other fees, which are integral part of the effective interest rate method. Amortization based on effective interest rate method is included in finance income in the consolidated statement of comprehensive income. Expenses related to impairment are recorded in the consolidated statement of comprehensive income as finance cost.

Short-term trade receivables are recoded at cost less bad debt reserve.

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Group has the positive intent and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment. Amortized cost includes the discounts and premiums at acquisition, as well as commissions or other fees, which are integral part of the effective interest rate method. Amortization based on effective interest rate method is included in finance income in the consolidated statement of comprehensive income. Expenses related to impairment are recorded in the consolidated statement of comprehensive income as finance cost. The Group did not have held-to-maturity investments during the reporting periods, ended 31 December 2012 and 2011.

Available-for-sale financial assets (AFS financial assets)

Available-for sale financial assets include equity and promissory notes. Equity investments classified as available-for-sale are the investments, are those not classified as held for trading, nor at fair value through profit or loss. Promissory notes within this category are instruments without defined term of sale and can be sold for liquidity purposes as a result of changing market conditions.

Subsequent to initial recognition the financial investments available-for-sale are measured at fair value, and resulting gains and losses are recorded as component of other comprehensive income as reserve for available-for-sale instruments. The instrument is held within this classification until derecognition or impairment adjustment, upon which the accumulated gains and losses from reserve on available-for-sale investments are reclassified to other operating gains and losses of statement of comprehensive income. Interest income on promissory notes available-for-sale are recorded at effective interest rate method and added to the statement of comprehensive income.

The Group has assessed its financial assets, available-for-sale for assumption of ability an intention to sell in the foreseeable future.

Derecognition

Derecognition of financial asset (or if applicable –part of the financial asset or part of the group of financial assets) performed if:

· The rights for cash proceeds and asset matured;

· The Group has transferred its rights for cash proceeds from the asset, or has accepted the liability to perform the payment to the third party in full and without any delays; or if (a) the Group has transferred substantially all risks and rewards from such asset, or (b) Group did not transfer, but also did not retain risks and rewards from such asset, therefore transferred the control over such asset.

If the Group has transferred all rights for cash proceeds from asset, or has concluded an agent agreement, but did not retain all risks and rewards from such asset, as well as did not transfer control over such asset, the new asset is recognized to the extend the Group continues its participation in the asset.

In this case the Group also recognizes related liabilities. The transferred asset and related liabilities are valued based rights and liabilities retained by the Group.

The continuous participation in form of guarantee on asset transferred is recognized at lower of initial book value and maximum possible amount to be claimed from the Group.

Impairment of financial instruments

At each reporting date the Group performs the assessment of indicators of impairment of financial asset or group of financial assets. Financial asset or group of financial assets can be impaired if, and only if, when there is a reliable evidence of impairment as a result of one of number of events taking place subsequent to initial recognition (the “event resulting the loss”), which resulted the impact, which can be reliably measured, on expected future cash flows of the financial asset or group of financial assets. The indicators of impairment can include the fact that debtor or group of debtors are experiencing insolvency issues, and cannot repay the debt or has delays is repayment of interest or principal amount of debt, as well as probability of insolvency and upcoming liquidation process or financial restructuring. Moreover, such indicators include observable evidence, indicating existence of reliably measured decrease in expected cash flows of the financial instrument, in particular, the changes in overdue debts or economic environment, which has certain dependencies with defaults in repayments of debt.

Financial assets recorded at amortized cost

The Group performs the assessment of indicators of impairment financial assets recorded at amortized cost if individually significant or if individually insignificant, than by groups. If the Group identifies the reliable evidence of absence of impairment, despite of the significance, such asset is included in the group of financial assets with similar characteristic of credit risk, and subsequently reviews this group for impairment indicators in aggregate. Assets, individually assessed as impaired are not included in aggregate assessment of the group for impairment.

When there is reliable evidence of incurred losses from impairment, the amount of loss is recognized as a difference of book value and discounted expected future cash flows (without expected future credit losses not yet incurred).

Present value of expected future cash flows are discounted at initial effective interest rate of the financial asset. If the interest rate of borrowing is a floating rate, the discount rate for impairment loss calculation is current effective interest rate.

The book value of the asset decreases through reserve account, and amount of loss added to the consolidated statement of comprehensive income. Accrual of interest income on decreased book value continued based on rate, used for discounting future cash flows for the purpose of assessing losses from impairment. Interest income is included in financial income in the consolidated statement of comprehensive income. Loans along with related provisions are not included in the consolidated statement of financial position if there is not evidence of recoverability of such and all available security was sold or transferred to the Group. If during the subsequent period the amount of calculated losses from impairment increases or decreases as a result of an event taking place after recognition of impairment, the amount of losses recognized increase or decrease by means of reserve account adjustment. If the subsequently the write-off of value of financial asset recovers, the amount of recovery recognized as decrease of finance costs in the consolidated statement of comprehensive income.

Financial investments, available-for-sale

The Group performs the annual assessment for impairment indicators for the investments held-for-sale.

If the investments in equity instruments, classified as available-for-sale, the reliable evidence of impairment would be significant and continuous decrease in fair value of the investment below its initial acquisition cost. The significance is measured in comparison to initial acquisition cost, continuous means the comparison to the period, when decrease below initial acquisition cost took place. When reliable evidence of impairment is identified the amount of comprehensive loss, calculated as difference of book value and current fair value, less any other impairment loss recognized in the statement of comprehensive income, the loss is reclassified from other comprehensive income to the consolidated statement of comprehensive income.

The promissory notes classified as available-for-sale are subject of same impairment criteria applied to financial assets recorded at amortized cost. However the amount of impairment loss recognized is the difference of amortized cost and current fair value, less accumulated impairment loss for this investment, recognized previously in the consolidated statement of comprehensive income.

Accrual of interest income on decreased book value continued based on rate, used for discounting future cash flows for the purpose of assessing losses from impairment. Interest income is included in financial income in the consolidated statement of comprehensive income. If during the subsequent period the fair value of the promissory note will increase and this increase can be reliably tied with event taking place after initial loss recognition in the consolidated statement of comprehensive income, the impairment losses are recovered in profit and loss.

(b) Financial liabilities

Initial recognition and measurement

Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit and loss and borrowings. Group classifies the financial liabilities at initial recognition.

Financial liabilities initially recorded at fair value and in case of borrowings and loans, which are recorded at amortized costs its initial recognition includes the transaction costs directly related to issue and acquisition.

Financial liabilities of the Group include the trade and other accounts payable, loans and borrowings.

Subsequent measurement

Subsequent measurement of financial liabilities depends on classification as follows:

Financial liabilities at FVTPL

Classification of Financial liabilities at FVTPL include the financial liabilities held-for-trading and financial liabilities Financial liabilities at FVTPL at recognition.

Financial liabilities are classified as held for trading, if they are acquired for disposal in the near future. Gains and losses under liabilities held for trading are included in the consolidated statement of comprehensive income.

Group does not have financial liabilities at FVTPL.

Loans and borrowings

Subsequent to initial recognition interest bearing loans and borrowings are measured at amortized cost based on effective interest method. Gains and losses resulting from these instruments included in consolidated statement of comprehensive income at derecognition, as well as amortizing at effective interest rate.

Amortized cost includes the discounts and premiums at acquisition, as well as commissions or other fees, which are integral part of the effective interest rate method. Amortization based on effective interest rate method is included in finance income in the consolidated statement of comprehensive income.

Derecognition

The financial liabilities in consolidated statement of financial position is derecognized when liability is settled, cancelled or the matured.

If the existing financial liability is substituted by another liability with the same counterparty with substantially different terms, or if existing liability terms are substantially changed, than such change is treated as derecognition of initial instrument and recognition of the instrument, and difference of book value are recorded in consolidated statement of comprehensive income.

(c) Offset of financial instruments

Financial assets and financial liabilities are offset and net amount is presented in the consolidated statement of financial position if, and only if there is existing contractual and legal right to offset these instruments, as well as intention to recognize as net amount, or dispose assets simultaneously with liabilities.

(d) Fair value of financial instruments

Fair value of financial instruments, which are quoted on active marketplace at each reporting date, determined based on market quotes or dealer quotes (quotes for bid for long position and quotes for ask for short position), without transaction costs consideration.

Financial instruments which are not quoted on an active marketplace the fair value is determined based on application of valuation methods. These methods include use of prices recently performed transactions based on market conditions, use of current fair value of similar instruments, analysis of discounted cash flows and other valuation models.

