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1. OVERVIEW 4 6. CONSOLIDATED FINANCIAL STATEMENTS 122

1.1. Financial Highlights...... 6 Independent Auditor’s Report 124 1.2. Operational Highlights...... 7 Consolidated Financial Statements 125 1.3. Mission Statement...... 8 Consolidated Statement of Financial Position 125 1.4. Chairman’s Statement...... 10 Consolidated Statement of Financial Position...... 125 2. BUSINESS REVIEW 12 Consolidated Statement of Comprehensive Income...... 126 2.1. Chief Executive’s Review...... 14 Consolidated Statement of Changes in Equity...... 127 2.2. Strategy...... 18 2.3. Market Overview...... 22 Consolidated Statement of Cash Flows...... 128 2.4. Principal risks and uncertainties...... 36 Notes to Consolidated Financial Statements 130 2.5. Management...... 38 6.1. Nature of Business...... 130 3. OPERATING REVIEW 40 6.2. Basis of Consolidated Financial Statements Preparation and Significant Principles of Accounting Policies...... �� 132 3.1. Current projects...... 44 6.3 Adoption of New and Revised International Financial 3.2. New projects...... 64 Reporting Standards and Interpretations �� 150 3.3. Land holdings...... 68 6.4. Critical Accounting Estimates and Judgements 3.4. Disposals and acquisitions...... 70 in Applying Accounting Policies ��154 3.5. Share buyback and changes to Company’s Charter...... 71 6.5. Property, Plant and Equipment...... 159 3.6. Loan restructuring...... 72 6.6. Investment Property...... 161 3.7. Asset contribution...... 74 6.7. Investment Property under Development...... 163 3.8. Viceroy Homes Limited...... 76 6.8. Inventories...... 164 3.9. Subsequent events...... 77 6.9. Investments Held to Maturity...... 166 4. FINANCIAL REVIEW 78 6.10. Prepayments...... 165 4.1. Key Highlights...... 80 6.11. Receivables...... 168 4.2. Revenue...... 84 6.12. Loans Issued...... 170 4.3. Cost of sales...... 86 6.13. Cash and Cash Equivalents...... 171 4.4. Gross profit and gross margin...... 88 6.14. Share Capital...... 172 4.5. Selling, general and administrative expenses...... 89 6.15. Additional Capital...... 173 4.6. Gain/ (loss) from change in fair value of investment property...... 91 6.16. Income Tax...... 174 4.7. Non-operating income (expenses) ...... 94 6.17. Loans and Borrowings...... 179 4.8. Income tax...... 95 6.18. Payables...... 181 4.9. EBITDA...... 96 6.19. Provisions...... 182 4.10. Net profit...... 97 6.20. Advances Received from Customers...... 183 4.11. Net assets value...... 98 6.21. Current Tax Liabilities...... 184 4.12. Liquidity...... 100 6.22. Construction Contracts...... 185 4.13. Capital resources...... 102 6.23. Revenue from and Cost of Construction Contracts...... 186 4.14. Capital expenditure and future projects...... 103 6.24. Revenue from Sales of Residential Property and Land Plots...... 187 4.15. Project portfolio valuation...... 104 6.25. Cost of Sales by Nature...... 188 5. GOVERNANCE 106 6.26. Selling, General and Administrative Expenses...... 189 6.27. Financial Costs...... 190 5.1. Board of Directors...... 108 6.28. Other Expenses...... 191 5.2. Corporate governance...... 114 6.29. Earnings per Share...... 192 6.30. Disposal of Subsidiaries...... 193 6.31. Related Party Transactions...... 195 6.32. Segment Information...... 197 6.33. Capital Commitments and Contingencies...... 204 6.34. Risk Management Policy...... 206 6.35. Financial Instruments: Presentation By Category And Fair Values...... 213 6.36. Events after the Reporting Date...... 215

2 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 3 1 OVERVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 6 CONSOLIDATED FINANCIAL STATEMENTS

Financial EBITDA for the year 2011 was US$86.9 mln or 32% of total revenue as opposed to a OVERVIEW Highlights negative US$570.4 mln in 2010. This improvement was the result of an increase in the gross profit and profit from investment property revaluation. ▶ р. 6

Mission Statement OPIN combines long-term strategic planning and the highest quality of construction with attention to detail, dedication to customers, market knowledge ▶ р. 8 and a strong vision. Its impressive land bank gives OPIN the flexibility to implement this vision for many years to come and its operational strength reinforces its commitment to delivering value for its shareholders.

Chairman’s The whole Board is committed to a transparent flow of information between the Statement Company and all its shareholders. During 2011 we fully reviewed our corporate ▶ р. 10 governance practices and in consequence have increased our levels of communication with the market and appointed an Investor Relations Director to our senior management team.

JSC OPIN and subsidiaries ANNUAL REPORT 2011 5 1 OVERVIEW 1.1 Financial Highlights 1 OVERVIEW 1.2 Operational Highlights 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Financial ⦁⦁ Revenue for the year 2011 increased ⦁⦁ The Company’s cash balance as at 31 Operational ⦁⦁ The Company completed the appoint- ⦁⦁ The transfer of four real estate assets by 79% year-on-year to US$270.2 mln. December 2011 was US$21.5 mln. ment of its new management team from Onexim, a majority shareholder Highlights The highest level of sales was reached Highlights and started the implementation of its of OPIN, is progressing as planned. at Pavlovo 2 project with revenue of ⦁⦁ Net asset value as at year end 2011 de- new strategy which was announced The assets comprise three office US$181.8 mln due to strong demand creased by US$31.2 mln and amounted in May 2011 and envisages expansion buildings in the centre of Moscow for completed residential property to US$1.02 bn or 3% down from 2010. into broader pricing segments, diver- with a total area of nearly 30,000 sq. and recognition of revenue from prior sification of the portfolio with quality m and a 14.5 hectare land plot in the years. Pestovo project accounted to ⦁⦁ In September, the Company an- commercial real estate and capital- area of the 65th kilometre point of US$26.0 mln in revenue and Marte- nounced a decision to buy back a total isation of the land bank through the MKAD zone, which is planned for myanovo project — US$17.1 mln. The of 60,000 registered ordinary shares development of new projects solely the development of a premium class In the Annual Report the terms “JSC revenue of the Canadian subsidiary representing 0.39% of the total free and with partners as well via selected residential complex. The transfer is OPIN”, “OPIN”, “Company”, “Group” Viceroy Homes Limited — US$44.1 float of the Company. The shares land sales. planned in two stages: during the relate to Joint Stock Company Open mln and other revenue — US$1.1 mln. were purchased from the market first stage in 2012 a business centre on Investments as well as to its subsidiaries for RUR955.65 per share. Over the ⦁⦁ The Company signed contracts for Shepkina Street 32/1 in Moscow and a whose financial results are consolidated ⦁⦁ Gross profit in 2011 was US$23.2 mln application submission period from 13 301units of residential property in land plot for residential development under JSC OPIN in accordance with after a gross loss of US$27.6 mln in October 2011 to 11 November 2011 the its three current projects Pavlovo 2, are planned. International Financial Reporting 2010. In the reporting period gross Company received 483,678 applica- Pestovo and Martemyanovo for a total Standards (IFRS). In the Annual Report profit increased by US$50.8 mln. tions to sell shares and met them on a proceeds of US$150.7 mln (including ⦁⦁ The Company sold Raikina shopping some data from management reports pro-rata basis equalling 12%. construction contracts), which was centre development project for the are used, which may differ from the data ⦁⦁ EBITDA for the year 2011 was US$86.9 125% higher than total proceeds in total proceeds of US$50 mln. presented in other documents of the mln or 32% of total revenue as opposed 2010. Company depending on the methodology to a negative US$570.4 mln in 2010. applied This improvement was the result of ⦁⦁ Total cash proceeds received from res- an increase in the gross profit and idential property sales was US$135.6 profit from investment property mln. revaluation. In comparison with the previous year the net loss decreased by ⦁⦁ The Company started the development US$557.1 mln and recorded net income of four new projects: Rublevo, Vesna was US$32.4 mln. (Aprelevka), Katuar and PESTOVO Life. ⦁⦁ In the course of the reporting year the Company restructured its credit ⦁⦁ The Canadian subsidiary Viceroy portfolio having obtained more Homes Limited signed 740 new con- favorable terms from Raiffeisen Bank, tracts, a 25% increase from 2010 and VTB Bank Deutschland AG, Rosbank, recognised revenue of US$43.6 mln. the Moscow Credit Bank and Grand Invest Bank.

⦁⦁ As of December 31, 2011 the principal amount of the Company’s debt under contracted liabilities was US$299.9 mln (exchange rate as of 31.12.2011 US$1 = RUR32.2).

6 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 7 1 OVERVIEW 1.3 Mission Statement 1 OVERVIEW 2 BUSINESS REVIEW 2 buSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Mission OPIN’s mission is to build unique real OPIN combines long-term strategic plan- estate in attractive developments that ning and the highest quality of construc- Statement enhance the lives of residents of Moscow tion with attention to detail, dedication and the Moscow Region. Taking forward to customers, market knowledge and a its recognised track record in the develop- strong vision. Its impressive land bank ment of residential and commercial real gives OPIN the flexibility to implement estate, OPIN focuses on the delivery of this vision for many years to come and modern multi-format high quality its operational strength reinforces its housing communities with a wide social commitment to delivering value for its and supporting commercial infrastruc- shareholders. ture. The Company always adheres to OPIN standards and aims to provide its customers of various income level real estate of European quality.

8 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 9 1 OVERVIEW 1.4 cHairman’s Statement 1 OVERVIEW 1.4 cHairman’s Statement 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Chairman’s Dear Shareholders and Investors, We now have the right management team to implement our strategy and in 2011 appointed a new Finance Director and Sales and Marketing Director. The achievements Statement The year 2011 has been a very important period in the history of OPIN. In May this of the management team in 2011 in progressing our existing projects and activating year we presented our new strategic direction to shareholders. The key elements of new projects are evidence of its strength and ability. the new strategy are the strengthening of OPIN positioning in the development of master-planned multi-format residential communities, broadening pricing ranges 2011 was OPIN’s first full year with Onexim as our major shareholder. Onexim is fully of the product lines, capitalisation of existing land bank and staged formation of committed to the growth of OPIN as one of Russia’s major listed real estate developers commercial investment real estate portfolio. We are certain that OPIN has all what’s with diversified portfolio of projects. In practice the commitment of Onexim includes necessary to be a platform for consolidation of assets in the industry, which remains as a first step the contribution of selected real estate assets including office real to be highly defragmented. estate. Today, Onexim sees OPIN as an active consolidator of the real estate sector, selectively investing in attractive development projects. At a time of global uncertainty and slow growth in the rest of Europe, the Russian economy is performing well. We saw that GDP growth in 2011 was over 4% and believe On this basis we look to 2012 with confidence in our strategy and our business. We that this positive macroeconomic climate means that the prospects for the real estate will begin work on new projects that take our business forward into the future, in the sector are good and we expect a healthy price appreciation for real estate in the forth- belief that OPIN represents a unique proposition in the Russian real estate sector. coming years. Dmitry Razumov, This year we spent significant efforts in improving the Company’s corporate gover- Chairman of the Board, JSC OPIN nance. We have strengthened our Board of Directors and have welcomed this year five 18 May 2012 new members. Together with the existing Directors we now form a very strong Board able to guide the Company on the new level of development.

The whole Board is committed to a transparent flow of information between the Com- pany and all its shareholders. During 2011 we fully reviewed our corporate governance practices and in consequence have increased our levels of communication with the market and appointed an Investor Relations Director to our senior management team.

10 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 11 1 OVERVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 6 CONSOLIDATED FINANCIAL STATEMENTS

Chief The success of our housing communities gives us a firm foundation for under- BUSINESS REVIEW Executive’s taking more such projects in the future. It also provides a core expertise from Review which we can expand our business into related segments. Using the skills and experience we have gained in our years of development, we now intend to ▶ р. 14 broaden our offering, launching new projects at more affordable prices. We will maintain the high standards of design and construction associated with our brand, while opening a major new market segment for our business, which is likely to grow as disposable incomes increase and economy shows positive near term prospects.

Strategy The Company’s objective is to create superior and sustainable shareholder value. In order to achieve this objective in May 2011 the Company adopted and publicly ▶ р. 18-21 announced its new strategy, which involves moving from an expansionary strategy, acquiring land, to the one that concentrates on developing suitable sites in the short and medium term with a focus on attractive residential real estate projects and expanding into operating commercial properties, selling non-core land holdings as well as creating a platform for consolidation of real estate assets in Russia.

Market Overview Healthy consumer confidence, employment and real wage growth, together with improvements in mortgage affordability translated into further recovery in ▶ р. 22-35 real estate especially in housing.

In order to use an integrated model of risk management OPIN has developed and Principal adopted a system of risk management (SRM) based on COSO standards. SRM is risks and integrated into existing management system. The Company seeks to obtain the uncertainties assurance that all the risks that can affect the achievement of goals are identified, analysed and considered. SRM does not imply that all the risks should be ▶ р. 36-77 mitigated, but they should be analysed and further steps on risk minimisation should be defined.

JSC OPIN and subsidiaries ANNUAL REPORT 2011 13 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2.1 Chief Executive’s Review 2 BUSINESS REVIEW 2.1 Chief Executive’s Review 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Chief Dear Shareholders and Investors, The results for our existing projects in 2011 demonstrate the market’s strong Executive’s In 2011, OPIN made excellent progress Imbalances remain in some key seg- demand for OPIN’s offering. Construc- Review on our existing projects and took the ments of the market, which will become tion at Pavlovo 2 was 95% completed by first steps in the implementation of our more pronounced as incomes increase. the end of the year and 81% of its units new development strategy. Our new In particular the expanding Moscow were contracted for sale. Sales showed strategy builds on the best elements of middle and professional class has unmet a significant increase in 2011, with 178 the Company’s history, but puts in place needs for quality accommodation in contracts signed for the total amount a concentrated focus on the development attractive areas. OPIN is well positioned of US$82.2, up from 66 in the previous of key sites and the rationalisation of our to serve this market, as it understands year totalling US$34.1 mln. We expect to land holdings. Our established repu- its requirements through its work on its complete construction work in 2012 with tation for the creation of multi-format earlier residential projects. The success the total investment of US$16.3 mln. residential communities in Moscow and of these projects means that the OPIN the Moscow Region remains central in brand is trusted by residential buyers and Pestovo is also at an advanced stage of implementing our strategy. its developments are sought after areas construction and by the end of 2011 OPIN in which to live, providing professional had completed 85% of the development The success of our housing communities Moscow families with the environment and 65% of the units were contracted gives us a firm foundation for undertak- and facilities that they want. for sale. During the year we finished ing more such projects in the future. building 59 houses and the supporting Construction at Pavlovo 2 was 95% completed by the end of the year and 81% It also provides a core expertise from The year also saw important changes in infrastructure. We expect to complete of its units were contracted for sale. which we can expand our business into the policies of the Moscow City authori- this project in 2013, but the majority related segments. Using the skills and ties towards planning and development of the outstanding capital expenditure experience we have gained in our years of in the centre of the city. The City author- will be carried out in 2012. We signed sale, Phases 4 and 5, the Rainbow and Vesna (formerly known as Aprelevka development, we now intend to broaden ity’s new approach seeks to create a more 55 contracts in 2011 totalling US$35.7 the Woodland districts, totalling 212 plots project) is a 220,000 sq. m business our offering, launching new projects at balanced traffic flow by concentrating mln, up from 19 in 2010 when the total are not presently offered to the market, class apartment complex opposite our more affordable prices. We will main- new projects outside the city boarders. revenue contracted was US$13.3 mln. The which is planned when a significant Martemyanovo project where social tain the high standards of design and Corresponding to this politics in May of Company estimates the total construc- progress is achieved in sales of Phases 2 infrastructure will be a key part of the construction associated with our brand, 2011 it was announced that the City of tion budget for 2012 to be US$24.6 mln. and 3 of development. In 2011 in Marte- development. In 2011, we started master while opening a major new market Moscow’s boundaries would expand into myanovo we signed 68 contracts totalling planning of the first phase and complet- segment for our business, which is likely the greater Moscow Region in southern By the end of 2011, OPIN had completed US$32.8 mln, up from 51 contracts total- ed part of the engineering and surveying to grow as disposable incomes increase and south-western directions by 148 80% of Martemyanovo and 67% of the ling US$19.5 mln in the previous year. arrangements. This year we will receive and economy shows positive near term thousand hectares in total area. units were contracted for sale. The the construction permits and start con- prospects. project was rebranded in 2011 and now Looking to the future, we identified four struction works. The total of US$42.0 mln This change in direction may positively includes five residential districts built new projects in 2011 to lead the next of capital investment is planned for 2012. benefit the business of OPIN as some of in phases. In Phase 1, the Park district, stage of OPIN’s growth. The flagship of our new projects border the territory of the residential area has been completed our new development pipeline is Ruble- “New Moscow”, where massive infra- and only six houses out of 53 were unsold vo, a 50,000 sq. m residential complex structural developments are planned in at the end of the year. Phase 2, the Sun in one of the most prestigious residential the coming years creating new areas to district of 197 plots, and Phase 3, the areas of Moscow. During 2012, we plan meet the growing demand for real estate, Flower district of 144 plots, will be the to obtain the necessary permits and start both within these areas and adjacent to focus of our activity in 2012. At the end construction in fall this year. The total them. Moreover, before urban planning of 2011, project completion was 98% and of US$45.0 mln of capital investment is for the “New Moscow” is developed and 80% respectively for each district and we planned for 2012. approved at all governmental levels, real expect to complete both of them in 2012 estate in these adjacent areas is expected by budgeting a total of US$18.3 mln of to experience the highest level of custom- invested capital. In line with our strategy er demand. of selectively releasing developments for

14 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 15 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2.1 Chief Executive’s Review 2 BUSINESS REVIEW 2.1 Chief Executive’s Review 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Katuar is near our Pestovo project and master planning and obtain the neces- Diversification to balance our residential features a 200,000 sq. m multi-storey sary permits. We expect to incur nearly development with the operation of com- residential complex. During 2011, we half of the estimated total amount of mercial properties is now a key element completed geological, ecological and US$4.5 mln. of our strategy. With Onexim as a major geodesic investigations and planning re- shareholder we have the opportunity to quirements were approved with the local These projects are consistent with our increase our exposure to more consis- Authorities and Architecture Depart- strategy to develop land in phases, which tent revenue streams from high quality ment. A preliminary project scheme has reduces development costs and enhances yielding assets, which will offset the been created and OPIN has started the marketing opportunities. PESTOVO Life volatility inherent in property develop- process of changing the land category to and Vesna will offer more affordable ment. We took the first steps towards settlement land. The total of US$6.0 mln prices, which represents our strategy to this in 2011 with Onexim committing of capital investment is planned for 2012. target broader pricing segments. Katuar three commercial assets in the centre is a mass-market project, new segment of Moscow and the plot for residential PESTOVO Life is the next phase of the for OPIN. As a result it is planned to be development in the Moscow Region. Pestovo project and will comprise over co-developed together with partners, The transaction will be completed in two 100 individual land plots with an area of such as professional mass-market stages by means of additional public 24 hectares. In 2011, we completed the builders. offerings — the first offering is expected necessary engineering investigations, to be completed in 2012. obtained the technical specifications We have taken the first steps to execute and started creating a planning scheme. our new land bank strategy which moves During 2011, OPIN made substantial In 2012, OPIN plans to obtain approval away from accumulating land and hold- progress in the financing of its loan port- for the planning scheme, complete the ing it for long-term appreciation. Under folio and this is continuing in 2012. Our this strategy, we will deploy some of our net debt levels remain low and we have land for non-real estate projects. This is experienced good cash flow from our land that OPIN considers suitable in the projects. OPIN’s budget for its construc- near-term. The management of this land tion programme in 2012 is over US$150.0 is not a core activity for OPIN and our mln and is fully financed. intention is to identify suitable partners. In 2011, we transferred 8,400 ha of arable As our current projects near completion land suitable for agricultural use under and four new and exciting projects come management of a non-affiliated company on stream, we are confident about the with considerable experience in farming. future. We believe the measures we have The other strand of this strategy involves put in place during 2011 leave OPIN well divesting land that no longer fits our placed to enable our shareholders to earn long-term requirements and in 2011 we attractive levels of return as we step into formed a new business unit to undertake the next phase of the real estate cycle in this task. It has already concluded pre- Russia. liminary sale and purchase agreements for 83 ha. Artemiy Krylov General Director, JSC OPIN OPIN’s land bank is a key competitive 18 May 2012 advantage and its size provides a large degree of flexibility for us to select the most attractive plots for development. We expect it to be the source of signifi- Pestovo is also at an advanced stage of construction cant revenue growth in the long-term.