Inventories

Inventories are recorded at lower of cost and net realizable value.

Expenses incurred to deliver and bring to the condition ready for use are treated as follows:

Raw materials and inventories are carried at:

· cost for purchases under FIFO costing method.

Finished goods and work in progress are carried at:

· direct cost for materials and labor costs, as well as allocation of overhead production expenses based on normal production capacity, but excluding borrowing costs.

Net realizable value is determined as estimated selling price in a normal course of business less estimated costs to complete the production and sale.

Impairment of non-financial assets

The Group performs the assessment of impairment indicators of the assets at each reporting date. If such indicators exist or if there is a requirement to perform impairment test, than Group perform the assessment of recoverability of asset. The recoverable amount of the asset or component, generating cash flows (“CGI”) is higher of fair value of the asset (CGI) less cost to sell and value in use of the asset (CGI). Recoverable amount is determined for separate asset, except for cases, when such asset does not generate cash flows, which dependent on cash flows generated by other assets or group of assets. If the book value of the asset or CGI exceeds its recoverable amount, the asset is impaired and written off to recoverable amount. When estimated value in use future cash flows are discounted at the discount rate before taxation, which reflects the current market estimate of time value of money and risks related to the asset. When determining fair value of the asset less cost to sell recent market deals (if any) are taken into account. If no such information is available, appropriate valuation model is used. These calculations are supported by valuation coefficients, market prices of freely convertible shares of the subsidiaries or other available indicators of the fair value.

If the book value of the asset or CGI exceeds its recoverable amount, the asset is considered as impaired and written down to recoverable amount. Under assessment of value in use the future cash flows are discounted at the rate net of tax, which reflects the present market value of cash flows and risks inherent to the asset. Under assessment of the fair value less cost to sell, the recent market transactions (if were existent) are taken into consideration. If no such transaction took place the relevant valuation model is applied. These computations are supported by estimated coefficients, active market quotes of subsidiaries shares and other available indicators of fair value.

Impairment losses from ongoing activities (including inventory impairment) are included in the consolidated statement of comprehensive income as a component of those expenses, which are related to the function of the asset, except for previously revalued real estate if revaluation was recognized in other comprehensive income. In such cases the impairment loss is deducted from other comprehensive income to the extent the revaluation gain was recognized.

The Group performs assessment of indicators whether indicators of impairment loss still exist or decreased on an annual basis. If such indicator exist the Group assess the recoverable amount of the asset or cash generating component. Previously recorded impairment losses recovered only if the changes in applied estimate of the recoverability of the asset, since most recent impairment loss recorded. The recovery is limited to the book have not exceeding its recoverable amount, as well as not exceeding book value less depreciation, which would be charged if such impairment loss would not be recorded. This recovery of loss is included in the statement of comprehensive income.

Intangible assets

Intangible assets with indefinite useful life are subject of impairment test annually on 31 December; also if there are indicators of impairment. The test for impairment is performed individually and if needed on a cash generating unit level.

Cash and short term deposits

Cash and short term deposits in the consolidated statement of financial position include the cash in banks, petty cash and short term deposits with initial maturity of 3 months or less.

For the purpose of this consolidated statement of cash flows, cash and cash equivalents include cash an short term deposits in accordance with definition above.

Provisions

Provision are recorded if the Group has current liabilities (legal or constructive), as a result of the past events, with a probable outflow economic benefits required to settle liability, and such liability can be reliably measured. If the Group expects to recover all or part of the provisions, e.g. under insurance contracts, the recovery is recorded as a separate asset, but only when such recovery inflow is not doubted. Expenses, related to the provision, are added to the consolidated statement of comprehensive income less recovery.

Retirement benefits and other remunerations

The Group performs payments to Social Fund in accordance with pension scheme of the Republic of Tajikistan. The payments to social fund are fixed. The Group will not have any further legal or constructive liabilities to the Fund in relation to the retirement benefits if Fund will not have sufficient resources to perform payments to employees for services performed in current and previous years.

The Group performs fixed payments to State Social Fund amounting to 25% of salaries of the employees and recorded in the period as incurred. The Group does not have any other pension or other schemes or liabilities to perform pension payments to its employees.

4. RESTATEMENTS AND RECLASSIFICATIONS

During 2012, the Management of the Group has restated the financial statements for the year ended 31 December 2011. These financial statements were restated as presented below.

Reconciliation of the Groups statement of financial position as at 31 December 2011:

	31 December 2011 (prior to restatement)	Amount of restatement	Amount of reclassifica-tion	31 December 2011 (after restatement)
ASSETS
Non-current assets
Property, plant and equipment	4,956,894	(320,211)	-	4,636,683
Intangible assets	267	-	-	267
Long-term accounts receivable	201,671	-	(143,309)	58,362
Long-term investments	31,631	7,487	143,309	182,427
Deferred tax assets	54,894	31,979	-	86,873
Total non-current assets	5,245,357	(280,745)	-	4,964,612
Current assets
Inventory	618,376	10	-	618,386
Trade and other receivables	454,452	(329,217)	62,068	187,303
Prepayments	36,168	6,972	24,349	67,489
Cash and bank balances	19,525	-	-	19,525
Total current assets	1,128,521	(322,235)	86,417	892,703
TOTAL ASSETS	6,373,878	(602,980)	86,417	5,857,315
EQUITY
Share capital	383,836	-	-	383,836
Foreign exchange differences from translation of foreign subsidiaries	(9)	-	-	(9)
Retained earnings	1,434,804	(494,574)	-	940,230
Reserves	24,302	-	-	24,302
Total equity	1,842,933	(494,574)	-	1,348,359
LIABILITIES
Long-term liabilities
Deferred revenue	1,810,032	7,487	-	1,817,519
Long-term liabilities	964,770	-	2,116	966,886
Total long-term liabilities	2,774,802	7,487	2,116	2,784,405
Current liabilities
Short-term debt	404,967	512	(2,116)	403,363
Short-term accrued liabilities	436,856	25,168	98,757	560,781
Current income tax payable	54,252	-	11,356	65,608
Trade and other payables	843,545	(141,573)	(100,496)	601,476
Prepayments received and other accounts payable	16,523	-	76,800	93,323
Total short-term liabilities	1,756,143	(115,893)	84,301	1,724,551
Total liabilities	4,530,945	(108,406)	86,417	4,508,956
TOTAL EQUITY AND LIABILITIES	6,373,878	(602,980)	86,417	5,857,315

Reconciliation of the Groups total comprehensive income as at 31 December 2011:

	31 December 2011	Сумма корректировки	31 December 2011
Revenue	964,975	-	964,975
Cost of sales	(398,713)	-	(398,713)
Gross profit	566,262	-	566,262
Selling expenses	(445,066)	(32,096)	(477,162)
General and administrative expenses	(169,304)	2,669	(166,635)
Net foreign exchange gain	-	8,672	8,672
Other expenses	(19,514)	(23,302)	(42,816)
Finance (cost)/income	122,542	(43,374)	79,168
Profit before tax	54,920	(87,431)	(32,511)
Income tax benefit	2,105	31,978	34,083
Net profit	57,025	(55,453)	1,572
Exchange differences on translating foreign operations	(15)	-	(15)
Total comprehensive income	57,010	(55,453)	1,557

Notes to the reconciliation of statement of financial position as at 31 December 2011 and total comprehensive income for the year then ended is provided below:

5. CRITICAL ACCOUNTING ESTIMATES AND PROFESSIONAL JUDGEMENTS IN APPLYING ACCOUNTING POLICY

The Group makes estimates and assumptions that affect within the next financial period the amounts of assets and liabilities recognized in consolidated financial statements. Estimates and judgments are continually evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Management also makes certain judgments, apart from those involving estimations, in the process of applying the accounting policies. Judgments that have the most significant impact on the figures recorded in the consolidated financial statements and estimates that can cause a significant adjustment to the carrying amounts of assets and liabilities within the next financial period include:

Significant accounting judgments, estimates and assumptions

The preparation of consolidated financial statements requires management to make judgments, estimates and assumptions at the end of the reporting period that affect the amounts of revenue, costs, assets and liabilities, presented in statements. However, uncertainty of these assumptions and estimates could result outcomes, that could require in future material adjustments of book value of asset or liability in respect of which such assumptions and estimates are made.

Judgments

In the process of applying the Group’s accounting policy, management has used the following judgments, which have the most significant effect on the amounts recognized in the consolidated financial statements.

Estimates and assumptions

The key assumptions about the future and other key sources of estimation of uncertainty at the reporting date, which may cause significant adjustments of the carrying value of assets and liabilities during the next financial year, are discussed below. Assumptions and estimates are based on the Group’s source data, which it had at the time of preparation of the consolidated financial statements. However, current circumstances and assumptions regarding the future are subject to change due to market changes or circumstances beyond the control of the Group. Such changes are reflected in the assumptions as they occur.

Impairment of non-financial assets

Impairment occurs when the carrying amount of an asset or the cash-generating unit, exceeds its recoverable amount, which is the higher of fair value less costs to sell and value in use. The fair value less costs to sell is based on available information on commercial deals of sales of similar assets or observable market prices less incremental costs incurred in connection with the disposal of an asset. The calculation of value in use is based on a discounted cash flow model. Cash flows are taken from the budget for the next five years and do not include restructuring activity, in conducting of which the Group does not have obligations or significant investment in future, which will improve the asset tested for impairment of cash generating unit. The recoverable amount is most sensitive to the discount rate used in the discounted cash flow model, and also to the expected cash inflows and the growth rate, used for extrapolation. More information about the key assumptions used to determine the recoverable amount of the various units, generating cash, including sensitivity analysis, is provided in Note 31.

Taxes

There is uncertainty in respect of interpretation of complex tax legislation, changes in tax laws, as well as the amounts and timing of future taxable income. Given the wide variety of operations, as well as the long-term nature and complexity of existing contractual relations, differences between the actual results and the assumptions made, or future changes in these assumptions could result in future adjustments of already reported amounts of revenues and income tax expenses. The Group does not create provisions for the possible results of tax inspection conducted by tax authorities in the countries in which it operates. As the Group estimates the occurrence of litigation in connection with the tax laws and the subsequent outflow of funds as unlikely, contingent liability is not recognized.

Deferred tax assets are recognized for all unused tax losses insofar it is probable that taxable profit will be available against which tax losses can be utilized. For determination the amount of deferred tax assets that can be recognized in the consolidated financial statements based on probable period of and amount of future taxable profit, and tax planning strategies, significant management judgment is required. Tax planning opportunities that could serve as a partial basis for the recognition of deferred tax assets in respect of these losses are not available.

The fair value of financial statements

In cases when the fair value of financial instruments and financial liabilities recorded in the consolidated statement of financial position can not be derived from active markets, they are determined using valuation techniques, including discounted cash flow model. As a source data for these models is used information from observable markets, but in those cases where this is not feasible, a certain proportion of judgment is required to determine fair value. The judgments include considerations of such data as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the fair value of financial instruments, recognized in consolidated financial statements.

6. NEW STANDARDS AND CHANGES IN EXISTING STANDARDS AND INTERPRETATIONS

Amendments to IFRSs affecting amounts reported in the financial statements

The following amendments to IFRSs have been applied in the current year and have affected the amounts reported in these financial statements.

Amendments to IFRSs affecting presentation and disclosure only

Amendments to IFRS 7 Disclosures – Transfers of Financial Assets

The Group has applied the amendments to IFRS 7 Disclosures – Transfers of Financial Assets in the current year. The amendments increase the disclosure requirements for transactions involving the transfer of financial assets in order to provide greater transparency around risk exposures when financial assets are transferred.

In accordance with the transitional provisions set out in the amendments to IFRS 7 Financial instruments: Disclosures, the Group has not provided comparative information for the disclosures required by the amendments.

Amendments to IAS 1 Presentation of Financial Statements (as part of the Annual improvements to IFRSs 2009-2011 Cycle issued in May 2012)

IAS 1 Presentation of Financial Statements requires an entity that changes accounting policies retrospectively, or makes a retrospective restatement or reclassification to present a statement of financial position as at the beginning of the preceding period (third statement of financial position). The amendments to IAS 1 Presentation of Financial Statements clarity that an entity is required to present a third statement of financial position only when the retrospective application, restatement or reclassification has a material effect on the information in the third statement of financial position and that related notes are not required to accompany the third statement of financial position.

New and revised IFRSs in issue but not yet effective

The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:

· IFRS 9 Financial Instruments¹;

· IFRS 10 Consolidated Financial Statements²;

· IFRS 11 Joint Arrangements²;

· IFRS 12 Disclosure of Interest in Other Entities²;

· IFRS 13 Fair Value Measurement¹;

· Amendments to IFRS 7 Financial Instruments: Disclosures – “Disclosures – Offsetting Financial Assets and Financial Liabilities”¹;

· Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures – “Mandatory Effective Date of IFRS 9 and Transition Disclosures”³;

· Amendments to IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interest in Other Entities – “Consolidated Financial statements, Joint Arrangements and Disclosure of Interest in Other Entities: Transition Guidance”¹;

· IAS 19 (as revised in 2011) Employee Benefits¹;

· IAS 27 (as revised in 2011) Separate Financial Statements²;

· IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures²;

· Amendments to IAS 32 Financial Instruments: Presentation – “Offsetting Financial Assets and Financial Liabilities”⁴;

· Amendments to IFRSs – Annual Improvements to IFRSs 2009-2011 cycle except for the amendment to IAS 1 (see above)¹.

¹ Effective for annual periods beginning on or after January 1, 2013, with earlier application permitted.

² Each of the five standards becomes effective for annual periods beginning on or after January 1, 2013, with earlier application permitted if all the other standards in the ‘package of five’ are also early applied (except for IFRS 12 that can be applied earlier on its own).

³ Effective for annual periods beginning on or after January 1, 2015, with earlier application permitted.

⁴ Effective for annual periods beginning on or after January 1, 2014, with earlier application permitted.

IFRS 9 Financial Instruments

IFRS 9 Financial Instruments, issued in November 2009 and amended in October 2010, introduces new requirements for the classification and measurement of financial assets and financial liabilities and for derecognition.

Key requirements of IFRS 9:

· All recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods. In addition, under IFRS 9 Financial Instruments, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

· With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 Financial Instruments requires that the amount of change in the fair value of the financial liability, that is attributable to changes in the credit risk of that liability, is presented in other comprehensive income, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss. Previously, under IAS 39 Financial Instruments: Recognition and Measurement, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was recognised in profit or loss.

The Group’s Management anticipates that IFRS 9 Financial Instruments in the future may not have a significant impact on amounts reported in respect of the Group’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 9 Financial Instruments until a detailed review has been completed.

Amendments to IFRS 7 Financial Instruments: Disclosures and IAS 32 Financial Instruments: Presentation – “Offsetting Financial Assets and Financial Liabilities and the related disclosures”

The amendments to IAS 32 Financial Instruments: Presentation clarify existing application issues relating to the offset of financial assets and financial liabilities requirements. Specifically, the amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’ and ‘simultaneous realization and settlement’.

The amendments to IFRS 7 Financial Instruments: Disclosures require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement.

The disclosures should be provided retrospectively for all comparative periods.

The Group management anticipates that the application of these amendments to IAS 32 and IFRS 7 may result in more disclosures being made with regards to offsetting financial assets and financial liabilities in the future.

 Annual Improvements to IFRSs 2009-2011 Cycle issued in May 2012

The Annual Improvements to IFRSs 2009-2011 Cycle include a number of amendments to various IFRSs. Amendments to IFRSs include:

 Amendments to IAS 32 Financial Instruments: Presentation

The amendments to IAS 32 Financial Instruments: Presentation clarifies that income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction should be accounted for in accordance with IAS 12 Income Taxes. The Group management anticipates that the amendments to IAS 32 Financial Instruments: Presentation will have no effect on the Group’s financial statements as the Group has already adopted this treatment.

All other Standards and Interpretations are not applicable to the Group’s operations. Management believe the adoption of these Standards and Interpretations will not have a significant impact on the results of the Group’s operations.

7. RELATED PARTY TRANSACTIONS

The parties are considered as related if one party can control the other party, under common control or can exercise significant influence over decision making process in relation to its operations or exercise joint control. Determining whether parties are related includes the assessment of relations of parties, and not only legal form. The information on Parent company and ultimate shareholder of the Group are disclosed in Note 1.

For the purpose of these financial statements the Management of the Group and Group itself are related parties.