16 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 17 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2.2 strategy 2 BUSINESS REVIEW 2.2 strategy 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Strategy The Company’s objective is to create A signature component of all OPIN’s superior and sustainable shareholder residential projects is the extensive value. In order to achieve this objective in supporting social infrastructure that May 2011 the Company adopted and pub- provides residents with a fully serviced licly announced its new strategy, which living environment, a unique feature involves moving from an expansionary for housing communities in the Mos- strategy, acquiring land, to the one that cow Region. concentrates on developing suitable sites in the short and medium term with a The Company ensures that in the devel- focus on attractive residential real estate opment of its social amenities facilities, projects and expanding into operating quality is not compromised and all of commercial properties, selling non- its facilities exemplify the same high core land holdings as well as creating a quality standards as found in its resi- platform for consolidation of real estate dential premises. The Company believes assets in Russia. these exacting standards provide it with a distinct competitive advantage, and OPIN will implement Within the residential sector OPIN focus- together with its focus on achieving its strategy though the es on the development of master-planned exceptional customer service levels, it multi-format residential communities intends to lead the market in its niche following actions in Moscow and the Moscow Region space in the coming years. on Company-owned land sites. In the l Providing exceptional quality real estate under the OPIN brand commercial sector the Company plans Offering master-planned to acquire and operate quality yielding multi-format real estate assets in Moscow. In striving to build projects adapted l Offering master-planned multi- format real estate to market demand, OPIN pioneered OPIN will implement its strategy though in the Moscow Region the concept of the following actions: multi-format residential communities l Focus on Moscow and the Moscow 50,000 sq. m multi-storey premium highest per capita incomes in Eastern Adhering to the highest standards of which offer multiple styles of real estate Region quality condominiums complex in the Europe. The lack of supply of quality real corporate governance Providing exceptional quality real estate within the same gated community, Krasnogorsky District, Vesna (formerly estate presents a further opportunity. OPIN has developed and clearly commu- under the OPIN brand all built in accordance with common l Adhering to the highest standards of Aprelevka) — a 220,000 sq. m business nicates throughout the Company a range Over the course of its 10-year history, architectural design and planning. The corporate governance class residential complex on the Kiev- For many years OPIN concentrated on of internal procedures and guidelines to OPIN has developed a strong brand trust- Company’s key formats for living space skoe highway, Katuar — a 200,000 sq. growing its presence in the Moscow preserve the core values and standards ed for the development of high quality are multi-storey condos, townhouses l Achieving target returns and m multi-storey residential complex on Region and the Company is now one of it applies in dealing with shareholders, real-estate. The Company’s previously and detached houses. maintaining optimal capital the Dmitrovskoye highway and PESTO- the largest local landlords with a total employees, suppliers and other stake- developed commercial projects including structure VO Life — the second stage of Pestovo of 20 thousand hectares of land under holders. OPIN adheres to external gover- the Domnikov Plaza office complex, the OPIN developed a unique position as one project with over 100 land plots for ownership, and thus a secured pipeline nance codes that set the framework for Meyerhold office center and the Novotel of the foremost developers in the grow- l Balancing off residential individual construction. of projects in years to come. This is a de- its internal standards, seeking to comply hotel are now considered to be some of ing niche of multi-format out of town development with operation of fining element in assessing the sustain- with established best practice in all areas the landmarks of Moscow’s commercial residential housing. commercial real estate Focus on Moscow and the Moscow Region ability of our business model. of corporate governance. property. OPIN’s acclaimed residential The Company’s management believes villages Pavlovo, Pestovo and Marte- More recently, in an attempt to meet l Capitalising land bank assets and that among all the geographical areas myanovo are the winners of numerous the demands of a more diverse cus- improving their liquidity of Russia the Moscow and the Moscow industry awards, and are recognised as tomer base, the Company expanded Region markets provide the strongest unparalleled examples of branded real its development activity into projects l Hiring and retention of professional fundamentals for our style of real estate estate, representing an aspirational qual- in broader pricing segments. Four employees development. These territories together ity of life for residents of Moscow and the new such projects are expected to be contain over 20 million people with the Moscow Region. launched during 2012: Rublevo — a

18 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 19 1 OVERVIEW l 2.2 Strategy 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 2.2 strategy 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Achieving target returns and maintaining Balancing off residential development with Capitalising land bank assets and Hiring and retention of professional optimal capital structure operation of commercial real estate improving their liquidity employees OPIN targets internal rates of returns in Diversification is a key part of OPIN’s Currently the Company owns nearly 38 In order to attract and retain the most excess of 20% in US dollar terms driven strategy and exposure to quality yielding thousand hectares of land in the Mos- professional and qualified employees by an optimal mix of debt and equity assets will seek to offset the volatility cow, the Tver and the Vladimir Regions OPIN focuses on the following key areas: finance, maintaining our loan to cost inherent in property development. The of Russia. The majority of OPIN’s land ratio at conservative levels, usually not Company plans to achieve this via a bank comprises large-scale agricultur- ⦁⦁ Individual appraisal performance exceeding 60% of the development bud- range of actions including additional al-use land parcels, some of which are system to analyse professional and get. The Company prefers project-level share offerings, reinvestment of proceeds used for agricultural purposes under- personal skills and identify areas of debt when developing new projects and from current operations and co-investing taken by a professional management professional development and career borrows funds against standing assets or in new projects. In the longer term the company contracted for the purpose. progress. freehold land for working capital needs. ultimate goal of OPIN is to become a The Company’s policy is not to provide platform for consolidation of assets in After the change in market conditions ⦁⦁ Training and skills development sys- guarantees or a pledge of shares of the the real estate industry in Russia. caused by the financial crisis in 2008, tems that include courses, education- holding company JSC OPIN. In addition, some sites are not suitable for efficient al programmes and seminars specially during the year 2011 the Company was In line with this strategy, the major- real estate development. As capitalisa- designed for OPIN employees. able to achieve substantial progress in ity shareholder of OPIN, Onexim, is tion of the existing land bank is key to refinancing its loan portfolio, which committed to contribute three yielding the Company’s long-term strategy, a ⦁⦁ High quality social security systems will continue during the year 2012 (see commercial assets in the center of specialised land asset management de- with various types of financial incen- Finance Review). To further optimise the Moscow and a land plot for residential partment was formed during 2011, which tives, medical and life insurance, and capital structure, the Company plans to development in the Moscow Region concentrates on the following: maternity leave support. seek a public listing on an international (the Rublevo project — the flagship of exchange when and if the global finan- OPIN’s new projects pipeline). The first ⦁⦁ Land zoning and rezoning (settlement ⦁⦁ Employee motivation systems with cial markets become more favourable. stage of this transaction will include and industrial land), changing the transparent principles of fixed com- the contribution of two assets, which allowed land use (individual and pensation and performance bonuses. will be accomplished in the form of an multi-storey housing, cottages, retail, Fixed salary levels are determined additional share offering expected to be logistics and etc.) based on the current rates in the labor completed during 2012. market; bonuses are calculated based ⦁⦁ Short-listing of land plots for real on the individual key performance estate development indicators, Company financial results and achievement of the Company’s ⦁⦁ Marketing activities to increase sales mid-term strategic goals. of non-core land plots

⦁⦁ Attracting profile investors for the development of new business projects in the agri business, economy class housing, retail, industrial and leisure facilities on OPIN sites

⦁⦁ Geological review of land mineral resources and raw materials (sand, bog, sand-and-gravel blends, clay, chalkstone)

20 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 21 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2.3 Market Overview 2 BUSINESS REVIEW 2.3 Market Overview 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Market Overview Despite the volatility of the global financial markets, for Russia the year 2011 has Russian key statistical indicators (data from Russian Statistics Service) ended on a positive note with the latest data reflecting a positive outlook. The State Statistics Service reported relatively strong 2011 GDP growth of 4.3% and consumption growth of around 7%, which was the key to Russian economic strength in 2011, 2004 2005 2006 2007 2008 2009* 2010* 2011E 2012E fuelled by decreasing unemployment from 7.5% in 2010 to 6.6% in 2011, healthy retail

credit expansion and falling savings. Declining y-o-y inflation from 8.8% in 2010 to National accounts 6.1% in 2011 was also a factor driving consumption growth. In fact inflation in 2011 Nominal GDP, $ bn 591.1 763.6 990.5 1,298.7 1,660.4 1,218.6 1,478.3 1,849.3 2,000.0 was at the lowest level in Russia’s recent history. Despite general pessimism in 2011, Real GDP,% y-o-y 7.2 6.4 8.2 8.5 5.2 -7.8 (–7.0) 4.3 (5.0) 4.3 4.0 the oil price has been resilient and is likely to remain strong, lending more support to Industrial production, real,% y-o-y 7.3 4.0 7.1 6.8 0.6 -9.3 8.2 4.7 4.5 Russia’s macroeconomic case. Private consumption, real,% y-o-y 12.5 12.2 12.2 14.3 10.6 -4.8 5.1 (6) 6.4 5.5 Gross fixed investment, real,% y-o-y 12.6 10.6 18.0 21.0 10.6 -14.4 5.8 6.2 5.0 Budget Budget balance/GDP,% 4.2 7.7 7.3 5.4 4.1 -5.9 -4.0 0.8 0.0 Sovereign funds, $ bn** 18.8 43.7 89.1 156.8 225.1 152.1 113.8 149.7 179.7 Key message CPI Year end,% y-o-y 11.7 10.9 9.0 11.9 13.4 8.8 8.8 6.1 4.5 Healthy consumer confidence, Year average,% y-o-y 11.0 12.5 9.8 9.1 14.1 11.7 6.9 8.4 4.5 employment and real wage growth, Social sector together with improvements in Unemployment rate,% 8.2 7.6 7.2 6.5 6.2 8.4 7.5 6.6 6.0 mortgage affordability translated into Average gross wages per month, R’000 6.8 8.6 10.7 13.6 17.1 18.8 21.1 23.5 26.0 further recovery in real estate especially Balance of payments in housing. Trade balance, $ bn 85.8 118.4 139.3 128.7 179.7 111.6 151.7 198.1 150.0 FDI, $ bn 15.4 12.9 29.7 55.1 75.5 38.7 37.8 48.5 55.0 Monetary reserves (excl. gold), $ bn 120.8 175.9 294.9 465.0 412.5 416.7 443.6 454.0 480.0 Debt Foreign debt/GDP, year average,% 33.7 30.6 29.2 32.2 30.5 39.2 32.4 27.8 27.6 RUB/USD exchange rate Average 28.8 28.3 27.2 25.6 24.9 31.8 30.4 29.4 31.5 RUB/EUR exchange rate Average 35.8 35.2 34.1 35.0 36.4 44.2 40.3 40.9 41.2 Urals, $/bbl 34.1 50.0 61.0 69.0 94.7 61.4 78.2 109.3 110.0

Data: Rosstat 2011

The following information was prepared by JSC OPIN’s own research Such data, statistical information and studies may be approximations estimates and includes references to data, statistical information and or use rounded numbers. The third parties referred to in the following studies prepared by third parties (among which are Rosstat, Troika information accept no liability for the accuracy of such information and Dialog, ING Bank, Cushman & Wakefield, Miel, Blackwood and Goldman prospective investors are advised to consider such information with Sachs). This information is provided for information purposes only. caution.

22 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 23 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 2.3 Market Overview 3 OPERATING REVIEW 2.3 Market Overview 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Investment in commercial real estate across the sector in 2011 achieved a re- Moscow’s out-of-town The number of new and existing housing communities cord-breaking level of US$7.66 bn, which is 30% higher than in 2008, the second best housing communities Positive macro factors led to in the Moscow Region year, when investment volume was US$5.8 bn. Moscow contributed on average 88% The suburban housing communities improvements in the investment of the volume for 2011, retaining a stable share since 2008, which confirms it as the segment in the Moscow Region in levels in real estate, in particular in core driver of the Russian investment market, where well-developed commercial real 2011 was more dynamic compared to large Russian metropolitan areas, the 780 estate generates plenty of investment opportunities for various types of investors. 2009–2010, when the activity of buyers largest of which is Moscow. 672 and sellers was limited to purchases of The growth in the residential market segment was fuelled by increasing personal land plots only. A number of high quality 527 incomes and growing mortgage affordability, which was observed to be the highest housing communities were introduced to 422 ever in Russia with borrowing costs falling to 10–11% and mortgage volumes increas- the market in the beginning of 2011; the 322 ing 75% from 2010 reaching RUR766 bn. demand for communities at a high level 220 150 145 of completion increased markedly; and 70 102 100 105 108 Moscow and the Moscow Region remained the most attractive market due to the high developers paid greater attention to the An important event in the Moscow real disposable incomes of its residents, its increasing population and low level of real design, planning and construction qual- estate sector was the decision of the City 2005 2006 2007 2008 2009 2010 2011 estate supply per capita especially of quality stock. ity of their projects. In general the year authorities in May of 2011 on expanding 2011 was successful: buyers were active, the territory of the city by more than An important event in the Moscow real estate sector was the decision of the City sales volumes were stable and delivery of Total stock New supply double in the south-western direction authorities in May of 2011 on expanding the territory of the city by more than double new projects continued. between Varshavskoye and Kievskoye in the south-western direction between Varshavskoye and Kievskoye highways so highways so that the combined area that the combined area of Moscow will be equivalent to 148 thousand hectares. As the During 2011 a total of 108 new projects of Moscow will be equivalent to 148 new territory is promised to receive substantial infrastructural improvements, this were introduced to the market, which is thousand hectares. As the new territory positively affected demand, pushing prices up for real estate located here and in the lower than during the record year 2010 New supply 2011. Breakdown by format is promised to receive substantial adjacent areas. when the majority of new projects were infrastructural improvements, this % offered in “land plot without construc- positively affected demand, pushing Other changes in the City policies were a ban on new construction in Moscow city tion contract” condition, but higher % prices up for real estate located here and center and an initiative to shorten the lease terms for land under development. Effec- than in any of pre-crisis and crisis years. % in the adjacent areas. tively, investor demand shifted to the next most attractive option after Moscow, that By the end of 2011, an estimated 780 49% % is the Moscow Region, which saw an increase of its share in new Russian stock under residential communities in total existed development from 20% in 2010 to 60% in 2011. on the market. % 25% % 23% In 2011 demand increased for suburban residential real estate in the Moscow Region. % Current trends indicate that many Muscovites are seeking an environmentally clean-

er lifestyle in single-family houses outside of the city, and that this is the primary % 3% source for the growth in demand for suburban real estate. Demand for single-family expanding the % territory of Moscow houses outside of the city is also coming from buyers from other parts of Russia. Q1 Q2 Q3 Q4 Average

1 48 Plots Plots with construction contract Multiformat Townhouses thousand ha

Moscow Region share in stock under development, 2011 60%

24 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 25 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2.3 Market Overview 2 BUSINESS REVIEW 2.3 Market Overview 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Breakdown of housing communities in the Moscow Region by class The main dynamic observed in 2011 was Geographical distribution of total housing a decrease in the supply structure of land % communities stock among the most prestigios directions 76% 24% % 73% plots without construction contracts % 21% 21% 20% 20% % offered for sale, the share of which % decreased from 91% in 2010 to 49% in 2011. 17% % In parallel the share of multi-format % 12% % 10% 10% 9% residential communities increased to 25% % 6% 6% 6% 6% % of the total new supply and completed 3% 3% 3% 3% % houses or plots with contracts increased % 21% 17% their share to 23%. The share of town- % % 7% houses in new supply is minor as they % 6% are represented within other formats. Others Kievskoye Minskoye % Kashirskoye Piatnitskoye Novorizhskoye Dmitrovskoye 2010 2011 Volokolamskoye By the end of the year 73% of all existing Rublevo-Uspenskoye Elite Business Econom residential communities in the Moscow Region were economy class, which is 3% 2010 2011 lower than in 2010. The share of business class communities in contrast increased by 4% to 21% of the total, but was still lower than in pre-crisis times when it reached 45% of total. Elite residential communities are becoming rare in the Breakdown of new housing projects by distance from MKAD It is interesting to note that during primary market and represent only 6% of 2011 Rublevo-Uspenskoye highway, a total supply. historical leader in the supply structure 6% lost share to Novorizhskoye highway Geographical distribution of out-of-town housing, new supply In 2011, about 65% of new supply was 16% with the latter share climbing from located in the traditionally most presti- 17% in 2010 to 21% in 2011. The share of gious north-west, west and south-west the second most popular Kaluzhskoye directions (except for Rublevo-Us- 21% 0-15 кm highway, similar to Rublevo-Uspenskoye penskoye highway, whose share in new 15-30 кm highway, accounted for 20% in the total 13% supply in 2011 was insignificant) and also 13% supply structure. Noteworthy is the 2% Novorizhskoye on Dmitrovskoye and Ostashkovskoye 30-60 кm Novorizhskoye y-o-y growth in share of the third most 5% 29% highways. Such geographical distribu- 5% 29% Kievskoye/Kaluzhskoye 60-100 кm popular Kievskoye highway. Kievskoye/Kaluzhskoye tion of new supply indicates the reviving 29% 5% 5% SimpheropolskoyeSimpheropolskoye interest in high-budget homes. 100+ кm A considerable part (73%) of new projects Yaroslavskoye 6% Yaroslavskoye launched in the out-of town residential 6% Dmitrovskoye/Ostashkovskoye 28% market in 2011 is located within 60 km 5% Dmitrovskoye/Ostashkovskoye from MKAD, and the majority is at a 5% Novoryazanskoye/Egor'evskoye distance of 15–60 km from MKAD. The Novoryazanskoye/Egor'evskoye 7% 20% Kashirskoye shares of new projects located at a range 7% 10% 20% KashirskoyeLeningradskoye of 60–100 km and 100+ km from MKAD at the end of 2011 were 21% and 6% respec- Others 10% Leningradskoye tively.

Others

26 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 27 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2.3 Market Overview 2 BUSINESS REVIEW 2.3 Market Overview 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Demand by product type Demand During the year buyers traditionally In 2011 the overwhelming demand was preferred purchasing real estate in the for land plots without contracts, which Demand by stage of completeness primary market at a completed stage of represented 69% of the total number of construction — the share of these transac- transactions. This demand was observed tions in Q4 accounted for 57%. The share of 16% to be decreasing in favor of complet- transactions in the primary market while ed multi-format real estate and plots under construction was 35% of the total Plots with contracts. The share in demand number of transactions in Q4. Investment for completed houses by the year end % transactions at the greenfield stage and 70% 69% 67% transactions on the secondary market 10% Plots with construction contract accounted for 10% of the total, the share % of townhouses and low rise apartment 57% accounted for 5% and 3% respectively. % buildings accounted for 16% (at the end of Cottages the year demand for this format exceeded % Novorizhskoye highway was the most pop- 5% all expectations and was equal to 30% of % 35% ular direction accounting for 25% in 2011. transactions in Q4 2011) and the share of Townhouses and multi- % land plots with contracts was 5%. 18% apartments 15% 15% 69% % 12% 13% 11% 5% In the structure of demand by class, the % 2% 4% 4% 3% economy segment remained a leader % with a 75% share by the year end. The Primary, investment Primary, Primary, completed Secondary shares of elite and business class housing stage constraction stage were 6% and 19% respectively.