Remuneration paid to chairman and deputy chairmen for services as executive managers includes the salaries in accordance with staff schedule and bonuses for performance in accordance with Bonus Regulation. The remuneration to Management of the Group is performed based on time-bonus system.

For the year ended 31 December 2012 and 2011, remuneration to key management is presented as follows

	For the year ended 31 December 2012	For the year ended 31 December 2011
Salaries and bonuses	377,222	315,519
Social fund payments	94,305	78,880
Total	471,527	394,399

Transactions with state entities

Transactions with state entities are not disclosed if these transactions are at the ordinary course of business conditions with equal terms available to all state and private sector companies, and in those cases when there are no other suppliers, e.g. railroad transportation services, telecommunications and etc. The Group has adopted limited exemptions stated in paragraphs 25-27 of IAS 24 Related party transactions with government agencies. The Group had transactions with other state companies. The amounts of these transactions are individually insignificant.

8. PROPERTY, PLANT AND EQUIPMENT

Changes of book value of property, plant and equipment is presentes below:

	Building and construction	Machinery and equipment	Other fixed assets	Construction in progress	Total
INITIAL COST
As at 31 December 2010	1,879,147	1,281,652	166,843	2,102,869	5,430,511
Additions	8,822	119,337	4,339	939,294	1,071,792
Internal transfers	(33,269)	152,576	46	(119,353)	-
Disposals	(625)	(3,806)	(8,772)	(31)	(13,234)
As at 31 December 2011 (before restatement)	1,854,075	1,549,759	162,456	2,922,779	6,489,069
Restatement1	-	-	-	(308,622)	(308,622)
As at 31 December 2011	1,854,075	1,549,759	162,456	2,614,157	6,180,447
Additions	3,154	16,414	4,235	300,196	323,999
Internal transfers	561,426	1,000,235	1,009	(1,562,670)	-
Disposals	(1,718)	(4,753)	(2,796)	(36,640)	(45,907)
As at 31 December 2012	2,416,937	2,561,655	164,904	1,315,043	6,458,539
ACCUMULATED DEPRECIATION
As at 31 December 2010	841,371	519,576	75,883	-	1,436,830
Depreciation for year	37,492	54,935	3,644	-	96,071
Disposals	(26)	(229)	(471)	-	(726)
As at 31 December 2011 (before restatement)	878,837	574,282	79,056	-	1,532,175
Restatement1	(19,439)	34,395	(3,367)	-	11,589
As at 31 December 2011	859,398	608,677	75,689	-	1,543,764
Depreciation for year	32,656	61,865	12,704	-	107,225
Disposals	(1,962)	(1,863)	(210)	-	(4,035)
As at 31 December 2012	890,092	668,679	88,183	-	1,646,954
NET BOOK VALUE
As at 31 December 2012	1,526,845	1,892,976	76,721	1,315,043	4,811,585
As at 31 December 2011 (restated1)	994,677	941,082	86,767	2,614,157	4,636,683
As at 31 December 2010	1,037,776	762,076	90,960	2,102,869	3,993,681

¹ As restated, see Note 4.

Plant, property and equipment and capital investment are not insured.

The Group monitors the use of its assets, but as the sole shareholder of the Groups is the Government of the Republic of Tajikistan, Company can not independently dispose fixed assets without the permission of the State Committee on Investments and State Property Management of the Republic of Tajikistan.

In-kind contribution to the Group included assets in form of power electrical equipment and electricity transmission devices, injected by the Government of the Republic of Tajikistan.

The Group borrows funds specifically for acquisition of assets that meet certain requirements and determines the amount of borrowing costs eligible for capitalization as the sum of the actual costs incurred on these loans during the period.

9. INTANGIBLE ASSETS

	Intangible assets
INITIAL COST
As at 31 December 2010	47
Additions	273
As at 31 December 2011	320
Additions	3
As at 31 December 2012	323
ACCUMULATED AMORTISATION
As at 31 December 2010	31
Additions	22
As at 31 December 2011	53
Additions	33
As at 31 December 2012	86
NET BOOK VALUE
Net book value as at 31 December 2012	237
Net book value as at 31 December 2011	267

 

10. LONG-TERM ACCOUNTS RECEIVABLE

	31 December 2012	31 December 2011
Accounts receivable	49,012	58,362
Total	49,012	58,362

As at 31 December 2012 and 2011, other long-term receivables include advances paid for construction of production facilities and equipment supply.

Below is information on the largest debtors:

		31 December 2012	31 December 2011
Alstom	Equipment	40,820	44,990
Turboatom (Ukraine)	Equipment	4,808	-
ТВЕА (China)	Construction works	1,338	-
Gencer	Equipment	-	7,138
Others		2,046	6,234
		49,012	58,362

11. LONG-TERM INVESTMENTS

	31 December 2012	31 December 2010
Shares of Sangtuda-2	150,796	150,796
Shares of Roghun HPS	31,603	31,603
Others	113	28
Total	182,512	182,427

In 2010, the Group acquired the shares of OJSC Roghun HPS amounting to 23,700 thousand Somoni, and in accordance with the Government Decree #65 “On approval of liquidation balance of Directorate of Roghun HPS” dated 26 February 2010 receivables in the amount of 7,903 thousand Somoni were sent for replenishment of share capital of OJSC Roghun HPS, as financial investments.

In 2006, the Group has signed agreement with OJSC Sangob on financing of the contruction of Sangtuda HPS in the amount of 40,000 thousand USD. In accordance with the agreement after 12 years of exploitation, the HPS would be transferred to the Group. As at 31 December 2012, the Group has fully paid obligations under the agreement.

12. INVENTORY

	31 December 2012	31 December 2011
Raw materials	576,145	426,738
Spare parts	102,822	76,486
Fuel oil	61,321	35,452
Supplies and accessories	47,551	37,212
Materials in work in process	8,330	4,466
Fuel	4,369	8,150
Construction materials	1,030	4,119
Finished goods	659	1,009
Other	17,138	25,263
	819,365	618,895
Less: Provision for inventory write-off to its net realizable value	(481)	(509)
Total	818,884	618,386

Management believes that carrying value of inventory does not exceed its net realizable value.

13. TRADE AND OTHER RECEIVABLES

	31 December 2012	31 December 2011
Accounts receivable for electricity	806,196	631,391
Accounts receivable for goods and services	20,875	7,058
Accounts receivable for heat	6,785	8,276
Taxes recoverable	2,141	150
Advances to employees	682	471
Other receivables	11,663	30,837
	848,342	678,183
Less: Provision for bad debts	(578,814)	(487,779)
Less: Provision for impairment	(1,756)	(3,101)
Total	267,772	187,303

The table below shows the change in provision for bad debt reserve on trade and other receivables:

	2012	2011
At the beginning of the year	487,779	106,745
Changes in estimates in the allowance for impairment during the year	94,764	381,034
Amounts written off	(3,729)	-
At the end of the year	578,814	487,779

As at 31 Decmebr 2012 and 2011, ageing analysis of trade receivables is as follows:

Year	Total	Not overdue	Overdue
			<30 days	30-90 days	90-120 days	120-360 days	>360 days
31 December 2012	848,342	187,446	-	48,075	72,145	90,950	449,726
31 December 2011	678,183	165,602	-	37,286	55,955	70,540	348,800

14. PREPAYMENTS

	31 December 2012	31 December 2011
Goods paid in advance	51,393	35,158
Services paid in advance in national currency	47,260	26,297
Other advance payments	18,662	16,844
	117,315	78,299
Less: Impairment reserve	(15,968)	(10,810)
Total	101,347	67,489

15. CASH AND CASH EQUIVALENTS

	31 December 2012	31 December 2011
Cash at bank in national currency	8,101	18,524
Cash on hand in national currency	674	126
Cash at bank in foreign currency in local banks	602	707
Cash in transit	34	167
Restricted cash	1	1
Total	9,412	19,525

16. EQUITY

As at 31 December 2012 and 2011, announced, issued and paid capital of the Group amounted to 383,836 thousand Somoni and 383,836 thousand Somoni, respectively.

In 2012 and 2011, the Group has not announced any dividends.

17. SHORT-TERM DEBT

Short-term debt is as follows:

	31 December 2012	31 December 2011
Bank loan from Orienbank in national currency	347,404	87,987
Current portion of long-term debt in foreign currency	295,937	251,748
Loans from the Ministry of Finance of the Republic of Tajikistan in foreign currency	27,872	27,863
Loans from the Ministry of Finance of the Republic of Tajikistan in national currency	16,555	33,740
Other short-term debts	4,144	2,025
Total	691,912	403,363

Current portion of long-term debt is allocated in accordance with repayment schedule of principal on loans (Note 31).

18. SHORT-TERM ACCRUED LIABILITIES

Short-term accrued liabilities are as follows:

	31 December 2012	31 December 2011
Interest payable	411,561	276,227
Accrued financial sanctions	276,395	125,913
VAT payable	132,249	12,908
Road users tax payable	43,980	31,912
Royalty tax	27,410	31,163
Payroll payable	22,269	24,521
Unused vacation reserve	11,232	12,837
Taxes, other than income tax	7,942	32,736
Social tax payable	5,845	6,075
Personal income tax payable	3,076	2,921
Other current liabilities	2,985	2,431
Other accrued expenses	1,550	1,137
Total	946,494	560,781

19. TRADE AND OTHER ACCOUNTS PAYABLE

Trade and other accounts payable are as follows:

	31 December 2012	31 December 2011
Accounts payable for goods and services	627,717	591,858
Accounts payable for property, plant and equipment	36,146	9,618
Total	663,863	601,476

Below is information on the largest creditors:

	31 декабря 2012 г.	31 декабря 2011 г.
Sangtuda-1	320,180	204,858
Sangtuda-2	50,046	-
JSC Splibau	18,534	18,534
Firuz Ltd., LLC	10,698	-
Torus 2011	10,170	11,626
Katari Dier, LLC	7,888	-
Nuri Osmon, LLC	7,492	-
Safiri Rushd, LLC	5,809	-
Super Oil, LLC	5,371	-
Maryam, LLC	4,924	-
Talco Management (Shokhon, LLC)	4,584	-
Paikom, LLC	4,200	-
Paikom, LLC	4,200	-
Sughd Inter Tour, LLC	4,095	6,020
Ningbao Internau	3,671	3,671
Ben, LLC	3,648	-
Mehrona 2010, LLC	3,577	-
Regar Cabel	3,573	61,535
Tekhnologiyai ma’danshinosi va kuhkori, LLC	3,532	-
CJSC Hasan & Co	3,299	-
OJSC Somon Khatlon	3,276	-
Shokhon, LLC	3,266	-
Nokili Talco, LLC	3,230	-
Garmofar Union, LLC	3,103	-
Factory Electrotekhmash	3,085	1,534
Bark, LLC	3,042	-
Electric stations (Kazakhstan)	2,228	2,225
KEGOC (Kazakhstan)	2,430	2,427
Uzbekenergp (Uzbekistan)	1,845	9,537
Tojiktsement, LLC	1,567	-
Senefit firm Ltd.	1 479	1,479
Fortes group	1 244	1,244
Elto Somon-Tajhizot	1,234	3,888
Tajikcabel OJSC	1,106	5,056
Ukz Expert, LLC	1 063	-
Pomir Osiyo, LLC	670	3,095
Kyrgyzstan NEK	495	3,224
CJSC DZKh Pomir	-	5,777
Davr, LLC	-	4,830
Faizi Sherali	-	3,006
Other	153,795	247,910
Total	663,863	601,476

20. PREPAYMENTS RECEIVED AND OTHER ACCOUNTS PAYABLE

Prepayments received and other accounts payable are as follows:

	31 December 2012	31 December 2011
Prepayments received for electricity in national currency	22,810	6,339
Payables under construction agreements	1,023	96
Other prepayments received	382	180
Other accounts payable	88,118	86,708
Total	112,333	93,323

21. DEFERRED REVENUE

Deferred revenue is as follows:

	31 December 2012	31 December 2011
Deferred income derived from government grants at interest rate below the market rates	1,685,342	1,710,180
Deferred income from grants	98,587	88,169
Other deferred revenue	19,170	19,170
Total	1,803,099	1,817,519

Deferred income from grants and other deferred revenue in the form of special-purpose financing, is gratuitous assets received from the government.

Deferred income derived from government grants at interest rate below the market rates is as follows:

	31 December 2012	31 December 2011
EximBank 06015	632,479	856,880
EximBank 06015-06016	156,642	174,268
EximBank 06016	133,708	178,182
EximBank 2010 (024)	133,975	-
Construction of the unified electric system of the Northern Tajikistan	100,692	-
ADB-1817	91,193	119,898
ADB -2303	58,633	60,455
KFW	50,666	34,170
IDB 0030	40,355	13,178
ADB 0124	37,973	32,722
Grant №H566 TJ	36,474	37,709
IDB -011-029-031	31,200	40,887
IDB -0022	26,418	28,023
Kuweit fund	25,102	39,431
KFW	24,479	14,647
Credit №4093 TJ & Grant №H178 TJ	23,944	24,527
Swiss Government	22,381	12,549
OFID -1141Р	20,833	25,533
ADB -1912	15,093	-
Grant №H372 TJ	10,375	10,996
Swiss Government	5,951	6,125
Regional project on electricity transmission 0213 TAJ	5,280	-
PIU	925	-
State Property Fund subloan dated 10.07.2008	571	-
Total	1,685,342	1,710,180

Other deferred revenue and deferred income from grants includes:

	31 December 2012	31 December 2011
Sangtuda-2	64,313	64,313
PIU South-North	19,000	19,000
Tutak HPS	7,000	3,400
Kukhiston HPS	5,582	4,682
TajHPS	3,486	3,486
CHPS	3,412	3,412
Kukhiston-1HPS	3,410	3,410
Grant IDA	2,469	-
Shahrinav	2,068	1,568
Rehabilitation of lines in Matchoh	1,800	800
Eastern boiler	971	-
Tajikenergoproject Agreement#7а dated 01.03.2008	947	947
OJSC TGEM addendum#3 dated 02.05.09	1,177	1,177
Pushti bog HPS	491	-
Lakhshi Jirgatol	487	-
Sokhtmon, LLC Subcontract agreement #2 dated 02.05.2009	450	450
Shifobakhsh, LLC Subcontract agreement #1 dated 02.05.2009	300	300
Isfara HPS	160	160
Parvoz	139	139
Muhandis, LLC	52	52
Mekhcalon #1 Agreement dated 19.03.2008	43	43
Total	117,757	107,339

22. LONG-TERM LIABILITIES

Long-term liabilities are as follows:

	31 December 2012	31 December 2011
Loans in the foreign currency	2,745,692	2,649,086
Loans in the national currency	1,080	1,199
Discount on loans	(1,838,192)	(1,854,543)
Restructured loan	170,000	170,000
Other long-term liabilities	-	1,144
Total	1,078,580	966,886

As at 31 December 2012, loans include:

Name	Currency	Initial amount		Incuding		Discount
		In currency	In somoni	Current portion	Long-term portion	In Somoni
ADB - 1817	US Dollar	26,576	194,962	53,614	141,347	101,495
IDB - 011-029-031	Euro (Islamic dinar)	10,563	77,492	9,687	67,806	34,398
Swiss Government	US Dollar	8,862	42,223	25,334	16,889	23,876
ADB - 2303	US Dollar	12,314	90,333	6,775	83,558	63,382
IDB - 0030	US Dollar	12,566	59,871	6,661	53,211	41,054
OFID - 1141Р	US Dollar	7,907	37,670	3,767	33,903	22,746
Kuweit fund	US Dollar (Kuweit dinar)	12,718	60,592	9,089	51,503	31,763
EximBank 06015	US Dollar	267,219	1,273,140	127,314	1,145,826	719,601
EximBank 06016	US Dollar	55,228	263,126	35,084	228,043	150,629
EximBank 06015-06016	US Dollar	51,000	242,984	-	242,984	167,102
EximBank 2010 (024)	US Dollar	35,055	167,016	-	167,016	133,975
KFW Grant	ЕВРО	14,814	93,344	-	93,344	52,005
KFW Grant	ЕВРО	5,761	36,300	3,308	32,992	25,058
ADB - 0124	US Dollar	11,641	55,463	-	55,463	38,158
IDB - 0022	US Dollar	9,798	46,684	7,652	39,031	27,297
ADB - 1912	US Dollar	3,062	22,463	3,456	19,007	15,093
Regional project on electricity transmission 0213 TAJ	US Dollar	1,527	7,276	-	7,276	5,280
Construction of the unified electric system of the Northern Tajikistan	US Dollar	26,464	126,084	-	126,084	100,692
IDA Grant №Н566	US Dollar	12,526	59,678	-	59,678	38,670
SECO Grant	US Dollar	2,316	11,070	525	10,544	6,254
IDA Grant №Н372	US Dollar	4,003	19,073	-	19,073	11,225
IDA Loan №4093, №178	US Dollar	11,183	53,282	3,552	49,730	26,947
PIU	US Dollar	290	1,382	-	1,382	924
State Property Fund subloan	Somoni	1,201	1,202	119	1,082	568
Total		604,594	3,042,710	295,937	2,746,772	1,838,192