Q1 2011 Q2 2011 Q3 2011 Q4 2011 Demand by class Demand by geography % 78% 75% % 72% 74% % %

% % % % % % %

% %% 19% 17% 19% % 14% % % 9% 9% 8% 6% % % % % % Q1 2011 Q2 2011 Q3 2011 Q4 2011 % %

Elite Business Econom Others Others KievskoyeKievskoyeMinskoye Minskoye KaluzhskoyeKaluzhskoye Piatnitskoye Novorizhskoye Dmitrovskoye Piatnitskoye Novorizhskoye DmitrovskoyeVolokolamskoye Rublevo-Uspenskoye Volokolamskoye Rublevo-Uspenskoye

Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2011

28 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 29 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2.3 Market Overview 2 BUSINESS REVIEW 2.3 Market Overview 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Prices By year end the best-selling houses were Multi-apartment housing New supply delivery in 2011, '000 sq. m By year end 2011 the average price per one in the business class segment in the in the Moscow Region square meter in elite class residential directions of Novorizhskoye, Kievskoe, Supply 3304,6 communities was US$5,075 including Kaluzhskoye and Dmitrovskoye high- For many years the Moscow Region was a the cost of land (+1.5% for the year), in ways. Prices averaged US$41,400 per leader in new construction. Historically,

business class residential communities sotka (+9% y-o-y) in the Novorizhskoye the annual new supply volumes average the average price including cost of land highway direction, US$16,900 per sotka 7.5–8 mln sq. m, of which 40% are low- was US$3,470 per sq. m (no change (–4% y-o-y) in the Kievskoe and the Kalu- rise residential and 60% are high-rise y-o-y) and in economy class residential zhskoye highway directions and $19,750 residential. According to the Statistics communities the average price including per sotka (–7% y-o-y) in the Dmitrovskoye Service of the Moscow Region in 2011 the elite class land was US$1,550 including cost of land highway direction. new supply volume amounted to 8.2 mln 696,9 726,4 residentials, m² 587,5 (+7% for the year). Additional demand sq. m, of which 67% or about 5.5 mln 475,5 498,5 555,1 283,7 311,7 328,3 292,7 $ 5 075 came from the announcement by the City In summary, prices remained stable for sq. m was high-rise residential (+3.5% 158,4 authorities on expansion of the Moscow all classes of residential out-of-town y-o-y). A total of 760 new addresses in business class metropolitan area, which also stimulated communities and prices in the most the high-rise residential segment was Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Деc residentials, m² price growth in the more affordable popular communities exhibited a growth offered for sale in the Moscow Region by segments of townhouses and low-rise rate of 5–15%. The volume of transactions the end of 2011. $ 3 470 residential. increased during the year with a shift from plots without contract to completed The largest developers of high-rise resi- economy class houses or plots with contracts. dential in the Moscow Region are Mor- residentials, m² ton, City-XXI Century, RGI International, $ 1 550 PIK, Renova-Stroygroup, FSK Leader, New supply breakdown by distance from MKAD Absolut, Urban Group, MITS, Krost, and Granel Development. Their combined market share is about 50%. Average year end prices in residential communities by class, US$/sq. m

In 2011, as in previous years, the majority 4% of new housing offered (about 85% of , % 11% total supply structure) was located 24% 6000 6,9% , % within 30 km from MKAD, including 24% 5200 of new housing located within 5 km from 5000 5075 , % 0-5 km MKAD; 11% of new housing was located in the range of 30–60 km from MKAD; 4% 4000 , % 5-15 km 3450 3470 of new housing offers were located over 3200 15-30 km , % 60 km from MKAD. 28% 30-60 km , % The eastern, southern and south-eastern 1600 1450 1550 60+ km 1,5% 1400 , % directions with their respective volumes of 20%, 18% and 17% of new supply , % 33% 0,5% remained the leaders in new stock. The , % western direction accounted for only 4% Elite Business Econom of the new supply.

2008 2009 2010 2011 Growth rate in 2011

30 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 31 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2.3 Market Overview 2 BUSINESS REVIEW 2.3 Market Overview 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

New supply breakdown The most active large-scale high-rise The best-selling projects in 2011 were Prices dynamic on the primary market in the Moscow by geography residential construction projects in 2011 Butovo Park, Solntsevo Park, Krasnaya Region in RUR and USD term per sq. m were in Leninskiy and Schelkovskiy dis- Gorka, Grad Moskovskiy, Novoye Na- tricts, as well as in the Moscow satellite habino and Zavidnoye Microdistrict. The 4% towns of Lobnya, Balashikha, Khimki, main factors accounting for their success 8% 8% Lyubertsy and Zheleznodorozhniy. were rapid construction speed, favorable North-West location and design concept, wide choice 14% The most popular construction material of apartment area and relatively low The average price North was monolith-concrete, following by price. on the Moscow Region

monolith-brickNorth-East and panel. In 2011 mono- primary market, m² 18% lith-concrete buildings accounted for 46% The average budget for the purchase of a East 63 560 rub. of new supply, monolith-brick 34% and new apartment in the Moscow Region at South-East 11% panel 20%. the end of 2011 was at the level of 3.5 mln rubles. With the average purchase area Jul Jul Jan Jan Feb Feb Jun Jun Oct Oct Sep Sep Apr Apr Dec South Dec Nov Nov Aug Aug Mar Mar May The majority of flats offered on the mar- of 40–60 sq. m, this translates into a per May ket wereSouth-West one- and two-rooms 40–60 sq. square meter price of 60–80,000 rubles, 2010 2011 17% m in size,West which represented 32% and 41% and 40% of housing on the primary respectively of the total new supply. market was within this range. RUR USD 20% 4% 8% 8% During 2011 a total of 43,000 transactions North-West was concluded, including 6,900 presale 14% North contracts. The structure of demand was in favour of one-room flats, which Prices In summary, in 2011, demand for North-East accounted to 56% of total demand, while The average price per square meter on the multi-apartment housing in the Moscow 18% East two-room flats accounted for 28% of total Moscow Region primary market at the Region enjoyed steady growth influenced end of 2011 was about 63,560 rub which is by positive macroeconomic conditions, 11% South-East demand. In terms of location, the most popular projects were a short distance 4% lower when compared to 2010 due to expansion of the Moscow city borders, South from Moscow (up to 10 km from MKAD) the growth in the number of presales at improved lending conditions and more South-West situated in satellite towns and within initial stages of construction. favourable prices when compared to large out-of-town residential settle- Moscow. Changing consumer preferenc- 17% West ments. Price leaders in the Moscow Region in es toward quality of construction and 20% 2011 were Reutov, Khimki (with an aver- modernity of project design and plan- age price of 95,000 rubles per sq. m) and ning together with increasing competi- Krasnogorsk (90,000 rubles per sq. m). tion forced developers to produce higher Average prices for projects located within quality, well-thought out projects with 5 km from MKAD were about 90,000 attention to supporting social amenities rubles per sq. m, 5–15 km from MKAD the and infrastructure. average was 75,000 rubles per sq. m and 15–30 km from MKAD the average was 67,000 rubles per sq. m.

Housing lending improved in 2011: the volume of mortgages increased across the country by about 75% y-o-y to 766 bn rubles, the down payment level remained stable at a minimum of 10% and interest rates declined to 10–11% in ruble terms.

32 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 33 1 OVERVIEW 2 BUSINESS REVIEW 2.3 Market Overview 2 BUSINESS REVIEW 2.3 Market Overview 3 OPERATING REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 6 CONSOLIDATED FINANCIAL STATEMENTS Key deals in Moscow in 2011.

Buyer/tenant Property name Area in sq. m

Moscow offices Office demand in contrast continued Average rental rates for offices grew by Investment deals Despite the slight slowdown in autumn, its recovery as the Russian economy almost 10% in class A and 5.5% in class which was influenced by turbulence on rebounded after the financial crisis of B and by the end of the year reached Marins Group Nagatinskiy business centre 70,000 the global financial markets, in general 2008–2009. The reduction in new supply US$830 and US$480 per sq. m per annum О1 Properties Lesnaya Plaza business centre 49,000 during 2011 the entire commercial real volumes together with increased activity (triple net). Rental rates for prime prem- estate sector in Moscow was character- in the rental and investment markets ises were in the range of US$1000–1300 Promsvyaznedvizhimost Alfa Arbat Centre 27,449 ised by high levels of activity of the part led to a decrease in vacancies. At the end per sq. m per annum with the most of investors, developers and tenants. of 2011 the vacancy in class A was 10–12% expensive space located in the historical Heitman Metropolis business centre 40,000 With an overall share in commercial real and in class B 12–13%. centre. The growth in rental rates for UFG Real Estate Concord multi-functional centre 27,000 estate transaction volumes of 40%, the quality premises occurred due to the

office sector remained the most attractive Total transaction volume in the office increase in real demand for space and its Svyaz Bank Nemetskaya Sloboda business centre 20,000 segment to investors. segment (sale and lease) in 2011 amount- deficit in the central part of the city. ed to 1.77 mln sq. m (compared to 1.4 mln VTB Capital White Square Share in project After the peak year of 2008 when a total sq. m in 2010) with activity being split Operational expenses averaged US$75–120 TPG Capital White Gardens Share in project of two million square meters of quality between international (51%) and domes- per sq. m per annum for class A, US$50– office space was delivered to the market, tic companies (49%). The breakdown of 90 for class B+ and US$35–60 for class B-. - Geneva House and Berlin House 22,431 volumes of new supply decreased in leasing transactions was as follows: new Sales prices for quality premises at the every succeeding year. The main reason leases accounted for 69%, renewals 9%; end of the year varied from US$6,000 to Hines Global REIT Gogolevsky II 7,965 for this negative trend is the sharp drop subleases, renegotiations, expansions US$15,000 per sq. m for class A, from End user deals in developer activity that occurred in 17% and end-user purchases 5%. US$3,500 to US$7,000 per sq. m for class 2008 and the new policy of the Moscow B+ and from US $2,500 to US$4,500 per Federal Grid Company «Western Gates 40,000 city government restricting developers Leasing activity in Q4 was spread across sq. m for class B-. Rusal Park Pobedy 28,120 from building new premises in the city three industry sectors, with the most centre in effect since end of 2010. As a prominent being IT companies account- VTB Federation Tower, Western Tower ~ 16,000 result, in 2011 new supply in the office ing for 33% (e.g. Mail.ru), the manufac- segment amounted to only 626,000 sq. turing sector accounted for almost 20% UniCredit Bank Nagatino i-Land 11, 680 m, bringing the total supply at the end (e.g. Schneider Electric) and business Largest leasing deals of the year to 12.5 mln sq. m. The largest services companies (e.g. Strategy Part-

projects delivered in 2011 were Imperia ners) accounted for about 11%. Mail.ru Group SkyLight business centre 29,932 Tower (70,110 sq. m), West Park (33,915 sq. m), Legion II Phase 2 (19,440 sq. m) The decentralisation of the Moscow office Kaspersky Laborotory Olympia Park 29,847 and Kaleidoscope BC (9,882 sq. m). market became even more apparent in Sberbank Technologies Danilovsky Fort business centre 19,914 2011, evidenced by significant take-up recorded in the zone between MKAD and Morton PREO 8 business centre 11,520 the Third Ring Road. Transactions in this area included the office complexes United Energy Company Silver Stone business centre 10,771 Olympia Park, Metropolis, SkyLight, Rosselkhozbank Alfa Arbat Centre 27,500 Krytaskye Hills, Dvintsev, Nagatino i-Land and Danilovsky Fort. Sberbank Danilovsky Fort 19,900

Greenatom AFI on Paveletskaya 13,500

Group M Legend 10,800

Schneider Electric Dvintsev 8,680

34 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 35 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2.4 Principal risks and uncertainties 2 BUSINESS REVIEW 2.4 Principal risks and uncertainties 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Principal risks and In order to use an integrated model of SRM should be business-oriented, i.e. The Company has defined the main significant risks applicable to its business. risk management OPIN has developed identification of risks should be focused The list of risks and the main steps for their mitigation are shown in the table below: uncertainties and adopted a system of risk manage- on the Company goals and based on busi- ment (SRM) based on COSO standards. ness processes. Potential risks depend on SRM is integrated into existing man- many factors. Some of them depend on agement system. The Company seeks to the conditions within the business unit Risk Description Mitigation Measures obtain the assurance that all the risks while other depend on external factors.

that can affect the achievement of goals The system of risk management includes Financial risks are identified, analysed and considered. the following categories: internal process Liquidity risks Risk of not having enough cash All new projects are expected to be financed primarily by project level debt. SRM does not imply that all the risks risks, technological/industrial and to support current developments The Company has a good reputation and track record for debt repayment. In and pay interest on the addition, the Company has proven successful in being able to refinance debt. should be mitigated, but they should construction risks, management/control borrowing facilities The Company has strong financial planning systems in place to control liquidity. be analysed and further steps on risk risks, risks arising from the employee’s Cash to be received from sale of property and advances to customers for minimisation should be defined. activities and external risks such as ex- construction contracts is sufficient to repay current debt obligations. In addition, Onexim, the Company’s major shareholder has on numerous ternal environment, suppliers, custom- OPIN’s occasions indicated to the stakeholders its readiness to support OPIN’s main goal SRM should be mainly based on quantita- ers and other factors. operations if necessary. tive indicators. Risks should be analysed Exchange risks Ruble and US dollar exposure The Company’s exposure to currency risk mainly comes from US dollar based loans. The Company continues to work towards converting these loans to OPIN’s main goal is to create added based on the following indicators: profit Effective risk management enables before tax, value of assets and work the identification and valuation of Rubles. A substantial part of this this risk is also mitigated through pricing real value for its shareholders through estate for sale and entering into agreement with contractors in US dollars. safety. significant risks that can exert negative capital growth. The growth Interest rate risks Interest rates the Company The Company’s strategy is to maximise the proportion of fixed interest loans. of profitability is the necessary condition influence on the achievement of goals pays are both fixed and floating Currently around 90% of loans by value of their remaining balances as of of capital growth. This growth is The Company’s General Director and the (LIBOR linked) 31.12.2011 are fixed term. ensured among other things by risk Board of Directors assure systematic and Operational risks management and control. proper management of the Company’s Property development Poor control over development Established policies in place. risks. The overall risk outlook is also and poor analysis of market Control over general contractors. Penalties for delays. demand before the project is Project monitoring and audit are always present. considered by the Audit Committee. developed Deep research of market demand before launching new projects and using In addition more critical risks are reg- consulting services of independent reputable advisors. ularly analysed for acceptability by the Human resources Risk of losing senior personnel, Remuneration is constantly being reviewed after analysis of market levels. Company. failure to recruit and retain Appraisal performance, training and motivational systems are in place for all quality people. Risks of not being personnel. able to maintain an efficient The Company implements the steady improvement of internal controls management system and managerial structure, which is periodically audited by independent international consultants. Permitting risks Risks of not being able to Supplying projects with sufficient social infrastructure that meets the rezone land and obtain requirements of local governments. necessary permits for envisaged Organisation of charitable activities. development projects Strong well established business reputation of the Company helping to ease the permitting process. Established Government relations department within the Company. Strategic risks Business strategy Risks associated with choosing The Company closely monitors market conditions and competitive landscape a strategy not reflective of the and adapts accordingly market environment Strong focus on customer needs and their changing demands OPIN additionally relies on expert advice from industry experts: analysts, brokers and consultants Spreading development risks with co-investors Limiting risks on a project level by financing without pledge or guarantees of the holding company’s JSC OPIN shares.

36 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 37 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2.5 Management 2 BUSINESS REVIEW 2.5 Management 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Management Artemiy Krylov Mr. Krylov graduated from MGIMO University with a degree in International Eco- (born 1977) nomics. He has extensive experience in project management and corporate strategic General Director management in real estate. Previously, Mr. Krylov was CEO of Novoe Zhiliyo Ltd and held senior management positions at RDI Group, CJSC Domostoitel and CJSC Stroymetresurs.

Andrey Smakhtalin Mr. Smakhtalin has a degree in Economics from The Moscow Institute of Property (born 1978) Management and Construction and a degree in Management and Economics from Operations Director The State University of Management. He has more than 10 year experience in the real estate sector. He previously worked for RDI Group, Domostroitel, and Stroyme- tresurs. In 2008, he was awarded a Medal for Work and Diligence by the Governor of The Management team of OPIN the Moscow Region. is composed of seven members and Artemiy Krylov Mr. Sheremetyev graduated from the Moscow State Academy of Food Production represents the following areas: General Igor Sheremetyev with a degree in Management and Engineering. He has over 12 years of managerial Management, Operations, Financial, (born 1975) experience in finance, economics and law. He has worked in major international Sales and Marketing, Business Finance Director companies such as KRAFT Foods in Moscow, KRAFT Foods Global Head Office Development, Investor Relations and (London), ORKLA Group and VISA International. Legal. The Directors are in charge of the day-to-day management of the Sergey Chernyshov Mr. Chernyshov graduated from the Moscow State Administration University with Company, represented by its operating (born 1973) a degree in Public and Municipal Administration. He has extensive experience in and financial performance, the senior management roles in commercial enterprises, federal executive authorities, implementation of the strategy defined Business Development Director and non -profit public organisations, including the central office of Rostechnadzor, by the Board of Directors, as well as the the Chamber of Commerce and Industry of the Russian Federation and the National performance of projects and studies of Union of Self-Regulated Elevator Business Organisations. He holds letters of award a strategic nature. A brief experience of from the Federal Service for Environmental, Technological and Nuclear Supervision each member of the senior management and from the Governor of the Moscow Region. who is not a member of the Board of Smakhtalin Sheremetyev Chernyshov Directors is set forth below. Andrey Igor Sergey Natalia Kartavtseva Ms. Kartavtseva has a degree in Engineering from Mendeleyev University of Chem- (born 1973) ical Technology and an MBA from the Russian Presidential Academy of National Sales and Marketing Director Economy and Public Administration. Before joining OPIN, Ms. Kartavtseva was a deputy CEO of Vesco Group. She has extensive managerial and sales experience in real estate, pharmaceutical and military hardware.

Stanislav Joukov Mr. Joukov graduated with a degree in Business Management from York University (born 1979) (Canada) and has an MBA degree from Laurier School of Business & Economics (Can- IR Director ada). He has extensive experience in real estate, consulting, equity and debt capital markets, and investor relations gained from work at Cushman & Wakefield, Ernst & Young, Alfa Capital Partners and AFI Development.

Denis Lebedev Mr. Lebedev has a PhD in Law from the State University of Land Management. He (born 1980) has over 11 years of experience in the legal profession including within Moscow Kartavtseva Stanislav Lebedev based real estate develop ment companies such as RC Group, RDI Group and CJSC Natalia Joukov Denis Director of Legal Grazhdanstroy.

38 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 39 1 OVERVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 6 CONSOLIDATED FINANCIAL STATEMENTS

Operating In 2011 OPIN made significant progress in successfully completing its existing OPERATING REVIEW review developments and bringing new projects forward. Work accelerated on three large-scale projects under construction – the housing communities of Pavlovo 2, ▶ р. 40 Pestovo and Martemyanovo - which are now in the final stages of construction. The nature of these projects gives the Company a high degree of visibility of earnings as it sees strengthening demand for a defined area of buildings to be sold, which represents a pipeline of property sales over the next two years.

New projects OPIN develops land in phases, which helps it to achieve significant savings ▶ р. 64-67 on utility connections and enables it to maximise marketing opportunities. A considerable amount of effort during the year was spent on such new projects. The Company selected the most promising sites from our land bank and started predevelopment works aimed at obtaining all necessary zoning, planning and building permissions.

Asset contribution A key part of OPIN’s new strategy announced in May 2011, is to achieve a well-balanced real estate portfolio. As part of the strategy to achieve this, ▶ р. 74-75 Dmitry Razumov, the Chairman of the Board of the Company announced that Onexim would transfer four of its real estate assets into OPIN.