Loan agreements are presented in the following table:

Loan #	Loan description	Purpose of the loan	Origination date	Maturity date	Loan amount under the agreement	%
2010 (024-029 BT)	EximBank	Construction of high-tension transmission line 220 kilowatt «Khujand-Ayni»	16 December 2010	21 September 2036	35 055 thousand US Dollars	3%
1141Р	OFID	For expansion of cooperation in energy sector between Tajikistan and Afghanistan	6 September 2007	15 March 2027	8500 thousand US Dollars	1%
0030.	Islamic Development Bank	For expansion of cooperation in energy sector between Tajikistan and Afghanistan	31 October 2007	30 November 2031	14 067 thousand US Dollars	3%
0124- TAJ (SF)	Asian Development Bank	Project on reconstruction of ОРУ-500 kilowatt on Nurek HPP	26 December 2008	15 October 2033	54,770 thousand US Dollars	5%
No number	KfW	For change of transmittal equipment 220 kilowatt on Nurek HPP	25 July 2008	1 November 2033	18,000 thousand Euro	8%
Grant №566TJ	International Development Association	Emergency Energy Recovery Assistance Project	16 July 2010	15 September 2030	9,900 thousand SDR	6%
Grant №H372 TJ)	International Development Association	Emergency increasing of volume and solidity of import of electricity especially in winter period	30 October 2008	15 September 2028	4,342 thousand US Dollars	6%
Credit №4093 TJ	International Development Association	Energy Loss Reduction Project	6 December 2005	15 June 2026	11,183 thousand US Dollars	6%
06016.	EximBank	For construction of power grid 220 кВ «Lolazor-Khatlon»	19 April 2006	21 February 2028	55,228 thousand US Dollars	3%
06015.	EximBank	For construction of power grid 500 кВ «ug-Sever»	19 April 2006	21 February 2028	267,219 thousand US Dollars	2%
665	Kuweit fund	Reconstruction of power grid of Dushanbe city	24 June 2003	15 November 2030	3,600 thousand Kuweit dinars	not stated
IDB -0022	Islamic Development Bank	Construction of small HPPs	18 April 2004	30 June 2031	6,623 thousand Islamic dinars	3,50%
IDB -011-029-031	Islamic Development Bank	Solid power supply in rural regions of Tajikistan	29 January 2001	31 December 2021	7,000 thousand Islamic dinars	5%
Swiss Government	Swiss Government	For financing of Swiss Subproject on energy loss reduction	8 September 2003	1 August 2017	8,862 thousand US Dollars	2%
2303	Asian Development Bank	For construction of intersystem power grid	22 February 2007	1 December 2031	8,500 thousand US Dollars	Libor+ 0,5%
1817	Asian Development Bank	Power grid rehabilitation project	26 February 2001	15 December 2025	39,947 thousand US Dollars	1,5%
06015-06016	EximBank	Additional construction of high tension transmission line 500/220 кВ Юг-Север, Lolazor-Khatlon	15 May 2009	21 August 2028	51,000 thousand US Dollars	5%
1912-TAJ (SF)	Asian Development Bank	Emergency project on stabilisation of Baipaza landslide	20 October 2003	1 December 2033	5,320 thousand US Dollars	1%+1,5%
0213-TAJ -28 БТ	Asian Development Bank	Regional project on electricity transmission	23 November 2010	15 September 2036	112,500 thousand US Dollars	5%
KFW-034ВТ	KFW	Construction of distributing facility of 220кВ on Nurek HPS	28 June 2011	30 May 2032	7,000 thousand US Dollars	3%
2011 (19) TOTAL № (170)-030 БТ	EximBank	Constrcution of united electricity system in Northern Tajikistan	20 July 2011	21 March 2031	26,464 thousand US Dollars	3%
Swiss Government	International Development Association	Electricity Loss Reduction Project	29 June 2007	30 June 2012	6,600 thousand US Dollars	6%
Grant №TF096573-035 BT	Swiss trust fund	Electricity Loss Reduction Project	20 December 2011	15 September 2031	3,150 thousand US Dollars	6%

23. INCOME TAX

As at 31 December 2012 and 2011, income tax assets and liabilities of the Group included:

	31 December 2012	31 December 2011
Income tax assets:
Deferred income tax assets	69,597	86,873
Current income tax assets	2,682	-
Total income tax assets	72,279	86,873
Income tax liabilities:
Current income tax liabilities	-	65,608
Total income tax liabilities	-	65,608

The Group measures and records its current income tax payable and its tax bases in its assets and liabilities in accordance with the tax regulations of the Republic of Tajikistan where the Group operates, which may differ from IFRS.

The Group is subject to certain permanent tax differences due to the non-tax deductibility of certain expenses and certain income being treated as non-taxable for tax purposes.

Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Temporary differences as at 31 December 2012 and 2011 relate mostly to different methods/timing of income and expense recognition as well as to temporary differences generated by tax–book bases’ differences for certain assets.

The tax rate used for the reconciliations below is the corporate tax rate of 15% payable by corporate entities in the Republic of Tajikistan on taxable profits (as defined) under tax law in that jurisdiction.

Deferred tax assets as at 31 December 2012 are as follows:

	IFRS	Tax accounting	Difference
Property, plant and equipment and intangible assets	3,497,359	3,504,929	(7,570)
Inventory	818,883	819,365	(482)
Accounts receivable	305,879	903,425	(597,546)
Investments	175,025	175,025	-
Accounts payable	(4,541,818)	(4,694,668)	152,850
Unused vacation reserves	(11,232)	-	(11,232)
	(266,560)	(708,076)
Temporary difference			(463,980)
Tax rate			15%
Deferred tax assets at the end of the year			(69,597)

Deferred tax assets as at 31 December 2011 are as follows:

	IFRS	Tax accounting	Difference
Property, plant and equipment and intangible assets	2,018,591	2,108,233	(74,118)
Inventory	618,376	665,415	(47,039)
Accounts receivable	165,707	2,402,922	(2,237,214)
Investments	31,631	22,053	9,578
Accounts payable	(4,403,698)	(6,188,871)	1,785,173
	(1,569,393)	(990,248)
Temporary difference			(579,144)
Tax rate			15%
Deferred tax assets at the end of the year			(86,873)

A reconciliation of income tax benefit as applicable to loss before income tax at the statutory income tax rate to income tax expense was as follows for the years ended 31 December 2012 and 2011:

	Year ended 31 December 2012	Year ended 31 December 2011
Current income tax expense	13,444	22,398
Deferred income tax expense/(benefit)	17,276	(56,481)
Income tax expenses/(benefit)	30,720	(34,083)
Loss before income tax	(300,850)	(32,511)
Statutory tax rate	15%	15%
Income tax expense at the statutory tax rate	(45,128)	(4,877)
Effect of permanent tax differences	75,848	(29,206)
Income tax expenses/(benefit)	30,720	(34,083)

Deferred income tax assets	Year ended 31 December 2012	Year ended 31 December 2011
As at January 1	86,873	30,392
Deferred income tax expenses/(benefit)	(17,276)	56,481
As at December 31	69,597	86,873

24. REVENUE

	Year ended 31 December 2012	Year ended 31 December 2011
Revenue from the sale of electricity	1,097,803	959,389
Revenue from the sale of heat	1,284	1,020
Revenue from frequency control for export	290	1,451
Revenue from electricity transit	-	3,115
Total	1,099,377	964,975

25. COST OF SALES

	Year ended 31 December 2012	Year ended 31 December 2011
Cost of electricity	449,455	355,311
Cost of heat	68,107	43,402
Cost of services provided	1,483	-
Total	519,045	398,713

Cost includes the following:

	Year ended 31 December 2012	Year ended 31 December 2011
Inventories	362,513	256,262
Remuneration of production workers and administrative staff	44,215	55,413
Depreciation of production equipment	26,051	13,533
Insurance expenses	11,070	13,853
Other costs include the cost of administrative bodies of production units	75,196	59,652
Total	519,045	398,713

Cost of sales include cost of own generated electricity, heat and the cost of purchased electricity. The cost of self generated electricity and heat include actual expenses of HPS and HPP.

26. SELLING EXPENSES

	Year ended 31 December 2012	Year ended 31 December 2011
Inventories	104,192	120,268
Payroll	97,871	106,576
Bad debt expenses	96,491	56,646
Depreciation expenses	74,688	80,265
Social fund contribution	24,636	26,123
Property, plant and equipment maintenance expenses	15,911	11,193
Road tax users expenses	12,012	24,818
Services	9,819	8,938
Unused vacation provision	6,087	-
Other selling expenses	37,938	42,335
Total	479,645	477,162

Selling expense include production expenses of enterprises - electricity networks, which are involved in transmission and distribution of electricity.

27. GENERAL AND ADMINISTRATIVE EXPENSES

	Year ended 31 December 2012	Year ended 31 December 2011
Fines and penalties on taxes	61,961	106,338
Taxes, other than income tax	21,433	27,944
PIU expenses	21,051	-
Payroll	11,889	10,033
Depreciation expenses	3,323	2,706
Social fund contribution	3,249	2,508
Bank charges	1,879	715
Other fines and penalties	100	15,689
Other expenses	36,261	702
Total	161,146	166,635

General and administrative expenses include expenses of Head Office, Project Implementation Unit, DPMTO and Representative office in Russian Federation, subsidiary of the Joint Limited Liability Company Bark-Kimgan.

28. OTHER EXPENSES

	Year ended 31 December 2012	Year ended 31 December 2011
Revenue from inventory sale	1,336	8,492
Loss from disposal long-term assets	(4,109)	-
Other expenses	(22,491)	(51,308)
Total	(25,264)	(42,816)

        

29. FINANCE INCOME AND COST

	Year ended 31 December 2012	Year ended 31 December 2011
Finance income:
Amortization of discount on loans	118,845	233,875
Total	118,845	233,875
Finance cost:
Amortization of discount on loans	(118,845)	(92,410)
Interest expenses on loans	(139,504)	(23,757)
Penalties on loans	(88,530)	(38,540)
Total	(346,879)	(154,707)
Total finance (cost)/income	(228,034)	79,168

30. CONTINGENT LIABILITIES AND CONTINGENT ASSETS

(a) Political and economic environment in the Republic of Tajikistan

Economy of the Republic of Tajikistan is characterized as developing country, which includes, but not limited to the existence of the national currency.

The Group is particularly vulnerable to political, legislative, fiscal and regulatory changes in the Republic of Tajikistan. The Government of the Republic of Tajikistan is continuing to take measures to ensure the overall political and economic stability and growth of investors’ and donors’ confidence to the Republic of Tajikistan.

However, the prospects for future economic stability of the country are largely dependent on the effectiveness of reforms undertaken by the government in the management, legal, and economic areas.

(b) Changes in the energy sector

Industry as well as a whole system of the Republic of Tajikistan is experiencing significant restructuring and reform (the process of transformation of the country with a planned economy into a state with a market economy), and the future direction of reforms and results are unknown at this time. Potential reforms in tariff policy, repayment of debt by state enterprises, reorganization of the market of gross sale and implementation of measures to promote competition in gross sale market, can have a significant impact on companies in this industry. Due to uncertainty regarding the ongoing changes in the industry, management is unable to assess the impact of reforms on the present and future financial position of the Group. However management believes that these uncertainties will have not a big impact on operational activity compared to other companies operating in the Republic of Tajikistan.

(c) Social commitments

The Group incurs expenses on development and maintenance of social objects and welfare of its workers and other social needs.

(d) Insurance

As at 31 December 2012, the Group had no insurance coverage in respect of its assets, activities and its public obligations and other risks, to be insured. Since the absence of insurance does not mean reducing the cost of the asset or liability is incurred, provisions were not included in the consolidated financial statements for uncertain losses.

(e) Environment protection issues

Official laws of the Republic of Tajikistan #58 “On environment protection” dated 15.06.2004 and #228 “On air protection” dated 01.02.1996 are aimed to protect atmosphere from pollution and established maximum permissible level of emission of harmful substances.

Integrated control and permits for allowable emissions of pollutants are conducted in accordance with the article 11 “Basic requirements for the valuation of atmosphere air quality” and article 13 “Measurement and control of emissions into the atmosphere”.

The Republic of Tajikistan has acceded to the Kyoto Protocol and ratified it on 22 November 2008.

After the ratification of Kyoto Protocol coordination is assigned to Committee for environmental protection under the Government of the Republic of Tajikistan.

Legislation for environmental protection in the Republic of Tajikistan is in the process of development and government agencies continuously revising standards for the application of such legislation. The Group periodically evaluates its obligations under environmental regulations. As obligations are defined, they are immediately defined in the consolidated accounts. Potential liabilities that may arise as a result of changes in existing regulations, litigation in civil cases or legislation can not be estimated with any certainty, but could be significant. Under the existing system of control and penalties for non-compliance with the existing legislation, Management believes that at the moment there are no significant liabilities related to environmental damage.

(f) Litigation

During the year the Group was involved in a number of litigations (as a claimant and defendant) arising in the ordinary course of business. In Management’s opinion at present time there are no pending legal proceedings or other claims, finishing of which could have a material adverse effect on the financial results and financial position of the Group, or which would not have been accrued or disclosed in these consolidated financial statements.

(g) Technical risks

Reconstruction of the electric power industry is dictated by the current situation in the energy sector due to the rapid deterioration of the technical condition of the fixed assets of the Group. Implementation of current and capital repairs is not enough; new construction, rehabilitation, reconstruction and technical re-equipment is required in accordance with technical progress.

Thus technical risk of impairment is high.

31. FINANCIAL RISKS MANAGEMENT

Main financial liabilities of the Group include loans, trade and other payables and agreements of financial guarantee. Main purpose of these financial liabilities is financing Group’s operations and support of its activity.

Group has trade and other receivables, cash and cash equivalents and short-term deposits, which directly arise in the course of Group’s operational activity. The Group also keeps investment held for sale.

The Group is subject to market risk, credit risk and liquidity risk.

Management of the Group controls risk management process. Management reviews and approves risk management policy.

Prior to placement of Group’s shares, duties of Superior Body are performed by the Government of the Republic of Tajikistan. Exclusive powers of Superior Body are:

· Determination of main directions of Company’s activity, approval of annual reports and financial statements,

· Amending of Group’s charter, including change of its share capital,

· Election of members of auditing committee (inspector) of the Group and their dismissal,

· Approval of Audit committee reports,

· Taking decision on acquisition of shares, issued by the Group,

· Taking decision on reorganization and liquidation of the Group, assignment of liquidation committee and approval of liquidation balance sheet,

· Election of Group’s Chairman and his termination,

· Exercise of other powers, prescribed by laws of the Republic of Tajikistan and charter of the Group.

Market risk

Market risk is a risk of possible fluctuations of the fair value of future cash flows as a result of changes in market prices. Market prices include four types of risks: interest rate risk, currency risk, risk of price change and other price risks. Financial instruments which are subject of market risk include loans, deposits, investments held for sale.

Sensitivity analysis as at 31 December 2012 and 2011 is presented below. Sensitivity analysis was prepared on the basis of assumption that amount of net debt and part of financial instruments in foreign currency is constant.

Analysis does not include effect of changes of market variables on book value of pensions and other liabilities on employee’s termination, provisions and also nonfinancial assets and liabilities of subdivisions.

In preparing sensitivity analysis the following assumptions were made:

Sensitivity of consolidated statement of financial position is associated with debt instruments held for sale.

Sensitivity of relevant account of consolidated statement of comprehensive income is the effect of proposed changes of relevant market risks.

The analysis was made on the basis of financial assets and financial liabilities held as at 31 December 2012 and 2011.

Sensitivity to changes in foreign exchange rates

The following table summarizes the sensitivity of profit before tax of the Group (due to possible changes in the fair value of monetary assets and liabilities) and equity of the Group to possible changes in foreign exchange rates provided that all other parameters unchanged. The Group’s exposure to foreign currency exchange rates is provided below.