JSC OPIN and subsidiaries ANNUAL REPORT 2011 41 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3.0 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 5. 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Operating In 2011 OPIN made significant progress near completed projects and with good in successfully completing its existing connections to major roads into Moscow. review developments and bringing new projects forward. Work accelerated on three Complementing the flow of development large-scale projects under construction — earnings, we are putting in place an the housing communities of Pavlovo 2, investment portfolio of high-quality OPIN is active in real estate development Pestovo and Martemyanovo — which are income yielding properties in Moscow. in Moscow and the Moscow Region. now in the final stages of construction. The demand for commercial space in The Company’s primary focus is on The nature of these projects gives the central Moscow remains strong, which development of multi-format residential Company a high degree of visibility the Company believes will be reflected in communities that contain various types of earnings as it sees strengthening future rental income. The Company pres- of real estate including single-family demand for a defined area of buildings ence in both Moscow Region residential detached houses, townhouses, multi- to be sold, which represents a pipeline of projects and central Moscow commercial storey apartment buildings as well property sales over the next two years. properties will diversify our exposure to as supporting commercial space and any one segment of the market. social infrastructure. Such communities OPIN will continue to set the standard are built in accordance with common for community residential projects in The Company’s focus on residential architectural planning and design and Russia, through developments such as development and selective investment can satisfy the needs of customers of Pavlovo, which is recognised as one of is supported by its extensive land bank various income-levels. the outstanding residential projects in (over 38,000 hectares), which contin- Russia. Our new projects will further ues to be of significant importance for diversify our offering within the Moscow cost control and hedging it against the Region residential sector while main- current trend of increasing land prices, taining the quality of design and imple- while also providing it with flexibility mentation identified with OPIN brand. in the locations that it chooses for its developments. Although the acquisition Given the near completion of its existing of the land bank was a priority for the projects and the outlook for the Moscow previous management team, it is now As a leader in real estate in Russia, real estate market, the Company believes the judgment of present management OPIN will seek to leverage its track this is the right moment to initiate new that no further land bank purchases will record and experience on the public developments. In this way the Company be required and our current objective is to market to enhance its position through sees expected property sales revenues ensure the most effective and profitable creating a platform for consolidation extending into the future. use of our existing resources. Where of assets via secondary public offerings, appropriate the Company will consider reinvestment of proceeds and project OPIN takes a strategic view of our proj- land bank sales, leasing arrangements or level co-investments. The Company ects, regarding them as multi-functional partnership ventures for development of started this path in 2011 and conducts integrated developments that create new projects outside the real estate business. on-going discussions with real estate communities for a growing segment of owners in Moscow. Russia’s increasingly prosperous and OPIN is well positioned to realise these sophisticated population. opportunities. A strong management team with a track record of success in the The Company’s management under- market has been formed and the Compa- stands the market and its needs. Profes- ny is strongly supported by the commit- sional families in Moscow are looking ment of the major shareholder Onexim. for high-quality housing in attractive Thus OPIN has both the capability and environments, with good access to the the resources to achieve strong growth in city centre. The Company therefore tar- the years ahead. gets development plots that are located

42 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 43 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3.1 Current projects 3 OPERATING REVIEW 3.1 Current projects 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Current projects Pavlovo 2 The project consists of 106 deluxe During the course of 2011 the Company The project will be fully completed in This is a deluxe housing community lo- single-family houses ranging in size completed the construction of seven 2012. All the works are expected to be cated 14 km away from the Moscow Ring from 300 and 800 sq. m on land plots detached houses and started two new completed including paving, landscap- Road (MKAD) in the direction of Novo- of between 20 and 75 sotkas (0.2 and ones. In addition the following infra- ing, engineering networks and unit rizhskoye highway on an 80 hectare site. 0.77 hectares), 290 townhouses ranging structural works were completed: water construction. As of December 31, 2011 It is the second phase of the Pavlovo com- in size between 150 and 250 sq. m, 380 supply facility construction, engineering the total amount of capital expenditures munity development and is recognised apartments ranging in size between 40 networks (70% completed), asphalt pav- remaining for Pavlovo community is for its extensive social infrastructure and 170 sq. m in eight low-rise condo- ing of roads (30% competed), landscaping estimated at US$16.3 mln. 106 houses which includes a large shopping centre, miniums and 40 land plots for individual (80% completed) and installation of gas from 300 to 800 m² school, kindergarten and the largest houses construction. The Company start- service in townhouses, with a total cost on land plots international standard fitness club in ed construction and presales at Pavlovo of US$17.6 mln. from 0,20 to 0,75 ha Europe. It provides residents with a fully 2 in 2007 and is currently in the final serviced living environment, a unique stages of the development cycle. 290 townhouses feature for the housing communities from150 to 250 m² of the Moscow Region market. Pavlovo community is a flagship development for the Moscow Region and has been 380 apartments recognised by numerous local real estate from 40 to 170 m² in eight industry awards. low-rise condominiums

The following table provides a summary of recent sales and unsold real estate in Pavlovo based on contracts signed:

Concept Total Total Total Total % change 2011/ contracts contracts contracts 2010 signed as of signed in 2011 signed in 31.12.2011 2010

Apartments 380 309 109 30 >100%

Townhouses 290 264 46 28 +64%

Houses 106 59 19 7 >100%

Land plots 40 26 4 1 >100%

Total 816 658 178 66 >100%

44 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 45 pavlovo 2 Novorizhskoye highway, 14 km away from MKAD 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3.1 Current projects 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 5. 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

During the year 2011 compared to the pre- Average prices during the year 2011 vious year sales of apartments increased compared to 2010 decreased slightly for by more than 100% in both units and apartments by 1% to US$3,570 per sq. dollar terms, while sales of townhouses m, for townhouses increased by 9% to increased by 64% in units terms and by US$3,200 per sq. m and for detached $ 82,2 mln 70% in dollar terms. Sales of detached houses decreased by 14% to US$1.5 mln total net sales, 2011 single-family houses as well as sales of per house due to growing demand for land plots increased by more than 100% smaller houses. The average price for both in unit and in dollar terms. land plots was US$36,300 per sotka, a 5% decrease compared to 2010.

In total, 178 contracts were signed with total net sales of US$82.2 mln, which is 141% higher than in 2010. In 2011 cash collected amounted to US$72.0 mln.

A comparison of the average value for the sale of houses, townhouses, apartments and land plots for 2011and 2010 is set forth in the table below:

2011 2010 % change

Average Contract Average Contract contract Contract Average volume contract volume (US$ value (US$ volume (US$ contract value 2011/2010 value 2011/2010 mln) mln) mln) (US$ mln) y-o-y% change y-o-y% change

Apartments 25.5 0.23 6.7 0.22 >100% 5%

Townhouses 24.2 0.53 14.2 0.51 70% 4%

Houses 28.1 1.48 12.0 1.71 >100% -14%

Land plots 4.3 1.08 1.2 1.19 >100% -9%

Total 82.2 34.1 141%

48 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 49 1 OVERVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3.1 Current projects 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 6 CONSOLIDATED FINANCIAL STATEMENTS

Pestovo The Company offers to customers ful- This is a premium class housing commu- ly-constructed houses in shell-and-core nity situated 22 km away from MKAD in condition and individual land plots. the direction of the Dmitrovskoye high- Buyers of individual land plots have a way, leading out of Moscow to the north, choice of entering into a construction on a 123 hectare site. It is located in a contract with OPIN for the construction desirable suburban area with neighbour- of a preselected house design and pay in ing golf and ski resorts and is surrounded installments or build their own house 421 houses by dense forest on the bank of Pestovskoe with general specifications such as 90% houses Reservoir. Pestovo community is targeted height, size, facades, etc. to be preap- from 300 to 500 м² at Moscow residents seeking a weekend proved by OPIN. on land 0,2-0,5 ha home. As with Pavlovo community, the Company aims to address important During the course of the year 2011 the 10% houses requirements of potential customers of Company completed construction of 59 from 500 m² deluxe houses and the project will also houses and supporting infrastructure on land 0,25 ha include social amenities such as a yacht including all engineering networks, with club, a private beach, walking tracks a total cost of US$18.3 mln. through parkland, a sports complex, a kindergarten, shops and restaurants. As of December 31, 2011 the total amount of capital expenditures remaining in Pe- Pestovo community is in advanced stage stovo community is estimated at US$46.5 of construction and will include approx- mln, US$24.6 mln of which is planned imately 421 deluxe single-family houses, for 2012. 90% of which are from 300 to 500 sq. m $35,7 mln in size, situated on individual land plots total net sales, 2011 ranging from 20 to 25 sotkas (0.2 to 0.25 hectares). Approximately 10% of houses are in excess of 500 sq. m in size, on individual land plot of more than 25 sotkas (0.25 hectares).

50 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 51 PESTOVO Dmitrovskoye highway, 22 km away from MKAD 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3.1 Current projects 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 5. 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

The following table provides a summary of recent sales and unsold real estate in Pestovo based on contracts signed:

Concept Total Total Total Total % change 2011/ contracts contracts contracts 2010 signed as of signed in 2011 signed in 2010 31.12.2011

Houses 318 180 19 12 258%

Land plots 103 93 36 7 >100%

Total 421 273 55 19 >100%

A comparison of the average value for the sale of houses and land plots for 2011 and 2010 is set forth in the table below:

2011 2010 % change

Contract Average Contract Average Contract volume Average volume (US$ contract value volume (US$ contract value 2011/2010 y-o-y% contract mln) (US$ mln) mln) (US$ mln) change value 2011/2010 y-o-y% change

Houses 18.9 0.99 10.5 0.87 80% 14%

Land plots 16.9 0.47 2.8 0.40 >100% 17%

Total 35.7 13.3 168%

During the year 2011 compared to 2010 sales of detached single-family houses increased by 58% in unit and 80% in dollar terms and sales of land plots increased more than four times, both in terms of units and dollars.

Average prices in 2011 for detached houses increased by 14% to US$1.0 mln per house and for land plots by 8% to US$20,400 thousand per sotka. In total 55 contracts were signed with total net sales of US$35.7 mln, which is 168% higher than in 2010. In 2011 cash collected amounted to US$33.1 mln.

54 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 55 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3.1 Current projects 3 OPERATING REVIEW 3.1 Текущие проекты 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Martemyanovo Phase 3 — Flower district. This develop- Martemyanovo is a business class ment is split into 144 individual plots housing community project situated in a each on average 25 sotkas (0.25 hectares) popular area 25 km away from MKAD in on a total area of 61.1 hectares. the direction of the Kievskoe highway on a 250 hectare site. Both Phase 2 and Phase 3 offer land plots “with” and “without” construction In 2011 OPIN completed 100% rebranding contracts for sale. A sale “with” contract 53 houses of the project. The Company launched enables the purchaser to buy a plot and from 350 м² a new project website, a new logo and then select a property offered by OPIN, on land plots marketing brochures and revisited our which will be delivered in three months from 0,2 to 0,3 ha approach to advertising custom-tailoring to a year. A purchaser buying a project it to our target audience. “without” contract can build property using their own contractors, provided 24,5 ha Martemyanovo is split into five different that the specifications and style follow area of parks fields or residential districts which OPIN certain requirements set forth by OPIN. develops in three phases. Customers also enter into construction contracts with the Company for the con- Phase 1 — Park district: This includes struction of fences around the properties the development of 53 custom made and for the connection of utilities. As pre-manufactured houses from our of the end of 2011 84 land plots and 16 Canadian subsidiary, Viceroy Homes. The detached houses remain unsold in Sun prefabricated housing technology allows and Flower districts. for quicker construction, with an entire house taking as few as two or three Currently project completion is estimat- months to complete. The timber frame ed at the level of 98% and 80% for both is also more environmentally friendly districts respectively. In the course of compared with the concrete houses used 2012 the Company plans to construct ten in some of OPIN’s other projects, with new detached houses, a kindergarten, reduced waste output and lower energy an administrative building and complete consumption in production, and higher landscaping and engineering with a total energy efficiency once finished. The cost of US$18.3 mln. houses are on average 350 sq. m, each on a land plot of between 20 and 30 sotkas During the course of the year 2011 the (0.2 and 0.3 hectares). Total area of the Company completed the construction district is 24.5 hectares. As of December of 16 houses and supporting infrastruc- 31, 2011 six houses remained unsold. ture (water supply and electricity) in the Flower district, with a total cost of The residential area is 100% completed. US$11.1 mln. The only investment planned in 2012 is for children playgrounds, amounting to As of December 31, 2011 the total amount US$163,000. of capital expenditures remaining at Martemyanovo community is estimated Phase 2 — Sun district. This development at US$38.1 mln. is split into 197 individual plots each on average 25 sotkas (0.25 hectares) on a total area of 77.9 hectares.

56 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 57 Martemyanovo Kievskoe highway, 25 km away from MKAD 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3.1 Current projects 3 OPERATING REVIEW 3.1 Current projects 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

The following table provides a summary of recent sales and total real estate in During year 2011 compared to the previ- Phase 4 and 5 — Rainbow and Woodland Martemyanovo based on contracts signed: ous year sales of detached single-family districts: This total approximately 212 houses increased by 50% in unit and 81% individual land plots, each on average in dollar terms and sales of land plots 20 sotkas (0.20 hectares) on a total area increased by 24% in unit and 55% in dollar of 69.6 hectares. These quarters are not Concept Total Total Total Total % change terms. currently offered for sale.T o initiate sales contracts contracts contracts 2011/ 2010 of land plots in Phase 3, the total amount signed as of signed in 2011 signed in 2010 Average prices during 2011 compared of capital resources needed for connection 31.12.2011 to 2010 increased for detached houses of utilities is estimated at US$78.7 mln, $32,8 mln by 39% to US$753,000 per house and for which the Company plans to invest only total net sales, 2011 land plots by 16% to US$16.2 thousand upon achieving a significant progress in Houses 53 47 27 18 50% per sotka. selling land in Phase 2 and 3 of the project.

In total 68 contracts were signed with Land plots 341 217 41 33 24% total net sales of US$32.8 mln. During 2011 compared to 2010 contracted revenue increased by 68%. In 2011 cash collected Total 394 264 68 51 33% amounted to US$30.4 mln.

A comparison of the average value for the sale of houses and land plots for 2011 and 2010 is set forth in the table below:

2011 2010 % change

Contract Average Contract Average Contract Average volume contract volume contract volume contract (US$ mln) value (US$ (US$ mln) value (US$ 2011/2010 value 2011/2010 mln) mln) y-o-y% y-o-y% change change

Houses 17.7 0.66 9.8 0.54 81% 21%

Land plots 15.0 0.37 9.7 0.29 55% 25%

Total 32.8 19.5 68%

60 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 61 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3.1 Current projects 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 5. 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Sales results in three main Approximately 81% of Pavlovo, 65% of Pe- projects in 2011 stovo and 67% of Martemyanovo is sold. Total investment In total, in the three settlements during The communities are more than 80% the period the Company signed 301 completed. Total investment planned for

$ 102,9 mln contracts with total contracted revenue the completion of all three is US$102.9 of US$150.7 mln, which is 125% higher mln, of which US$59.2 mln is planned than in 2010. for 2012.

The share of mortgage transactions Sales seasonality is presented in the increased by 10% within the total con- chart below: 150,7 mln. US$ tracted revenue, or seven times in dollar terms. As seen from the chart, the second quarter is the highest sales season with 36% of The share of contracts with deferred the total contracted revenue. payments in 2011 reduced significantly to 66,9 mln. US$ 19% falling from 44% in 2010.

5% 15% 20%

2010 Actual 2010 Actual 95% Pavlovo 2 Pestovo Martemyanovo 85% 80% 2011

2011 81% 65% 67% 26%

22% 36% 29%

26% PAVLOVO PESTOVO MARTEMYANOVO 2010 22% 36% Completed To be completed Contracted 29% 20%

29% 2010 22% , 20% 2011 2010

16% 29% , 22%

16% ,

Plots w/o contract , Townhouses REVENUE REVENUE CONTRACTED, US M Detached houses Plots w/o contract , Apartments Townhouses Detached houses Apartments Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

62 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 63 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3.2 New projects 3 OPERATING REVIEW 3.2 New projects 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

New projects Rublevo garten, a quay with a mooring, a prom- Vesna (Aprelevka) In 2011 master-planning of the first phase The second phase development will be A 50,000 sq. m residential complex in enade area, playgrounds and cycle path This is a site located across the Kievskoe was started and part of the engineer- started only upon achieving a significant one of the most prestigious residential and a fitness center. In the course of 2012 highway opposite to the Martemyanovo ing and surveying arrangements were progress in selling apartments in Phase 1 areas of Moscow. It is located just outside the Company plans to obtain all permits project and includes a 220,000 sq. m completed. of the project. the city border in the forest between by July and start demolition of existing business class apartment complex on an Volokolamskoe and Novorizhskoye buildings. Construction of the complex is area of 32.8 hectares. An important event The phase will consist of two apartment As of February 2012 the total construction highways on the bank of the Moscow planned to start in August 2012. in Moscow real estate was the decision buildings with a total area of 55,000 sq. budget of the entire project is estimated River and is an exclusive project minutes of the City authorities in May of 2011 on m and a kindergarten. at US$350.0 mln of which over US$40.0 away from the metro and shopping, golf The construction budget is estimated at expanding the territory of the city by mln is budgeted construction cost for OPIN develops land in phases, which helps and yacht clubs and is expected to be US$190.0 mln. The Company plans to more than double in the south-western In the second quarter of 2012 OPIN plans 2012. it to achieve significant savings on utility a flagship of OPIN’s new development spend US$45.0 mln of the total budget direction between Varshavskoye and Ki- to start mobilisation works on the site: connections and enables it to maximise pipeline. in 2012. evskoye highways so that the combined fence, a temporary construction camp, marketing opportunities. A considerable area of “New Moscow” will be equivalent temporary roads and utilities. In August amount of effort during the year was spent A unique concept was developed by a to148 thousand hectares. 2012 the Company expects to receive ap- on such new projects. The Company selected German-Austrian architectural practice proval from Mosgosexpertise and permits the most promising sites from our land and the main features of it are the “green The site borders “New Moscow”. in September. bank and started predevelopment works build” principle and energy efficiency. aimed at obtaining all necessary zoning, The complex is master-planned in the Social infrastructure will be a key focus planning and building permissions. The way that will maintain the integrity of a and will include a school, kindergar- following describes new projects that will large forest. The complex will consist of tens, leisure zones, a parking complex, add to OPIN’s portfolio of well-designed separate multi-storey low rise apartment a medical centre and supporting retail developments in premium locations and the buildings that will not rise above the tree premises. progress made during 2011. line, with intent to create an experience of country comfort in a major megapolis. The infrastructure will include a kinder-

area area 50 000 m2 220 000 m2

construction budget construction budget $ 190 mln $ 350 mln

plans to spend plans to spend in 2012: in 2012: $ 45 mln $ 40 mln

64 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 65 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3.2 New projects 3 OPERATING REVIEW 3.2 New projects 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Katuar approved with the local authorities and PESTOVO Life In 2012 the Company plans to obtain The project includes a 200,000 sq. m Architecture Department. A preliminary The next phase of the Pestovo project approvals for the planning scheme, com- multi-storey residential complex. OPIN project scheme was created. The Compa- includes a 16 hectare land plot divided in plete the master planning and all other plans to create a complex of an economy ny started the process of changing the more than 100 land plots for individual requirements for obtaining the necessary class with completed social and commer- land category to settlement land. construction. The project will offer more permits. cial infrastructure: a school, a kindergar- affordable prices than Pestovo while ten, a medical centre and a trade centre. As the project does not fully fit within providing full access to the amenities of The Company estimates the total project the OPIN quality type (business and the Pestovo community. Its proximity to construction budget to be US$11.0 mln of The site is situated 20 km away from the elite segment), the Company intends Pestovo provides significant advantages which US$4.5 mln is budgeted for 2012. Moscow Ring Road in the direction of to attract co-development partners for in marketing and delivers significant Dmitrovskoye highway in Mytischinskiy realisation of this project. The total con- cost savings on new utility connections. district on an area of 32 hectares. Dmitro- struction budget required is estimated at vskoye highway is an attractive direction US$205.0 mln of which US$6.0 mln is a In 2011 the Company fully completed due to a great number of sport and recre- planned budget for 2012. engineering works, received technical ation zones. Among other advantages of specifications and started creating a the project is its walking distance from planning scheme. the railway station that guarantees an easy commute to the centre of Moscow.