	Change of US dollar exchange rate	Effect on profit before tax	Effect on equity
31 December 2012	-3%	51,787	44,019
	+3%	(51,787)	(44,019)
31 December 2011
	-5.5% +5.5%	97,129 (97,129)	82,559 (82,559)

	Change of Euro exchange rate	Effect on profit before tax	Effect on equity
31 December 2012	-3%	66,948	56,906
	+3%	(66,948)	(56,906)
31 December 2011
	-5.5% +5.5%	2,613 (2,613)	2,221 (2,221)

Risk of price changes

Risk of price changes is the risk or uncertainty arising from possible changes in market prices and their impact on future performance and results of operational activity of the Group.

Price decrease can lead to decrease of net income and cash flows. Maintaining low prices for an extended period of time can lead to a reduction in activity and may ultimately have an impact on the Group’s ability to fulfill its obligations under the contracts. Management estimates the decline as hardly probable and Group does not use derivative instruments to reduce its exposure to this risk.

The Group enters into long-term contracts for products supply on standard commercial terms; thereby the Group is not exposed to the risk of loss of revenue due to price increase on the market.

Interest rate risk

Interest rate risk is a risk that the fair value of future cash flows of financial instruments will fluctuate because of changes in market interest rate risks. Risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates.

As at 31 December 2012, 100% of the Group’s borrowings have fixed interest rates (31 December 2011: 100%).

Currency risk

Currency risk is a risk that the fair value of future cash flows of financial instruments will fluctuate due to changes in exchange rates. The Group’s exposure to foreign currency exchange rates is stipulated primarily due to Group’s operating activity (when sales or expenses are denominated in currencies, other than the functional currency of the Group), as well as the Group’s net investment in foreign subsidiaries.

The Group exports its production to Central Asia, acquires equipment and materials from overseas suppliers and attracts a substantial amount of long-term loans in foreign currency. Significant concentration of currency risk lies in loans denominated in various foreign currencies (mainly in US dollars). In accordance with he Group’s accounting policy, these loans were translated to Somoni using exchange rates prevailed at the balance sheet date. However future changes in exchange rate of Somoni to US dollar are unpredictable. Future changes in exchange rates may affect the carrying value of liabilities denominated in foreign currencies.

There are strict restrictions and controls in respect of Somoni conversion into other currencies.

Currently Somoni is not convertible currency outside the Republic of Tajikistan.

	Tajik Somoni	US Dollar	Euro	SDR	31 December 2012 Total
Financial assets:
Cash and cash equivalents	8,806	606	-	-	9,412
Trade and other receivables	255,035	12,737	-	-	267,772
Long-term investments	182,512	-	-	-	182,512
Total financial assets	446,353	13,343	-	-	459,696
Financial liabilities:
Trade and other payables	573,557	73,782	16,524	-	663,863
Short-term debt	146,555	468,517	3,308	73,532	691,912
Long-term liabilities	171,080	762,776	41,739	102,985	1,078,580
Short-term accrued liabilities	120,172	434,485	11,118	154,922	720,697
Total financial liabilities	1,011,364	1,739,560	72,689	331,439	3,155,052
Open currency position	(565,011)	(1,726,217)	(72,689)	(331,439)

	Tajik Somoni	US Dollar	Euro	SDR	31 December 2011 Total
Financial assets:
Cash and cash equivalents	18,818	707	-	-	19,525
Trade and other receivables	174,169	13,134	-	-	187,303
Long-term investments	182,427	-	-	-	182,427
Total financial assets	375,414	13,841	-	-	389,255
Financial liabilities:
Trade and other payables	538,890	62,586	-	-	601,476
Short-term debt	119,613	184,018	-	99,732	403,363
Long-term liabilities	172,343	686,365	24,947	83,231	966,886
Short-term accrued liabilities	34,249	298,104	22,570	81,871	436,794
Total financial liabilities	865,095	1,231,073	47,517	264,834	2,408,519
Open currency position	(489,681)	(1,217,232)	(47,517)	(264,834)

Credit risk

Credit risk is a risk that the Group will incur financial loss because the counterparties fail to meet their obligations under financial instrument or client contract. The Group is exposed to credit risk related to its operating activity (primarily, trade receivables).

Trade accounts receivable

Credit risk management associated with customers is performed by each subsidiary in accordance with the policies, procedures and control system established by the Group in respect of credit risk management associated with customers. Regular monitoring of outstanding accounts receivables is carried out.

Financial assets of the Group, which are potentially subject to credit risk, compose primarily of trade receivables.

In 2012 the percentage of money collection for the sold energy in the whole group was 89.3% (accrued – 1,245,193 thousand Somoni, paid - 1,111,841 thousand Somoni), including Tajik Aluminium Plant 115.8% (accrued – 430,763 thousand Somoni, paid – 498,936 thousand Somoni).

Approximately 34.6% of all sales in 2012 were supplied to the largest industrial consumer Tajik Aluminum Plant (TADAZ), which is currently controlled by the Government of the Republic of Tajikistan. Only 4.3% of accounts receivable is accounted for Tajik Aluminium Plant.

The carrying value of accounts receivable, net of allowance for bad debt, represents the maximum amount exposed to credit risk.

Need for impairment recognition is reviewed at each balance sheet date, individually for each large entity. In addition, the amounts due from a large number of individuals are grouped into homogeneous groups and assessed for impairment on a collective basis. The calculations are based on the information on actual losses incurred in the past. The maximum exposure to credit risk at the reporting date is presented by the book value of each class of financial assets. The Group does not have the property received as security for the debt owed to it.

Although collection of receivables could be influenced by economic factors, management believes that there is no substantial risk of loss beyond the provision for impairment of receivables.

Liquidity risk

Group exercises control over the risk of shortage of funds using a recurring liquidity planning tool.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans and contracts for the hire purchase.

The Group has access to financing in sufficient amounts and terms of loans to be paid within 12 months may be postponed to a later date by agreement with current creditors.

The following table summarizes the contractual undiscounted payments on financial liabilities of the Group by maturity.

	Up to 1 month	From 1 to 6 months	From 6 months to 1 year	Over 1 year	31 December 2012 Total
Financial assets:
Cash and cash equivalents	9,412	-	-	-	9,412
Trade and other receivables	25,339	44,100	198,333	-	267,772
Long-term investments	-	-	-	182,512	182,512
Total financial assets	34,751	44,100	198,333	182,512	459,696
Financial liabilities:
Trade and other payables	663,863	-	-	-	663,863
Short-term debt	647,722	19,885	24,305	-	691,912
Long-term liabilities	-	-	-	1,078,580	1,078,580
Short-term accrued liabilities	720,697	-	-	-	720,697
Total financial liabilities	2,032,282	19,885	24,305	1,078,580	3,155,052
Net position	(1,997,531)	24,215	174,028	(896,068)

	Up to 1 month	From 1 to 6 months	From 6 months to 1 year	Over 1 year	31 December 2011 Total
Financial assets:
Cash and cash equivalents	19,525	-	-	-	19,525
Trade and other receivables	19,552	30,515	137,236	-	187,303
Long-term investments	-	-	-	182,427	182,427
Total financial assets	39,077	30,515	137,236	182,427	389,255
Financial liabilities:
Trade and other payables	601,476	-	-	-	601,476
Short-term debt	-	-	403,363	-	403,363
Long-term liabilities	-	-	-	966,886	966,886
Short-term accrued liabilities	158,176	-	278,618	-	436,794
Total financial liabilities	759,652	-	681,981	966,886	2,408,519
Net position	(720,575)	30,515	(544,745)	(784,459)

Capital management

Capital includes capital owned by the Government of the Republic of Tajikistan.

The main objective of the Group’s capital management is to ensure a strong credit rating and an adequate level of capital to conduct its operations and maximize shareholder value.

The Group manages its capital structure and its changes in response to changes of economic conditions.

For the year ended 31 December 2012 and 2011 no changes were made in the objectives, policies and processes for managing capital.

The Group monitors capital using gearing ratio, which is calculated by dividing net debt by total capital and net debt.

Group’s policy is to maintain the value of this ratio in the range 25-40%. Net debt includes interest-bearing loans and borrowings, trade and other payables less cash and cash equivalents.

	31 December 2012	31 December 2011
Short-term debt	691,912	403,363
Long-term liabilities	1,078,580	966,886
Trade and other payables	663,863	601,476
Short-term accrued expenses	946,494	560,781
Less: cash and short-term deposits	(9,412)	(19,525)
Net debt	3,371,437	2,512,981
Total equity	1,016,789	1,348,359
Equity and net debt	4,388,226	3,861,340
Gearing	77%	65%