Over the course of 2011 geological, ecological and geodesic investigation were completed. Planning requirements were

area area 200 000 m2 16 ha

construction budget construction budget $ 205 mln $ 11 mln

plans to spend plans to spend in 2012: in 2012: $ 6 mln $ 4,5 mln

66 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 67 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3.3 Land holdings 3 OPERATING REVIEW 3.3 Land holdings 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Land holdings OPIN has significant land holdings in In 2011 the Company organised an In September 2011 to effectively capitalise In 2011 together with Agrorezerv the the Moscow, the Tver and the Vladimir inventory of all land assets. During this opportunities within the land holdings Company conducted analysis of all Regions of Russia currently totalling over process about 90% of all land holdings and to sell selected sites a land asset agricultural land and identified numer- 38,000 hectares, the major part of this were visually inspected, a full review management department was formed ous opportunities in dairy farming, land bank being in excess of the land of sites and the technical state of assets within OPIN. seed growing, beef, pork and vegetables required for new project development located on the sites was carried out and production. As this activity falls outside in the short and medium terms. This visual presentations were prepared some This department initiated work on of OPIN core business, the Company land bank was acquired predominantly of which have been posted on the corpo- attracting strategic partners to develop plans to attract business partners, such Total area before 2009 with a view to develop large rate website. new business lines within the scope of as specialised agri investors to manage 38 510 ha scale phased projects and sell the land our land bank. these projects. to realise capital appreciation from time The Company’s management performed to time. Since the world economic crisis the highest and best use analysis for About 8.4 thousand hectares of agri- Positive market fundamentals for devel- of 2008, residential real estate demand selected sites in the medium term and cultural-use arable land are presently oping agribusiness in Russia including for projects in the Tver and the Vladimir prepared proposals to the Board of Direc- transferred to the management of the the 10% annual increase in consumption Regions as well as in areas of the Moscow tors for their development. Management non-affiliated Agroreserv LLC manage- of agricultural production over the past Region distant from Moscow was weak. also prepared proposals for the local au- ment company which has significant 5 years, excess demand of consumption As a result the Company shifted its thorities to include OPIN land sites in the experience in farming. Part of this land when compared with domestic produc- strategy to capitalisation of land assets, master-planning of territories for further is cultivated under their management for tion levels and proximity of OPIN’s land Dmitrovskiy District 7 488 increasing their marketability, selling usage in individual housing construc- crops and animal farming. An additional holdings to the major consumer markets of non-core land plots and realising new tion, industrial, retail, and logistics. A 9.3 thousand hectares are leased to local of Russia (Moscow and the Moscow Klinskiy District 10 676 business projects (independently and list of land plots for sale and not suitable farmers. Region comprise nearly 20 million with co-investors) in the economy class for development was also identified. people) lead the Company’s management Mytischinskiy District 1 124 housing, industrial, retail, agri busi- to believe in a successful search for such ness, sport and leisure sectors. business partners. Odintsovskiy District 30

Naro-Fominskiy 137 District*

Tverskaya Oblast 15 596

Vladimirskaya Oblast 3 459

Total 38 510

* classified in the financial statements in accordance with IFRS as inventory

68 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 69 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3.4 dIsposals 3 OPERATING REVIEW 3.5 share buyback and changes 4 FINANCIAL REVIEW and acquisitions 4 FINANCIAL REVIEW to Company’s Charter www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Disposals Part of OPIN’s strategy is a focused real estate development of master-planned Share buyback and On 8 September, 2011 OPIN announced a decision to buy back a total of 60,000 regis- multi-format residential communities and investment in quality yielding commer- tered ordinary shares representing 0.39% of the total float from the market at a price and acquisitions cial properties. Land holdings where realisation of such projects is not feasible in the changes to Company’s of RUR955.65 per share and decrease the authorised capital stock of the Company in near term are considered for disposal or joint venture schemes outside the real estate Charter the same proportion. This decision was approved during the General Shareholders sector. Meeting and was intended to support the longer-term value of the Company following a significant fall in its share price caused by global financial market turbulence In line with this strategy on September 15, 2011 the Company announced the sale of and the fall in share prices around the world caused by the S&P downgrade of the US the Raikina shopping centre project located at 8 Sheremetyevskaya Street in Moscow economy and the European sovereign debt crisis. During the application submission for total gross proceeds of US$50 mln. The project assumed its redevelopment into a time from 13 October to 11 November the Company received 483,678 applications to sell area registered 70,000 sq. m shopping centre and was completed at an underground level when sold. shares and met them on a pro-rata basis equalling 12% of the applications received. 2 ordinary shares 70 000 m An additional rationale behind the disposal was design inefficiencies due to limita- tions on existing buildings being redeveloped and potential permitting risks arising 60 000 In addition, in order to attract additional capital it was decided to amend the Com- total gross as a result of delays in construction. pany’s Charter to allow an additional share placement of up to 10 million registered $ 50 mln price ordinary shares at a nominal value of RUR1,000. 955,65 rub.

70 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 71 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3.6 Loan restructuring 3 OPERATING REVIEW 3.6 Loan restructuring 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Loan restructuring Raiffeisen Bank In May 2011 the interest rate decreased by 200 basis points As of December 31, 2011 the Company’s total principal amount of debt under the from 3m Libor +10% per annum to 3m Libor +8% per annum contractual obligations was as follows: and the Company negotiated a more attractive repayment schedule, with a one year extension to the original credit line closure. Lender Outstanding Interest (annual) Maturity balance as of VTB For two of the credit lines the maturity period was extended 31.12.2011 Bank Deutschland AG by one year to December 2012 and the repayment schedule One of OPIN’s key priorities during was changed from US$17 mln per quarter to US$5 mln per 2011 was the restructuring of the quarter in 2011 and US$8.5 mln per quarter in 2012. Rosbank US$58.5 mln 9% April 2013 Company’s loan portfolio. We Credit Bank of Moscow In July the Company opened a new three-year credit line for managed to achieve better terms for RUR2.5 bn with an interest rate of 12.4% per annum. the following loans. Rosbank In October 2011 the Company restructured a total of US$67.5 VTB Bank Deutschland US$34.0 mln 9.75% and 10.45% December 2012 mln of loan facilities with Rosbank achieving a decrease in the interest rate from 11% to 9% per annum and a change to the repayment schedule with over 50% of the principal ING Bank N.V US$99.9 mln 10.45% March 2013 repayment amount now postponed to 2012–2013 from October 2011. Raiffeisen Bank US$21.0 mln 3m Libor +8% December 2012 Grand Invest Bank In December 2011 the Company opened two new credit facilities for the amount of US$3.4 mln and RUR 210 mln with respective annual interest rates of 11% and 14%. The Credit Bank of Moscow US$46.6* mln 12.4% June 2014 funds are intended for funding the remaining construction at Pavlovo 2. The term of both facilities is one year. Grand Invest Bank US$2.8 mln 32% of the amount at 11% December 2013 68% of the amount at- 14%

Non-banking institutions US$ 37.1 mln 15% Recurring credit line

Total US$299.9 mln

*Denominated in US$, exchange rate RUR32.2 per US$1 As of 31.12.2011 the Company total recorded liabilities including interest payable was US$317.4 mln.

72 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 73 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3.7 Asset contribution 3 OPERATING REVIEW 3.7 Asset contribution 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Asset contribution A key part of OPIN’s new strategy The transaction will take place in the The building is located on a secure and announced in May 2011, is to achieve form of a secondary public offering and is gated 0.35 hectare site and has a gross a well-balanced real estate portfolio. planned in two stages. In 2012 during the building area of 19,538 sq. m. The build- As part of the strategy to achieve this, first stage, the business centre on Shep- ing was originally constructed in 1870 Dmitry Razumov, the Chairman of the kina 32–1 and the land plot for residential and fully reconstructed in the 1980s in Board of the Company announced that development will be transferred. Office the style of Stalinist Neoclassicism. It is Onexim would transfer four of its real complexes on Tverskoy Boulevard 13–1 now a B class office center. The property estate assets into OPIN. and 15–1 are planned to be transferred is managed by Kraus-M, a professional after their partial redevelopment, which real estate firm. Part of the premises are total area 2 The assets comprise three office buildings will be undertaken by OPIN at an expense not presently reconstructed and provide 30 000 m in the centre of Moscow with a total area of Onexim. Redevelopment includes the opportunities for increasing rental of nearly 30,000 sq. m and a 14.5 hectare increase of rentable space and capital income. The major tenants currently land plot land plot in the area of the 65th kilome- renovation of part of the buildings. include Onexim, OPIN and the Moscow tre point of the MKAD zone, which is Financial Club bank. Annualised net 14,5 ha suitable for the development of a luxury Tverskoy Boulevard, 13–1 operating income is circa US$7.6 mln. residential complex (described as Rublevo This is a nine-storey building located project above). in the historical centre of Moscow on Tverskoy Boulevard, 15–1 the first line of the Boulevard Ring, a The history of this two-storey mansion 10-minute walk from the metro stations situated in the historical centre of Mos- Tverskaya, Chekhovskaya and Push- cow close to the metro stations Tverskaya, kinskaya and 2 km away from the Red Chekhovskaya and Pushkinskaya goes Square. back to the beginning of the XIX century. In 1979 the historical building was fully demolished and rebuilt in the same architectural style and with the same front facades. Later in the 2000s the building was redeveloped into an office space with a gross area of 4,020 sq. m. Currently the building is leased to a single tenant Polyus Zoloto. Annualised net operating income is circa US$1.9 mln.

Schepkina Street, 32 This is a seven-storey class B+ office space with a total area of 4,875 sq. m and includes aboveground and underground parking. The building is located at the center of Moscow, within walking distance of the Prospect Mira metro station and the Olympisky Sports Complex and was constructed in 1995 in accordance with international standards of engineering, technical capacity and interior finishing. The building is fully leased to a single tenant, Soglasie Insurance Com- pany. Annualised net operating income is circa US$2.0 mln.

74 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 75 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3.8 Viceroy Homes Limited 3 OPERATING REVIEW 3.9 subsequent events 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Viceroy OPIN acquired the Canadian compa- Brand promotion: After two difficult Subsequent events Mandatory tender offer from ONEXIM HOLDING LIMITED ny, Viceroy Homes Limited in 2008. years related to the weak economy, At 5 March 2012 OPIN received a Notice from its shareholder ONEXIM HOLDINGS Homes Limited Viceroy Homes was established in 1955 Viceroy reinstated marketing efforts in LIMITED that the latter increased its share ownership in the Company to 9,703,080 and earned a reputation as one of the 2011. Significant effortsere w made to shares representing 63.75% of total stock from 4,584,066 shares representing 30.12% of most recognised brands in custom update marketing channels including total stock. manufactured prefabricated homes the Company’s website, promotional in North America. Viceroy owns two activities and media advertising. OPIN also received a Notice from ONEXIM GROUP LIMITED that the later became a manufacturing facilities in Ontario and controlling shareholder of the Company with the total share ownership of 12,659,224 British Columbia and operates through a Japanese sales: Following the earthquake sales shares representing 83.17% of total stock since ONEXIM GROUP LIMITED is a share- network of sales offices and independent and resultant tsunami experienced in holder in ONEXIM HOLDINGS LIMITED and LEONINA INVESTMENTS LIMITED. CDN$43.6 mln home package dealerships across Canada Japan during the spring of 2011, the and internationally. company has experienced an increase Due to such events and in accordance with article 84.2 of the Federal Law #208-FZ gross margin 2011 in the demand for North American “On joint stock companies” as of 26.12.1995 ONEXIM HOLDING LIMITED sent a 12% During 2011, the company was able to frame housing in the Japanese market. Notice to the Russian Federal Markets Authority (FSA) of a mandatory tender offer to increase sales by nearly 8% to CDN$43.6 In addition to the uplift in demand shareholders for 2,561,569 of ordinary shares (16.8%) of OPIN at a purchase price of 534 mln and increase gross margin to 12% in for temporary housing that initially gross margin 2010 rubles 96 copecks per share. The Board of Directors finds the announced price of the 2011 from 2% in 2010. We accredit this occurred, standard housing unit sales offer to be justified and corresponding to the weighted average price for the last six 2% improvement to the factors below: have increased by nearly 10% during the months of trade on the open market prior to filing the mandatory offer by ONEXIM year. Sales revenues to Japan in total HOLDINGS LIMITED with the Federal Markets Authority of Russia on 02.03.2012. New management team in place: In late were approximately 20% higher in 2011 2010 and during 2011 a new CEO, CFO, compared with 2010. Signing of a loan agreement with OJSC Rossiysky Capital VP of Sales and Director of Western Sales At 30 March 2012 OPIN’s subsidiary Stroy Group LLC signed a loan agreement with were hired to re-energise the business OJSC Rossiysky Capital Bank for the total amount of RUR2.3 bn for a total term ending strategy and boost operational efficien- 10 December 2014. The annual interest rate on the credit facility is 13.5% in Russian cies. Several improvements in product rubles with quarterly installments. The facility is collateralised by real estate and costing and supply chain implemented land plots in Pavlovo residential community belonging to Stroy Group LLC and Pe- in 2011, led to cost savings of over CDN$1 stovo residential community belonging to Pestovo LLC as well as by guarantees from mln for the year and the contribution Pestovo LLC and JSC OPIN. margin improved by 3%. The funds are planned to be used to finalise the construction of the Company’s cur- Strong performance of subsidiary Viceroy rent projects at Pavlovo and Pestovo and for the development of new projects in the Building Solutions (VBS): VBS began multi-storey segment, which OPIN is about to launch in 2012. operations in 2010 and concentrates primarily on the assembly of Viceroy houses and the provision of related services required to complete the project. This business is one rung up on the vertically integrated chain for the Company with high prospects to maximize the revenue per home. Sales in this division increased from CDN$2.3 mln in 2010 to CDN$4.0 mln in 2011. Sales orders for this division by the end of 2011 were approximately CDN$7.0 mln, the majority of which are expected to be completed during the 2012 financial year.

76 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 77 1 OVERVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 6 CONSOLIDATED FINANCIAL STATEMENTS

Key Currently OPIN’s operations are mostly concentrated in the segment of residen- FINANCIAL REVIEW Highlights tial real estate. In 2011 OPIN continued to develop its current projects Pavlovo 2, Pestovo and Martemyanovo. The Company provides customers a high-quality, ▶ р. 80-83 ready-made offering at competitive prices.

Revenue Revenue has increased by US$118,906 thousand or 79% as compared to 2010. The major reasons for such a significant revenue increase are: sales growth due to ▶ р. 84-85 an active sale and marketing policy as well as more active transfer of property to clients which was contracted in previous periods and which construction was completed in the current period.

Gross profit In 2011 OPIN significantly improved its gross profit. The gross margin increased and gross by 27% in 2011 and comprised 9% (2010: -18%) margin

▶ р. 88

EBITDA In 2011 OPIN achieved a positive financial result. EBITDA was US$86,894 thousand against a loss of US$524,643 in 2010. This change was primarily caused by ▶ р. 96 the improvement in the gross margin to US$23,249 thousand as compared to a gross loss of US$27,646 thousand in 2010, the gain from the change in fair value of investment property of US$110,444 thousand against a loss from the change in fair value of US$457,074 thousand in 2010.

Project The OPIN portfolio of projects includes current projects of residential property portfolio construction (Pavlovo 2, Pestovo and Martemyanovo), and also projects planned valuation to launch in the short term. Besides the Company owns a land bank for future development in medium and long term. ▶ р. 104-105

JSC OPIN and subsidiaries ANNUAL REPORT 2011 79 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4.1 Key Highlights 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 5. 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Key Highlights

EBITDA (mln US$) 2010 2011 Revenue (mln US$) 86.9

(570.4) 270.2

10% Net Income (mln US$) 16% 2010 2011 1% 32.4

(524.6) 6%

151.3 Revenue by segment

10% 16%

1% 67%

67% – Pavlovo 2

16% – Viceroy

10%– Pestovo

6% – Martemyanovo 2011 2010 1% – Land bank

67%

67% – Pavlovo 2 This discussion of the operational results, including its net profit Currently OPIN’s operations are mostly concentrated in the segment determined by the consolidated statement of comprehensive income16% – Viceroyof residential real estate. In 2011 OPIN continued to develop its current

should be read in conjunction with the net asset value (NAV) section10% – Pestovoprojects Pavlovo 2, Pestovo and Martemyanovo. The Company provides below. customers a high-quality, ready-made offering at competitive prices. 6% – Martemyanovo

1% – Land bank

80 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 81 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4.1 Key Highlights 4 FINANCIAL REVIEW 4.1 Key Highlights www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Net asset value (mln US$) The following table sets forth consolidated results from statement of comprehensive income for the years ended 31 December 2011 and 2010, respectively: 33% 31%

1 049,6 (US$ thousand) 2011 2010 1 018,4

Revenue 270,167 151,261

Debt Cost of sales (246,918) (178,907) Equity Gross profit/ (loss) 23,249 (27,646)

Selling, general and administrative expenses (34,191) (26,270)

Gain/ (loss) from change in fair value of investment property and investment 110,444 (457,074) 345,4* 317,4* property under development

Financial expenses, net (20,140) (37,610) 2010 2011

*Debt amount includes bank loans and non-banking financing Loss on disposal of investment property and investment property under (2,455) (27,037) development

Debt-to-Equity ratio (mln US$) Other expenses, net (11,735) (36,564)

32,4 (61.8) Profit/ (loss) before tax 65,172 (612,201)

(1.8) Income tax (32,736) 87,558

Profit/ (loss) for the year 32,436 (524,643)

EBITDA 86,894 (570,379) 1 049,6 1 018,4

EBITDA% 32% (377%)

NAV as of Gross Profit Translation Share buy back NAV as of 31.12.2010 difference 31.12.2011

2010 2011

82 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 83 1 OVERVIEW 4 FINANCIAL REVIEW 4.2 Revenue 2 BUSINESS REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4.2 Revenue www.opin.ru 5 GOVERNANCE 6 CONSOLIDATED FINANCIAL STATEMENTS

Revenue The following table sets forth revenue split by type for 2010–2011: The following table sets forth the split of revenue from sales of residential Revenue property and land plots by quantity: from sales of goods Revenue from sales of goods is represented by sales of frame-panel houses (US$ thousand) 2011 2010 produced by the Company’s Canadian Number of objects 2011 2010 subsidiary Viceroy Homes Limited. Growth was US$4,994 thousand or 13% as Revenue from sales of residential property and 223,688 102,154 Pavlovo 1 - 10 compared to 2010. This growth is caused land plots by some market improvements in this Revenue has increased by US$118,906 Pavlovo 2 431 129 segment as well as a more active selling thousand or 79% as compared to 2010. Revenue from sale of goods 44,104 39,107 strategy. The major reasons for such a significant including: revenue increase are: sales growth due 2,315 2,971 Revenue to an active sale and marketing policy as Revenue from other services townhouses 136 95 from construction well as more active transfer of property contracts to clients which was contracted in Revenue from construction contracts 60 7,029 260 13 Revenue under construction contracts is previous periods and which construction apartments generated from houses construction con- was completed in the current period. Total revenue 270,167 151,261 cottages and land plots 35 21 tracts in Pavlovo 2 and Pestovo and from infrastructure construction contracts in Pestovo 101 44 all three cottage communities Pavlovo 2,

Pestovo and Martemyanovo.

Martemyanovo 50 46 Revenue from sales Revenue from construction contracts of residential property and land plots Other decreased significantly as compared to 2010. This decrease is due to several The following table sets forth split of revenue from sales of residential property Total revenue from sales of residential and land plots by projects for 2010–2011: 582 229 reasons including the decrease of the property and land plots share of revenue from construction contracts in total revenue; the reduction of The following table sets forth factor analysis of revenue from construction revenue from cancellable and potentially (US$ thousand) 2011 2010 contracts recognised in 2011–2010: cancellable construction contracts and reviewed assumptions on the completion This revenue has increased by US$121,534 percentage and general costs for cottages Pavlovo 1 - 17,161 in Pestovo which reduced revenue in the thousand or more than twice as (US$ thousand) 2011 2010 compared to 2010. This type of revenue current period by amount of revenue is a major one for the Group (83% and Pavlovo 2 177,810 68,377 recognised in prior periods. 68% of the total revenue in 2011 and Revenue from cottage construction Revenue 2010, respectively). Such a significant Pestovo 28,893 8,100 revenue growth has been caused by Revenue recognition by completion percentage 1,449 10,632 from other services Revenue from other services represents the acceleration of sales and transfer Martemyanovo 16,985 8,314 of properties to clients. This consistent Revenue adjustment for cancellable and potentially (10,074) (31,395) mainly revenue from rendering services and active sales and marketing policy cancellable contracts and as a result of reviewed to clients in cottage communities and Other - 202 resulted in more positive results as assumptions on completion percentage and general costs rental income from land plots. This compared to 2010. type of revenue comprises 0.9% of total Total revenue from sales of residential Revenue from infrastructure construction revenue (2010: 2%). 223,688 102,154 property and land plots Revenue recognition by completion percentage 8,685 27,792

60 7,029

84 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 85 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4.3 Cost of sales 4 FINANCIAL REVIEW 4.3 Cost of sales www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Cost of sales The following table sets forth the cost of sales breakdown in 2010–2011 by type: Cost of goods sold Inventory write-down The cost of goods sold represents the cost To analyse net realisable value of of sold frame-panel houses produced by inventory, i.e. of land plots and houses the Group’s Canadian subsidiary Viceroy in cottage communities, selling prices (US$ thousand) 2011 2010 Homes Limited. The increase was 1%. for respective items from current price This is much lesser than the increase of lists were used, taking into consideration the respective revenue which is first of possible discounts. Cost of sales of residential property and land plots (147,201) (76,488) all due to production and administrative cost reduction policy pursued by the In 2011 the total amount of provision Cost of sales includes cost of sales of Cost of goods sold (38,663) (38,228) management of Viceroy Homes Limited for inventory write down comprised residential property and land plots, in 2011. This policy resulted in the reduc- US$39,851 thousand against US$43,321 cost of goods sold, cost of construction (463) (376) tion of production costs. thousand recognised in 2010. contracts, cost of other services and Cost of other services inventory write-down. Cost of construction contracts (20,740) (20,489) Cost of construction contracts As compared to 2010 cost of sales The cost of construction contracts increased by US$68,011 thousand or Inventory write-down (39,851) (43,326) includes costs incurred under contracts 38%. This change is mainly caused by for construction of cottages and infra- growing sales of new properties and the structure and also the expected loss on a more active transfer to clients of new Total cost of sales (246,918) (178,907) construction contract and the amount of properties sold in prior periods. expected warranty costs. The following table sets forth the factor analysis of the cost of construction contracts recognised in 2011–2010: The cost of cottages construction Cost of sales of residential property and land plots contracts decreased by 83% (recognition by completion percentage). Apart from (US$ thousand) 2011 2010 The following table sets forth the breakdown of cost of sales of residential this cost of construction contracts was property and land plots in 2011–2010 by projects: effected by adjustment for cancelable and potentially cancellable contracts and, to a lesser extent, an identified expected Cost of cottage construction

(US$ thousand) 2011 2010 loss of US$756 thousand. Cost recognition by completion percentage (1,425) (8,296) The cost of infrastructure construction This type of cost of sales includes the contracts decreased by 66% (recognition - (11,753) Cost adjustment for cancellable contracts and as 2,430 18,671 cost of constructed property (or net Pavlovo 1 by completion percentage). Meanwhile a result of reviewed assumptions on completion realisable value as at the beginning the identified loss of US$10,079 thou- percentage and general costs Pavlovo 2 (102,171) (49,045) of the year if this amount is less than sand in Pavlovo 2 and the actual loss on cost). The increase in this type of cost Martemyanovo infrastructure of US$1,452 Recognition of identified loss (756) - of sales was US$70,713 thousand or Pestovo (26,322) (7,003) thousand were recognised within the 92% as compared to 2010. The lower cost of construction contracts (in 2010 Cost of infrastructure construction increase in cost of sales as compared to Martemyanovo (18,708) (8,590) loss on Martemyanovo infrastructure was the increase in the respective revenue recognised as US$3,359 thousand). is due to realisation of a large bulk of Cost recognition by completion percentage (9,458) (27,505) Other (97) highly profitable residential property in Cost of other services Pavlovo 2. The cost of other services represents an Recognition of identified loss (11,531) (3,359) Total cost of sold residential property insignificant amount and its change (147,201) (76,488) and land plots is generally in line with the change in (20,740) (20,489) revenue from other services.

86 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 87 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4.4 gRoss profit and gross margin 4 FINANCIAL REVIEW 4.5 selling, general www.opin.ru 5 GOVERNANCE 5 GOVERNANCE and administrative expenses 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Gross profit The following table sets forth the Group’s gross profit/ (loss) and gross margin Selling, general The table below sets forth selling, general and administrative expenses for the and gross margin for the years ended 31 December 2011 and 2010 by types: and administrative years ended 31 December 2011 and 2010 by types: expenses

(US$ thousand) 2011 2010 (US$ thousand) 2011 2010

Gross profit/ (loss) is revenue less cost of sales. Gross margin is calculated as Construction contracts (20,680) (13,460) Payroll and insurance contributions to non- 15,281 9,136 gross profit/ (loss) divided by revenue, budget funds expressed as a percentage. Residential property and land plots 76,487 25,666 Advertising 3,410 1,396

Sale of goods 5,441 879 Compared with the 12 months of 2010, Rent 2,167 1,488 selling, general and administrative expenses increased by US$7,921 thousand, Other services 1,852 2,595 or 30%, in 2011 and represented 13% and 17% Consulting services 1,889 1,422 of revenue in 2011 and 2010, respectively.

Inventory write-down (39,851) (43,326) Land tax and property tax 1,764 2,876

Gross profit / (loss) 23,249 (27,646) In 2011 OPIN significantly improved its Brokerage fees 1,606 2,096 gross profit. The gross margin increased by 27% in 2011 and comprised 9% (2010: Construction contracts n/a n/a –18%). The improvement in the gross Other expenses 8,074 7,856 result was caused mainly by good Residential property and land plots 34 25 realisation of houses, townhouses and apartments in low-rise buildings in Total selling, general and administrative Sale of goods 12.3 2 34,191 26,270 Pavlovo 2. These properties were the expenses most profitable (approximately 42% for the project). Other services 80 87

Also, the positive trend is due to the Inventory write-down n/a n/a results of Viceroy Homes Limited from realisation of frame-panel houses. The gross margin increased by 10% and stood Gross margin 9 (18) at 12.3% in 2011 against 2% in 2010. The growth was caused by implementation of special programmes to reduce production costs.

88 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 89 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4.5 selling, general 4 FINANCIAL REVIEW 4.6 gain/ (loss) from change www.opin.ru 5 GOVERNANCE and administrative expenses 5 GOVERNANCE in fair value of investment property 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Investment property of the Group is represented by land in different Russian Payroll and related taxes represented 5.7% and 6% of revenue in 2011 and 2010, respectively. Gain/ (loss) Payroll and related taxes regions. At 31 December 2011, the Company held 38,510 hectares of land. (insurance contributions) In 2011, payroll and related taxes increased by US$6,145 thousand, or 67.3%, compared with 2010. This from change change was primarily due to an increase in the number of the Company’s employees arising from the expansion of its activities as well as the increase of rate of insurance contributions to non-budget in fair value funds (from 26% in 2010 up to 34% in 2011). Payroll increase was the result of expanded function of of investment (US$ thousand) 2011 the Company’s Sales Department, which was partially compensated by decrease in advertising and brokerage fees. property

Advertising is the expense that OPIN incurs to advertising agencies for advertising services, such as Advertising Balance at 1 January 874,294 outdoor advertising, printed media advertising, Internet and other advertising, and was 1.3% and 0.9% of revenue in 2011 and 2010, respectively. In 2011, advertising increased by US$2,014 thousand, or 144% compared with 2010. These increases were primarily due to advertising in relation to Pavlovo 2, Pestovo and Martemyanovo communities. Additions 599

Rent Rent expenses are mostly related to the rental of office space on Tverskoy Boulevard 13. These expenses represented 0.8% and 1% of revenue in 2011 and 2010 respectively. Transfer from property, plant and equipment 4,561 Investment property of the Group is In 2011 rent increased by US$679 thousand or 46% in connection with the expansion of OPIN’s activities and as a result the need for an increase in office space. represented by land in different Russian regions. At 31 December 2011, Disposals (1,093) the Company held 38,510 hectares of land. Consulting services Consulting services includes financial audit, appraisals of assets, legal expenses on loan portfolio restructuring and other consulting services. Consulting services represented 0.7% and 0.9% of revenue in 2011 and 2010, respectively. In 2011 consulting services increased by US$467 thousand or 33% which relates mostly to significant Changes in fair value as a result of revaluation 110,444 expenses on legal services on loan portfolio restructuring which were partially compensated by optimisation of expenses on appraisals and audits. Translation difference (56,674) Land tax and property tax Land tax and property tax comprised 0.7% and 1.9% of revenue in 2011 and 2010. Land tax decreased by US$1,132 thousand or 45.8% in 2011 as compared to 2010. The major change is due to the decrease in the cadastral value of land plots of Agrosistema LLC, OPIN’s subsidiary. Balance at 31 December 932,131

Brokerage fees Brokerage fees mostly related to services of real estate agencies on sales of property represented 0.6% and 1.4% of revenue in 2011 and 2010, respectively. Brokerage fees decreased by US$490 thousand or 23% in 2011, as compared to 2010. This is mostly due to the decrease in the number of selling contracts signed through real estate agencies and the increase in the number of selling contracts signed by the Company’s sales department. Brokerage fees on Pavlovo 2 properties fell by US$596 thousand or 49.3% as compared to 2010. This decrease was partially compensated by increases in brokerage fees on Pestovo properties.

The fair value of investment property included in the consolidated within a similar model due to the significant uncertainty associated with financial statements at 31 December 2011 and 31 December 2010 is the the forecast of the timing of the future cash flows generated by sale of result of a management valuation. OPIN engaged an independent these land plots. The revisions reflected a longer time period to optimally valuation company Jones Lang LaSalle (which is being the Company’s realise land assets and a reduced level of future price growth which appraiser since 2004) to prepare a valuation of its land assets using the resulted in lower valuation of the land plots compared to the figure method of comparative sales. As a result of a review of the independent generated by the independent valuer. valuer’s report, OPIN’s management revised certain key assumptions

90 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 91 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4.6 gain/ (loss) from change 4 FINANCIAL REVIEW 4.6 gain/ (loss) from change www.opin.ru 5 GOVERNANCE in fair value of investment property 5 GOVERNANCE in fair value of investment property 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

The following major assumptions were used by management in their analysis: In 2011, the gain from revaluation of investment property was US$110,444 thousand. The carrying value of investment property increased by 6.62% (US$57,837 thousand) due to the negative effect of translation difference. In general, the increase is related to a detailed plan to prioritise the further development of the land bank, which has Assumption 31 December 2011 led to an increase in the fair value of land located in the Mytishinsky district of the Moscow Region by 30% and in the Kashinsky District of the Tver Region by 23%.

Source of cash inflows Sale of land The change in the carrying amount of land plots by region are as follows:

Discount rate 11%-23% (US$ thousand) 31 December 2011 31 December 2010 Type of authorized use Expected period of sale of land 2012–2026

Net book value Net book value

Land selling price in 2012, USD per 1,00 284–49,500 square metres (the price range reflects locations of land) Klinsky District, Moscow Region 261,520 262,300 A/c, SPT

Projected increase in selling prices 6%-8% growth in 2012–2018, Mytishinsky District, Moscow Region 297,015 228,410 A/c, IHC then decreasing to 3% (Odintsovskiy District — remaining at the level of 4%) Dmitrovsky District, Moscow Region 276,802 292,020 A/c

Kalyazinsky District, Tver Region 10,050 8,730 A/c, IHC

Assumption 31 December 2010 Kashinsky District Tver Region 34,328 27,965 A/c

Source of cash inflows Sale of land Kesovogorsky District, Tver Region 3,176 3,003 A/c

Discount rate 14%-20% Odintsovsky District, Moscow Region 45,700 48,657 A/c, LHC

Expected period of sale of land 2011–2025 Suzdalsky District, Vladimir Region 1,191 1,097 A/c

Land selling price in 2012, USD per 1,00 296–52,000 Yuriev-Polsky, Vladimir Region 2,349 2,112 A/c square meters (the price range reflects locations of land)

Total 932,131 874,294 Projected increase in selling prices 7% in 2012–2013, then decreasing to 2%

92 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 93 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4.7 non-operating income (expenses) 4 FINANCIAL REVIEW 4.8 income tax www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Non-operating income Financial expenses at 31 December 2011). Also, this decrease Income tax Income tax expense represented Financial expenses decreased by is caused by the Company’s approach US$32,736 thousand in 2011. The major (expenses) US$18,405 thousand or 47.2% in 2011 to the allocation of financial expenses reasons for this increase are the in- as compared to 2010. These changes between capitalised within inventory crease in taxable profit as a result of are mostly caused by weakening of and property, plant and equipment and the increase of revenue from the sale of the Group’s debt burden by US$28,077 expensed in the current period which property in Pavlovo 2 and the decrease of thousand or 8.1% in connection with loan resulted in an increase of capitalised in- deferred tax assets due to the change in portfolio restructuring (refer to Note 17 to terest expenses by US$16,505 thousand. fair value of investment property. the consolidated financial statements as These income and expenses relate to Income tax is represented by current non-operational activities of the Group income tax and deferred income tax. and include, besides other items, the costs of financial activities, gain (loss) Non-operating income (expenses) on the disposal of investment property for 2011 and 2010 years are shown on the table below. The following table sets forth the income tax breakdown for 2011 and 2010: and other income and expenses.

(US$ thousand) 2011 2010 (US$ thousand) 2011 2010

Financial expenses, net (20,140) (37,610) Current income tax (13,968) (7,584)

Loss on disposal of investment property and (2,455) (27,037) Deferred income tax (18,768) 95,142 investment property under development

Total (32,736) 87,558 Other expenses, net (11,735) (36,564)

Total non-operating income/ (expenses) (34,330) (101,211)

94 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 95 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4.9 EBITDA 4 FINANCIAL REVIEW 4.10 Net profit www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

EBITDA EBITDA is equal to profit/ (loss) before tax plus depreciation and amortization of fixed Net profit In 2011 the Company achieved a positive assets and intangible assets plus financial expenses less interest income. EBITDA financial result. Net profit in 2011 was margin equals to the ratio of EBITDA to revenue. US$32,436 thousand against a net loss of US$524,643 thousand in the prior year. In 2011 OPIN achieved a positive financial result. EBITDA was US$86,894 thousand This change was caused by the same against a loss of US$524,643 in 2010. This change was primarily caused by the factors as EBITDA and also is due to the improvement in the gross margin to US$23,249 thousand as compared to a gross loss change in allocation of financial expens- of US$27,646 thousand in 2010, the gain from the change in fair value of investment es between capitalised (within inventory EBITDA Net profit property of US$110,444 thousand against a loss from the change in fair value of and property, plant and equipment) and $ 86 894 US$457,074 thousand in 2010. $ 32 436 expensed in the current period. thousand thousand

gross margin $ 23 249 thousand EBITDA (mln US$) Net profit (mln US$)

86.9 2011 32.4 2011

2010 2010

(570.4) (524.6)

96 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 97 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4.11 net assets value 4 FINANCIAL REVIEW 4.11 net assets value www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Net assets value OPIN believes that NAV is an important The following table shows major sources of NAV growth for 2011 and 2010. Change of NAV indicator of the Company’s results. Compared with 31 December of the pre- This is primarily because a significant vious year, NAV decreased by US$31,179 portion of the assets is represented by thousand or 3%. This net decrease of 2011 2010 the land bank, which has been acquired 3% is due to several factors. The main for long-term appreciation and future proportion of the net decrease (2.8%) development. In particular, it is import- derives from “organic” changes in NAV. ant to consider NAV in addition to the “Organic” changes in NAV “Organic” changes in their turn consist Total NAV per share results of the Company’s operations for of the positive financial result for 2011 $ 66.91 the following reasons: (net profit of US$32,436 thousand) which Net current profit / (loss) 32,436 (524,643) is offset by the negative effect of transla- ⦁⦁ Revenue under construction contracts tion from the functional currency to the is recognised by reference to the presentation currency (minus US$61,796 Translation differrence (61,796) (6,225) stage of completion of the relevant thousand). The increase in the exchange construction contract, rather than rate of RUR to US$ at the end of 2011 (RUR payments received. 32.2 to US$ 1 at 31 December 2011) led to a Total “organic” changes in NAV for the year (1) (29,360) (530,868) negative net “organic” change in NAV. ⦁⦁ Revenue from the sale of townhouses, apartments, part of individual houses NAV was also affected by the repurchase NAV changes relating to shareholders’ with high percentage of comple- of treasury shares in Q4 of 2011 for contributions tion and from sale of land plots is US$1,819 thousand (0.2% of net decrease recognised upon completion of the of NAV). relevant construction works and the Repurchase of treasury shares (1,819) - transfer of title to the relevant prop- NAV per share erty to customers upon the signing As of 31 December 2011 NAV per share of an act of acceptance, rather than Total NAV changes relating to shareholders’ (1,819) - decreased by USD 1.78 or 2.6%. This slight payments received from customers. contributions decrease is due exclusively to the negative impact of the dollar’s increase at the end of the reporting period that led to a Total NAV decrease for the period (31,179) (530,868) negative effect of the translation from the functional currency to the presentation currency.

Total NAV per share as at 31 December, in USD 66.91 68.69

98 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 99 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4.12 Liquidity 4 FINANCIAL REVIEW 4.12 Liquidity www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Liquidity Real estate investment development is a The Company’s primary source of Net cash from / (used in) operating activities capital-intensive industry. The Compa- liquidity consists of net cash provided by In 2011 net cash from operating activities increased by US$16,319 thousand or by ny’s liquidity needs arise primarily from its financing activities and its operating 133.6% compared with 2010. Mostly such a change related to the increase of sales of the need to finance the construction activities. From time to time, OPIN residential property and land plots and as a result of an increase in cash flows from and development of real estate. In the generates liquidity from the sale of assets customers. periods to which the Financial State- it develops and invests in. By its nature ments relate, OPIN has been able to meet investment is very capital-intensive Net cash from investing activities its liquidity needs from operating cash (also because of the size of projects) In 2011 net cash from investing activities increased by US$29,307 thousand or more net cash increased by flow, supplemented by funds borrowed and neither in 2010 nor in 2009 did the than ten times when compared with 2010. Mostly such a change related to receipt of from non-banking institutions and loans Company have sufficient operating cash $ 16 319 cash from sale of the Raikina shopping centre in 2011 (refer to Note 7 to the consoli- provided by credit organisations. flow to cover the required cash flows for thousand dated financial statements as at 31 December 2011). In its turn OPIN used part of its investing activities. As a result funds funds for placing deposits with banks, issuance of loans and purchase of bank notes. borrowed from financial institutions and received from sale of assets were used for Net cash used in financing activities OPIN’s investing activities and, in some In 2011, net cash from financing activities increased by US$23,815 thousand, or 46.1%, periods, for operations. compared with 2010 mainly due to the increase of financial operations. In 2011 loans and borrowings were US$95,236 thousand that is US$45,236 thousand more than in 2010. At the same time US$121,087 thousand was paid back that is US$19,473 thousand more than in 2010. Thus partial repayments of loans were made by new borrowings. The table below shows the main items of consolidated statement of cash flows for the years ended 31 December 2011 and 31 December 2010.

(US$ thousand) 2011 2010

Net cash from / (used in) operating activities 4,100 (12,219)

Net cash from investing activities 31,556 2,249

Net cash used in financing activities (27,799) (51,614)

100 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 101 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4.13 Capital resources 4 FINANCIAL REVIEW 4.14 Capital expenditure www.opin.ru 5 GOVERNANCE 5 GOVERNANCE and future projects 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Capital resources Capital commitments During 2011 loans were taken for Capital expenditure In the short and medium term the As at 31 December 2011, the Company did US$56,566 thousand and other borrow- Company may require investments not have any significant commitments ings were US$38,670 thousand. and future projects for future projects. These investments for future capital expenditures. As of 31 may take the form of project financing, December 2010, the Company’s capital At 31 December 2011 partial non-com- long-term loans/borrowings from banks commitments under concluded contracts pliance of some financial covenants of and shareholders, debt issuance and approximated US$38,000 thousand. a long-term loan from ING Bank N. V. of also share capital increases. The choice US$103,121 thousand was addressed. In of method will be made depending on Long-term and short-term connection with this the above long- market conditions. loans and borrowings term loan was reclassified as short-term.

At 31 December of 2011 debt decreased In January-April 2012 the Company by US$28,077 thousand. During 2011 the reached agreements to obtain debt The debt consists of long-term and short-term loans principal part of loans due to mature in financing for US$258,158 thousand. This and borrowings as shown in the table below: 2011 was repaid by US$69,990 thousand amount will be partially used to repay and non-banking borrowings were repaid the loans of ING Bank N. V. (a short-term by US$51,097 thousand. loan of US$103,121 thousand as at 31 (US$ thousand) 31 December 31 December December 2011) and JSC Credit Bank of 2011 2010 Moscow (a short-term loan of US$46,165 thousand at 31 December 2011). Also part of the above loans can be directed to Short-term loans and borrowings 286,285 327,972 repay other loans and borrowings in 2012 if there are no reclassifications of these loans and borrowings. The repayment Long-term loans and borrowings 31,070 17,460 schedule for these loans is from Q3 201 to Q2 2014.

Total debt 317,355 345,432

102 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 103 1 OVERVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4.15 pRoject portfolio valuation 5 GOVERNANCE 6 CONSOLIDATED FINANCIAL STATEMENTS

Project portfolio The current balance value of projects and land bank valuation at 31 December 2011 is shown below:

Type Project title Total Balance area, ha value, USD’000 The OPIN portfolio of projects includes current projects of residential property construction (Pavlovo 2, Pestovo and Residential Martemyanovo – 106,230 Martemyanovo), and also projects property Pavlovo 2 – 88,029 planned to launch in the short term.

Besides the Company owns a land bank Pestovo – 129,292 for future development in medium and long term. Current projects Total 323,551

New projects Aprelevka 33 17,868

Katuar 31 7,374

Pestovo Life 24 13,339

New projects Total 88 38,581

Land bank Vladimir Region 3,459 3,936

Dmitrovsky District, Moscow Region 7,488 327,782

Klinsky District, Moscow Region 10,676 320,480 The debt consists of long-term and short-term loans and borrowings Mytishinsky District, Moscow Region 1,069 310,630

as shown in the table below: Odintsovsky District, Moscow Region 30 45,700

Naro-Fominskiy District, 137 57,528 (US$ thousand) 31 31 Moscow Region* Dec ember Dec ember 2011 2010 Tver Region 15,596 53,183 Short-term loans 286 285 327 972 and borrowings Land Total** 38,510 1,119,239

Long-term loans 31 070 17 460 Manufacturing Viceroy Homes Limited – 19,094 and borrowings Others*** – 75,683 Total debt 317 355 345 432

TOTAL 1,576,148

* Classified in the consolidated financial statements in accordance with IFRS as inventory ** Includes deferred tax assets related to the land bank revaluation *** Includes cash, other inventories, loans issued, investments held to maturity, other deferred tax assets

104 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 105 1 OVERVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 6 CONSOLIDATED FINANCIAL STATEMENTS

GOVERNANCE Board During the Annual General Meeting of Shareholders held on June 30 2010 all the of Directors elected Board members were Dmitry Razumov, Artemiy Krylov, Sergey Riaboko- bylko, Sergey Koshelenko, Natalia Griza, Ekaterina Salnikova, Valery Senko, ▶ р. 108-115 Mikhail Sosnovskiy and Elena Lomakina.

Principles OPIN is committed to the principles of strong corporate governance. The Compa- of Corporate ny recognises the importance of maintaining the highest standards of corporate Governance governance in all areas of its business. In terms of overall direction and control the Company is committed to enforcement of shareholders rights prescribed р. 116-121 ▶ by the law, efficient cooperation and harmonization of majority and minority stockholders’ interests, effective corporate governance and control, reliability and completeness of the Company disclosure of information.

JSC OPIN and subsidiaries ANNUAL REPORT 2011 107 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5.1 Board of Directors 5 GOVERNANCE 5.1 Board of Directors 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Sergey Ekaterina Natalia Mikhail Dmitriy Artemiy Sergey Valery Riabokobylko Salnikova Griza Sosnovskiy Razumov Krylov Koshelenko Senko

Board of Directors The current members of the Board of Directors were elected at the Annual General Meeting of Shareholders held on June 30, 2011. All directors except for the General Director are independent non-executive directors. Information regarding the Board members’ positions is as of 31.12.2011. Information is provided in accordance with Article “On information disclosure for listed companies”

108 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 109 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5.1 Board of Directors 5 GOVERNANCE 5.1 Board of Directors 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Dmitriy Razumov Mr. Razumov is CEO of Onexim Group LLC. He was appointed Chairman of OPIN in November Sergey Koshelenko Mr. Koshelenko was appointed a member of the Board in February 2011. He is also deputy CEO 2010. He has been a member of the Board since December 2008. Mr. Razumov also holds the of Vnesheconombank Investment Company Ltd (VEB Capital). Previously Mr. Koshelenko was

Chairmanship of the Board of Soglasie Insurance Company Ltd and is a Board member of Renais- Vice Chairman of the board of OJSC Rosbank and chairman of the Board of OJSC APR-Bank. Mr. Chairman Born in 1969, a citizen sance Financial Holdings Ltd, Polyus Gold International Ltd, United Company RUSAL PLC, Integro Koshelenko graduated from the State Financial Academy with a Degree in International Economic Born in 1969, a citizen of the Russian Federation. Management Company Ltd, a Director of Nor-Med Limited and Chairman of the Board of Directors of Relations. He is presently not a shareholder of OPIN. of the Russian Federation. yo-Auto LLC. Earlier in his career, Mr. Razumov was deputy CEO and a Board member of OJSC MMC Norilsk Nickel and Chairman and a Board member of OJSC International Financial Club Bank. Mr. Elena Lomakina Ms. Lomakina was appointed a member of the Board in February 2011. She currently holds the post Razumov graduated from the Faculty of International Law of MGIMO University with a Degree in of Chief Legal Officer at Agranta Ltd. Previously Ms. Lomakina held senior management positions

International Law. He is presently not a shareholder of OPIN. at CJSC Hals Management and Selprom-Invest Ltd. Ms. Lomakina holds a Degree in Law from Born in 1972, a citizen Moscow State Law Academy and a Degree in International Marketing from MGIMO University. She is of the Russian Federation. Artemiy Krylov Mr. Krylov was appointed General Director of OPIN in November 2010 and became a member presently not a shareholder of OPIN. of the Board in February 2011. He has extensive experience of project and corporate strategic management in the real estate sector. Previously, Mr. Krylov was CEO of Novoe Zhiliyo Ltd and held General Director JSC OPIN Natalia Griza Ms. Griza was appointed a member of the Board in February 2011. She is currently deputy CFO at senior management positions at RDI Group, National Economic Council (a social fund promoting ONEXIM Group Ltd. Previously, Ms. Griza was a CFO at Integrated Financial Systems Ltd. Ms. Griza Born in 1977, a citizen socioeconomic development in Russia), CJSC Domostoitel and CJSC Stroymetresurs. Mr. Krylov graduated from the Academy of Water Transport with a Degree Engineering and Economics and of the Russian Federation. Born in 1966, a citizen graduated from MGIMO University with a Degree in International Economics. He is presently not a holds an MBA from California State University. She is presently not a shareholder of OPIN. shareholder of OPIN. of the Russian Federation.

Ekaterina Salnikova Ms. Salnikova was appointed a member of the Board in December 2008. She is currently deputy CFO of ONEXIM Group Ltd. Ms. Salnikova also holds Board positions at JSC Polyus Gold, Solglasie Mr. Riabokobylko was appointed a member of the Board in February 2011. He is also a Senior Exec- Sergey Riabokobylko Insurance Company Ltd, OJSC Quadra Generating Company, OJSC RBC and yo-Auto LLC. Earlier utive Officer and Board member of Cushman & Wakefield and is a member of the Board of Directors Born in 1957, a citizen in her career, Ms. Salnikova was a member and a Chairman of the Board of OJSC Polys Gold. She and membership Chairman of the American Chamber of Commerce in Russia. Mr. Riabokobylko is of the Russian Federation. has also held Board memberships of OJSC International Financial Club Bank, MMC OJSC Norisk Born in 1971, a citizen also Vice Chairman of the Board of Directors and a Co-chair of the Committee on the allocation of Nickel, CJSC Agros, Silovie Mashiny — ZTL, LMZ, Electrosila, Energomashexport and was Deputy of the Russian Federation. grants and an independent Board member of OJSC Promsvyaznedvizhimost. He is an independent CFO of corporate governance CJSC INTERROS Holding Company. Ms. Salnikova graduated from the Board member of PIK Group and Chairman of the Russian National Committee at the Urban Land Ordzhonikidze Moscow Management Institute and has a PhD in Economics from the Russian State Institute. Mr. Riabokobylko received a Bachelor’s degree from Moscow State Linguistic University. Service Academy. She is presently not a shareholder of OPIN. He studied International Relations and Literature at Pomona College in California and Financial Issues in Real Estate at the Institute of Commercial Real Estate Investment (CIREI) in Chicago. In 2006, he completed administration management training at INSEAD (France). He is presently not a Valery Senko Mr. Senko was appointed a member of the Board in December 2008. He is an Investment Director at ONEXIM Group Ltd, Chairman of the Board of OJSC Polys Gold, Board member of Soglasie Insurance shareholder of OPIN. Company Ltd, OJSC RBC, CJSC Optogan and RUSAL America Corp and yo-Auto LLC. Prior to this, Mr. Born in 1975, a citizen of the Russian Senko was a Board member of OJSC Quadra Generating Company and held senior management Federation. positions with OJSC MMC Norilsk Nickel. He is presently not a shareholder of OPIN.

Mikhail Sosnovskiy Mr. Sosnovskiy was appointed a member of the Board in December 2008. He is currently deputy CEO of ONEXIM Group Ltd and a Board member of Renaissance Financial Holdings Limited, OJSC

Quadra-Generation Company and CJSC Profotek. Previously, Mr. Sosnovskiy held Board positions Born in 1975, a citizen at Gold Field Limited (South Africa), OJSC International Financial Club Bank, OJSC RBC and was of the Russian Federation. Executive Director of Media Plaza Ltd and also held the position of Advisor to President and Vice president at OJSC MMC Norilsk Nickel. Mr. Sosnovskiy graduated from MGIMO University with a Degree in International Law. He is presently not a shareholder of OPIN.

110 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 111 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5.1 Board of Directors 5 GOVERNANCE 5.1 Board of Directors 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Role of the Board Competencies ⦁⦁ Preliminary approval of transactions Changes in the composition of Directors of the Board of Directors which involve the issuance or receipt of the Board of Directors The Board of Directors of JSC OPIN is The election of the Board takes place every year at the Annual General Meeting of The Board of Directors is in charge of the of debt and issuance of the Company’s for the reporting period central to maintaining good corporate Shareholders via a cumulative vote. following, amongst other things: guarantees in the amount exceeding Three re-elections were made to the governance at the Company. The 1,500,000,000 (one billion five hun- Board of Directors during 2011. Company views the key roles of The The matter is approved by the Board by the majority vote of the members present at ⦁⦁ Determining the Company’s business dred million) rubles; Board of Directors as: the meeting, except for cases provided in the Charter or by the appropriate legisla- priorities and approving and super- The Board of Directors elected for a one ture. Each member of the Board has one vote. In case votes are equally divided the vising the execution of its annual ⦁⦁ Approval of the disclosure policy of year term at the Annual General Meeting l Protecting the rights of shareholders Chairman has the casting vote. business plan; the Company. of Shareholders on June 30 2010 com- and helping to solve corporate prised Sergey Bachin, Aleksey Bashkirov, conflicts Board of Directors sessions can be called by the Chairman, at his own initiative, or ⦁⦁ Deciding on the formation of the The Board of Directors acts in compliance Olga Voytovich, Alexander Kartsev, by any of the Board’s members, the auditor, an Executive Director or a shareholder Company’s sole executive body and with the Federal law: “On joint stock Dmitry Razumov, Ekaterina Salnikova, l Maintaining appropriate oversight whose shareholding in the Company is not less than 10%. Organisation and man- the early termination of its powers, companies”, the Company’s Charter and Georgiy Svanidze, Valeriy Senko and of the Company’s business, except agement of the Board is the sole responsibility of the Chairman. Sessions take place determining the material conditions clause on the Board of Directors. Mikhail Sosnovskiy. for matters which, according to the when required, but not less than once every eight weeks. Notifications are sent to the of the sole executive body’s employ- Company’s Charter, fall within the Board members together with supporting materials not less than 5 days prior to date ment, establishing the level of fees The number of Directors on the Board At the Extraordinary General Meeting exclusive competence of the Annual of calling the session. and compensation payments; is governed by the Company’s Charter. of Shareholders held on February 11 2011 General Meeting of Shareholders According to article 26.1 of the Compa- the Board was re-elected and comprised ⦁⦁ Approving major party transactions in ny’s Charter the Board should comprise Dmitry Razumov, Artemiy Krylov, Sergey l Setting the Company’s business accordance with section X of the Fed- nine members. Riabokobylko, Sergey Koshelenko, Na- strategy, approving the annual eral law “On joint stock companies”; talia Griza, Ekaterina Salnikova, Valery financial and economic plans and In accordance with article 3.2 of the Senko, Sergey Podsypanin and Mikhail providing control over the Company’s ⦁⦁ Approving transactions in accordance clause “On the Board of Directors of Sosnovskiy financial and operating activities with section XI of the Federal law “On Joint Stock Company “Open Invest- joint stock companies”; ments” (approved at the Annual General During the Annual General Meeting of l Providing guidelines to the executive Meeting of Shareholders of JSC “OPIN” Shareholders held on June 30 2010 all bodies of the Company to ensure best ⦁⦁ Approving the dividend policy of the on 30.06.2009) the Board must include at the elected Board members were Dmitry practice is maintained across all areas Company; least 3 independent members. Razumov, Artemiy Krylov, Sergey Ri- of the business abokobylko, Sergey Koshelenko, Natalia ⦁⦁ Preliminary approval of transactions Griza, Ekaterina Salnikova, Valery Senko, worth 10% or more of the balance Mikhail Sosnovskiy and Elena Lomakina. sheet value of the Company’s assets, reflected in the financial statements as of the last reporting date prior to the transaction approval date. Trans- actions falling within the Company’s day-to-day activities are excluded;

112 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 113 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5. 2 corporate governance 5 GOVERNANCE 5. 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Corporate governance

114 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 115 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5.2 principles of Corporate Governance 5 GOVERNANCE 5.2 principles of Corporate Governance 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Principles Corporate governance is based upon The Company has also made provision Directors’ emoluments Audit Committee principals set in the Corporate Code of for effective control over financial and During 2011, members of the Board of Di- In 2005, the Board established an Audit of Corporate Conduct ratified by the Federal Finan- operating activities to protect the rights rectors, Sergey Riabokobylko and Sergey Committee which plays an important Governance cial Markets Service as at 4 April 2002 and legitimate interests of shareholders. Koshelenko were paid an incentive role in maintaining good corporate № 421/r.OPIN’s corporate governance To this end, the Company has estab- amount of RUR385,568 per quarter each governance by undertaking the following principles are: lished an Audit Committee under the for their work as directors of OPIN. key responsibilities: Board of Directors and a Review Commis- Transparency sion. In addition to improving corporate Additionally, Sergey Riabokobylko re- ⦁⦁ Monitoring the integrity of the Com- OPIN is committed to the principles The Company aims to disclose accurate governance, the Company focuses on ceived a further emolument of RUR192,784 pany’s financial reporting, including of strong corporate governance. The information in a timely manner on all developing both its corporate culture and per quarter relating to his appointment as its annual and interim reports and Company recognises the importance of material facts pertaining to its activities, efficient external and internal commu- member of the audit committee. Amount other formal announcements relating maintaining the highest standards of including financial standing, operating nications. of emolument was approved by the Board to financial performance; corporate governance in all areas of its results, and shareholding and man- of Directors at 30 June 2011. business. In terms of overall direction agement structure. The Company also JSC OPIN is governed by internal ⦁⦁ Reviewing the adequacy and effec- and control the Company is committed ensures that this information is accessi- documents comprising the Company’s Board work in 2011 tiveness of the Company’s internal to enforcement of shareholders ble to all stakeholders. Charter and regulations about the Annu- Over the course of 2011, there were 15 control and risk management systems rights prescribed by the law, efficient al General Meeting of Shareholders, the meetings of OPIN’s Board of Directors, and disclosure of statements concern- cooperation and harmonization of Accountability Board of Directors, the Audit Committee, including 7 meetings held in person. The ing these in the annual report; majority and minority stockholders’ OPIN’s Board of Directors is accountable Auditing Service, Information Policy and most important issues discussed at the interests, effective corporate to all shareholders as required under Insider Information. meetings of the Board of Directors were: ⦁⦁ Monitoring the effectiveness of the governance and control, reliability and current legislation. Company’s internal audit function, completeness of the Company disclosure ⦁⦁ Approval of the preliminary financial reviewing the scope of the Company’s of information. Fairness results for the year 2010 internal audit programme and con- The Company undertakes to protect the sidering the findings and recommen- rights of shareholders and to maintain ⦁⦁ Disposition of Maryina Roscha Plaza dations of the reports produced from their equal treatment. The Board of Di- LLC, a project company with rights to this programme; rectors ensures that all shareholders have Raikina shopping centre project access to timely recourse in the event of ⦁⦁ Overseeing the relationship with the infringement of their rights. ⦁⦁ Approval of the Company’s business external auditor, including appoint- strategy for the years 2011–2015 ment, removal and fees and ensuring Responsibility the auditor’s independence and the OPIN acknowledges the rights of all ⦁⦁ Decisions to list on MICEX stock effectiveness of the audit process. stakeholders under the relevant legis- exchange in view of its merger with Corporate governance lation and strives to cooperate actively RTS stock exchange Until February 11 2011 the Committee principles with them to increase shareholder value, comprised: Georgy Svanidze (Committee including the price of its shares and ⦁⦁ Approval of results of shares buyback Chairman), Olga Voytovich and Valery l Transparency other securities, as well as stimulate job Senko. l Accountability creation. ⦁⦁ Approval of audited IFRS consolidated l Fairness financial results The current members of the Committee l Responsibility Reliability were elected on March 02, 2011 and l Reliability OPIN takes the issue of confidential and ⦁⦁ Approval of related party transactions comprise: Valery Senko (Committee insider information very seriously. With Chairman), Natalia Griza and Sergey this in mind, the Company has adopted ⦁⦁ Other matters relating to the jurisdic- Riabokobylko. the Statute for Communications Policy tion of the Board of Directors in ac- and Insider Information, intended to cordance with Federal Law «On Joint prevent any unlawful use of insider Stock Companies» and the Charter of information and market manipulation. the Company

116 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 117 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5.2 principles of Corporate Governance 5 GOVERNANCE 5.2 principles of Corporate Governance 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Executive bodies Disclosure policy During the course of the year, sharehold- Dividends The quoted shares of OPIN are included Pursuant to Russian law and articles OPIN understands the considerable ers are kept informed of the progress of During the reporting year the authorised in calculating the indices RTS-2, MICEX 29.1–29.4 of the Company’s Charter, the importance of maintaining effective the Company through results statements body (General Shareholders’ Meeting) FNL (MICEX Financials Index), RTSfn General Director is the Company’s sole relationships with all its shareholders and other announcements that are made no decision on payment (an- (an index of companies in financial and executive body and is entitled to perform and seeks to frame its communications released through multiple news services. nouncement) of dividends for the full banking sector) and MICEX SC (MICEX the Company’s day-to-day management. strategy accordingly. The Company has Company announcements and presenta- year, the first quarter, the half year and Start Cap Index an index of capitalisation The General Director is accountable to always provided and continues to provide tions are made available simultaneously the nine months of 2011. companies). the Board of Directors and the General equal and timely access to information to on the Corporate website, affording all Shareholders’ Meeting. shareholders and investors and strives to shareholders full access to material infor- The Company may consider making div- Global depositary receipts disclose fully, information of a material mation. The Investor Relation section of idend payments on its ordinary shares, Global depository receipts issued against The General Director has responsibility nature, in an accurate manner. This the website is kept under regular review if and when commercially prudent, after the Company’s shares and are traded on for the Company’s day-to-day activities includes information on securities, the and is continuously updated. Sharehold- taking into account profits, cash flow the U.S. OTC market (OTC Market) as No. administration excluding the ones under ownership structure, lists of affiliated ers can also raise questions directly with and capital investment requirements. 47972M106. One global depositary receipt the Board of Directors and the General persons and its financial situation. These the Company at any time through a fa- certifies the rights in respect to eight Shareholders’ Meeting competence. The principles of information disclosure are cility on the website or via more regular Capital markets ordinary shares. The procedure for the General Director has responsibility for set in the “Regulations for Company in- methods such as, telephone or email. Share Capital issue and circulation of the depositary implementing the Board of Directors formation policy” as of May 30 2005 and The authorized capital of the company on receipt is set by agreement between JSC and the General Shareholders’ Meeting meet all the requirements of the Federal Internal Auditing December 31, 2011 amounted to 15,280,221 OPIN and The Bank of NewY ork, as well decisions. Law On Joint Stock Companies and the As part of its corporate governance the ordinary shares of a nominal value as by Regulation S of the Securities Act listing rules of RTS and MICEX stock Company has a financial control and RUR1,000. The registration number of (Regulation S refers to Rules 901–904 During the course of 2011 Artemiy Krylov exchanges. The Company has a compre- reporting department that among other securities issue is 1–01–50020A. On 8 Sep- (inclusive) under the United States Se- performed as sole executive body. hensive Investor Relations programme responsibilities carries out the functions tember 2011 at OPIN’s General Sharehold- curities Act as of 1933 with all periodical whereby the Company aims to initiate of internal audit. The department closely ers’ Meeting it was decided to decrease the amendments). Corporate Code of Conduct regular meetings with existing and collaborates with the audit committee authorised capital stock of the Company OPIN complies with the requirements potential shareholders. In addition, the and external auditors. The financial via a buyback from the market. Depository — The Bank of NewY ork of the Code of Conduct approved by the Company participates regularly in inves- control and reporting department has Mellon Federal Financial Markets Serviceon tor conferences and roadshows in order the following key responsibilities: The results of the shares buyback were 04.04.2002 № 421/p. Successful comple- to raise the awareness of the Company approved at a Board Meeting on Decem- Custodian — ZAO ING (Eurasia) tion of the requirements was provided among new and existing shareholders. ⦁⦁ Assurance that all internal control ber 13, 2011 (notes #130 as of 13.12.2011). by attaching them to the Charter and Feedback from such meetings and the procedures of risk mitigation are At January 16, 2012 OPIN registered a de- internal documents of the Company. key issues raised by investors are commu- implemented and function properly; crease in share capital by 59,428 shares. nicated to the Board, and brokers’ reports The Board of Directors 2011 had eight in- are regularly circulated to all directors for ⦁⦁ Development of Risk Assessment OPIN’s shares are included in the «B» list dependent board members and the Audit consideration. system as well as instructions for of the MICEX stock exchange. Committee was established. Company departments; The free float is 28%. The Сompany has both adopted and ⦁⦁ Support to the Company management strictly follows regulations on disclosure and the Board of Directors for the Shares traded outside the Russian policy, insider information, internal operational activities of the Company; Federation represent 0.0048% of the total control procedures, and auditing. The number of shares of the corresponding availability of and compliance with ⦁⦁ Selection of external auditors and category (type). these and other internal regulations and monitoring their work; procedures ensure that high corporate governance standards are maintained ⦁⦁ Information support to the Audit at the Сompany and the Сompany is Committee relative to critical issues of compliant with the requirements of the Company performance. MICEX stock exchange.

118 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 119 1 OVERVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 5 GOVERNANCE 5.2 principles of Corporate Governance 6 CONSOLIDATED FINANCIAL STATEMENTS

Shareholding Structure On March 5, 2012 the Company received a Notice from its shareholder ONEX- OPIN share capital structure as of December 31, 2011: IM HOLDINGS LIMITED that the later increased its share ownership in the Com- pany to 9,703,080 shares representing 63.75% of total stock from 4,584,066 shares Stockholder Share in capital,% representing (30.12% of total stock).

OPIN also received a Notice from ONEXIM HOLDINGS LIMITED 29.99% ONEXIM GROUP LIMITED that the latter became a controlling shareholder of the Company with the total share ownership ROSBANK (OJSC JSCB) (nominee holder) 23.96% of 12,659,224 shares representing 83.17% of total stock since ONEXIM GROUP LIMITED is a shareholder in ONEXIM Closed Joint-Stock Company Depository Clearing 29.90% HOLDINGS LIMITED and LEONINA Company (nominee holder) INVESTMENTS LIMITED.

Due to such events and in accordance Non-banking credit organisation National 14.05% with article 84.2 of the Federal Law Settlement Depository LLC (nominee holder) #208-FZ “On joint stock companies” as of 26.12.1995 ONEXIM GROUP LIMITED Others 2.10% sent a Notice of a mandatory tender offer to shareholders for 2,561,569 of ordinary shares (16.83%) of OPIN at a purchase price of 534 rubles 96 copecks per share. Total 100% The Board of Directors finds the announced price of the offer to be justified and corresponding to the weighted average price for the last six months of trade on the open market prior to filing the mandatory offer by ONEXIM HOLD- INGS LIMITED with the Federal Markets Authority of Russia (on 05.03.2012).

120 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 121 1 OVERVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 6 CONSOLIDATED FINANCIAL STATEMENTS 7 ПРИЛОЖЕНИЯ

Independent We have audited the accompanying consolidated financial statements of JSC CONSOLIDATED Auditor’s OPIN and its subsidiaries (the “Group”) which comprise the consolidated Report statement of financial position as of 31 December 2011 and the consolidated FINANCIAL STATEMENTS statements of comprehensive income, changes in equity and cash flows for the ▶ p. 124 year then ended and a summary of significant accounting policies and other explanatory notes.

Segment Information The Group operates in four principal geographical areas: Russian Federation, Canada, USA and Japan. ▶ р. 201-207

Ria sk M nagement Risk management is essential for the Group. The main risks inherent to the Policy Group’s operations include credit risk, liquidity risk, interest rate risk, foreign exchange risk and other price risks. ▶ р. 211-218

JSC OPIN and subsidiaries ANNUAL REPORT 2011 123 1 OVERVIEW 6 CONSOLIDATED 6. Consolidated Statement 2 BUSINESS REVIEW FINANCIAL STATEMENTS of Financial Position 3 OPERATING REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 6 CONSOLIDATED 6. Independent Auditor’s Report FINANCIAL STATEMENTS Consolidated Statement of Financial Position

(in thousands of US dollars) Note 31 December 31 December 1 January 2011 2010 (restated) 2010 (restated)

Management’s Responsibility Independent Auditor’s ASSETS for the Consolidated Financial Statements Non-current assets Report Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Property, plant and equipment 5 17 330 24 051 29 793 Standards, and for such internal control as management determines is necessary Capital advances 377 583 57 286 to enable the preparation of consolidated financial statements that are free from Investment property 6 932 131 874 294 1 272 899 material misstatement, whether due to fraud Investment property under development 7 - 50 000 53 300 or error. Deferred tax assets 16 181 213 195 883 127 366 Investments held to maturity 9 9 523 - - To the Shareholders Auditor’s Responsibility Other non-current assets 1 872 3 020 10 964 and Board of Directors Our responsibility is to express an opinion on these consolidated financial Total non-current assets 1 142 446 1 147 831 1 551 608 of JSC OPIN statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply Current assets We have audited the accompanying with ethical requirements and plan and perform the audit to obtain reasonable Inventories with period of realization above one year 8 280 938 309 646 417 483 consolidated financial statements assurance whether the consolidated financial statements are free from material Inventories with period of realization during the year 8 84 652 204 042 173 916 of JSC OPIN and its subsidiaries (the misstatement. Prepayments 10 15 804 18 603 46 995 “Group”) which comprise the consoli- Receivables 11 21 966 37 545 74 118 dated statement of financial position An audit involves performing procedures to obtain audit evidence about the as of 31 December 2011 and the consol- amounts and disclosures in the consolidated financial statements. The procedures Loans issued 12 8 867 - 7 900 idated statements of comprehensive selected depend on the auditor’s judgement, including the assessment of the risks Cash and cash equivalents 13 21 475 12 116 74 590 income, changes in equity and cash of material misstatement of the consolidated financial statements, whether due Total current assets 433 702 581 952 795 002 flows for the year then ended and a to fraud or error. In making those risk assessments, the auditor considers internal TOTAL ASSETS 1 576 148 1 729 783 2 346 610 summary of significant accounting control relevant to the entity’s preparation and fair presentation of the consolidat- policies and other explanatory notes. ed financial statements in order to design audit procedures that are appropriate EQUITY AND LIABILITIES in the circumstances, but not for the purpose of expressing an opinion on the Equity effectiveness of the entity’s internal control. An audit also includes evaluating the Share capital 14 568 667 570 570 570 570 appropriateness of accounting policies used and the reasonableness of accounting Additional capital 15 1 887 498 1 887 414 1 897 861 estimates made by management, as well as evaluating the overall presentation of Uncovered loss (759 833) (792 269) (278 073) the consolidated financial statements. Translation difference (677 899) (616 103) (609 878)

We believe that the audit evidence we have obtained is sufficient and appropriate to Total equity 1 018 433 1 049 612 1 580 480 provide a basis for our audit opinion. Non-current liabilities Opinion Deferred tax liabilities 16 111 291 103 949 137 804 In our opinion, the accompanying consolidated financial statements present fairly, Long-term loans and borrowings received 17 31 070 17 460 300 207 in all material respects, the financial position of the Group as of 31 December 2011, Total non-current liabilities 142 361 121 409 438 011 and its financial performance and its cash flows for the year then ended in accordance Current liabilities with International Financial Reporting Standards. Short-term loans and borrowings 17 286 285 327 972 102 077 Accounts payable 18 42 890 47 358 30 436 11 April 2012 Current tax liabilities 21 9 244 9 527 3 138 Moscow, Russian Federation Provisions 19 9 213 7 247 - Advances from customers 20 67 722 166 658 192 468 Total current liabilities 415 354 558 762 328 119

Total liabilities 557 715 680 171 766 130

TOTAL EQUITY AND LIABILITIES 1 576 148 1 729 783 2 346 610

These consolidated financial statements have been approved by the management and signed on 11 April 2012.

124 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 125 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6. Consolidated Statement 6 CONSOLIDATED 6. Consolidated Statement FINANCIAL STATEMENTS of Comprehensive Income FINANCIAL STATEMENTS of Comprehensive Income

Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity

(in thousands of US dollars) Note 2011 2010 (restated) (in thousands of US dollars) Share Additional Revaluation Uncovered Translation Total equity capital capital reserve loss difference Revenue Revenue from sales of residential property and land plots 24 223 688 102 154 Previously recognised balance as at 31 December 2009 570 570 1 897 861 133 676 (411 749) (609 878) 1 580 480 Revenue from sales of goods 44 104 39 107 Revenue from other services 2 315 2 971 Adjustment result (Note 2) - - (133 676) 133 676 - - Revenue from construction contracts 23 60 7 029 Total revenue 270 167 151 261 Adjusted balance as at 1 January 2010 570 570 1 897 861 - (278 073) (609 878) 1 580 480

Cost of sales Transfer (Note 15) - (10 447) - 10 447 - - Cost of sales of residential property and land plots 25 (147 201) (76 488) Cost of goods sold 25 (38 663) (38 228) Comprehensive losses Cost of other services (463) (376) Loss for the year - - - (524 643) - (524 643) Cost of construction contracts 23 (20 740) (20 489) Other comprehensive losses for the year - - - - (6 225) (6 225) Inventory write-down (39 851) (43 326) Total cost of sales (246 918) (178 907) Total comprehensive loss for the year - - - (524 643) (6 225) (530 868)

Gross profit/ (loss) 23 249 (27 646) Balance as at 31 December 2010 570 570 1 887 414 - (792 269) (616 103) 1 049 612 Selling, administrative and general expenses 26 (34 191) (26 270) Gain/ (loss) from change in fair value of investment property and investment property under 6,7 110 444 (457 074) development Repurchase of treasury shares (Note 14, 15) (1 903) 84 - - - (1 819) Loss from impairment of premises, plant and equipment 5 - (8 361) Gain on subsidiaries disposal 30 - 6 591 Comprehensive income/ (losses) Interest income 467 1 402 Profit for the year - - - 32 436 - 32 436 Financial expenses 27 (20 607) (39 012) Other comprehensive losses for the year - - - - (61 796) (61 796) Net loss from operations with foreign currency (2 950) (3 782) Loss on disposal of investment property and investment property under development 6,7 (2 455) (27 037) Total comprehensive income / (loss) for the year - - - 32 436 (61 796) (29 360) Other income 2 431 2 204 Other expenses 28 (11 216) (33 216) Balance as at 31 December 2011 568 667 1 887 498 - (759 833) (677 899) 1 018 433 Profit/ (loss) before tax 65 172 (612 201) Income tax 16 (32 736) 87 558 Profit/ (loss) for the year 32 436 (524 643)

Other comprehensive losses Translation difference (61 796) (6 225)

Total other comprehensive losses (61 796) (6 225) Total comprehensive loss for the year (29 360) (530 868)

Earnings/ (loss) per share: Basic and diluted earnings/ (loss), USD 29 2.12 (34.33)

126 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 127 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6. Consolidated Statement 6 CONSOLIDATED 6. Consolidated Statement FINANCIAL STATEMENTS of Cash Flows FINANCIAL STATEMENTS of Cash Flows

Consolidated Statement of Cash Flows Consolidated Statement of Cash Flows

(in thousands of US dollars) Note 2011 2010 (in thousands of US dollars) Note 2011 2010

Cash flows from operating activities Movements in cash flows from investment activities Profit/ (loss) before tax 65 172 (612 201) Loans issued (10 906) (250) Proceeds from loans repaid 1 968 5 993 Adjustments: Disposal of subsidiaries adjusted by net cash of disposed entities 30 - 30 774 Depreciation of premises, plant and equipment and amortisation of intangible assets 1 919 4 212 Acquisition of investments held to maturity (9 687) - Loss/ (gain) from disposal of property, plant and equipment 5 891 (1 520) Interest received 90 266 Gain on subsidiaries disposal 30 - (6 591) Proceeds from sale of investment property and investment property under development 50 254 1 261 Net loss from operations with foreign currency 2 950 3 782 Acquisition of investment properties (45) (31 277) Loss on disposal of investment property and investment property under development 6,7 2 455 27 037 Proceeds from sale of property, plant and equipment 3 098 1 991 Inventory write-down 8 39 851 43 326 Acquisition of property, plant and equipment and other non-current assets (3 216) (1 497) Interest income (467) (1 402) Acquisition of investment properties under development - (5 012) Change in provision for doubtful debts 28 7 498 4 217 Net cash from investing activities 31 556 2 249 Change in provisions 19 3 824 7 272 Non-recoverable VAT write off 28 393 13 857 Movements in cash flows from financing activities (Gain) /loss from change in fair value of investment property and investment property under 6,7 (110 444) 457 074 Decrease in finance lease payables (129) - development Repurchase of treasury shares 14,15 (1 819) - Impairment loss on non-current assets 5 - 8 361 Loans and borrowings received 95 236 50 000 Financial expenses 27 20 607 39 012 Loans and borrowings repaid (121 087) (101 614) Net cash used in financing activities (27 799) (51 614) Cash from operating activities before changes in current assets 34 649 (13 564) Effect of exchange rate changes on cash and cash equivalents 1 502 (890) Net increase/ (decrease) in cash and cash equivalents 9 359 (62 474) Decrease/ (increase) in inventories 112 404 (5 230) Cash and cash equivalents at the beginning of the year 13 12 116 74 590 Decrease in other assets 816 100 Cash and cash equivalents at the end of the year 13 21 475 12 116 Decrease in receivables under construction contracts 13 578 20 268 (Increase) /decrease in trade and other receivables (2 109) 6 297 (Increase) /decrease in advances paid (5 201) 29 151 Interest expenses capitalised by the Group during the year ended 31 December 2011 Decrease/ (increase) in trade and other accounts payable (3 911) 19 785 amounted to USD 20 262 thousand (31 December 2010: USD 3 757 thousand). This Decrease in advances received from customers (99 169) (23 442) interest was fully paid as at 31 December 2011 and 31 December 2010, respectively. (Decrease) / increase in current tax liabilities other than on income tax (3 622) 710

Cash from operating activity 47 435 34 075

Interests paid (36 334) (36 278) Income tax paid (7 001) (10 016)

Net cash from/ (used in) operating activities 4 100 (12 219)

128 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 129 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.1 Brief description of major activities 6 CONSOLIDATED 6.1 Brief description of major activities FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Brief description Land bank Commercial property The future economic development of the In order to assess the ability of the Group In addition, during 2012 the Group in- At 31 December 2011, the Group held 38 development Russian Federation is dependent upon to meet its obligations as they fall due, tends to expand its activities and launch of major activities 373 hectares of land located in Moscow, At 31 December 2010, the Group was external factors and internal measures management has prepared a cash flow new projects using additional sources of Tver and Vladimir Regions of Russian engaged in a single commercial devel- undertaken by the government to sustain projection for 2012. The key assumptions debt and financial instruments. Federation (31 December 2010: 38 384 opment project — A. I. Raikin Retail and growth, and to change the tax, legal and are as follows: hectares) (Refer to Note 6). Entertainment Center in Moscow. In regulatory environment. Management be- In connection with the uncertainty which 2011, this property was sold at the stage lieves it is taking all the necessary measures ⦁⦁ In January-April 2012, the Group has currently prevails in the credit and capital Residential property of construction (Note 7). to support the sustainability and develop- negotiated the attraction of long-term markets, the controlling shareholder In the year ended 31 December 2011, the ment of the Group’s business in the current loans of USD 258 158 thousand secured has confirmed to management that the Group was engaged in development of Frame-panel houses business and economic environment. by investment property and inven- Group will receive financial support in the the following residential cottage commu- Frame-panel houses are designed, tories. These funds will be partially foreseeable future if the need arises. nities in the Moscow Region: engineered and manufactured by the The Group also carries out operational allocated for repayment of loans from Group’s subsidiary located in Canada. activity in Canada, country with stable ING Bank N. V. (short-term liability of The Group’s ability to continue its opera- Pavlovo-2 Cottage Houses are mainly sold to individuals political and economic environment. USD 103 121 thousand as of 31 Decem- tions on basis of going concern concept is Nature Community and professional contractors in Canada, In 2011 the economic environment in ber 2011) and JSC Moscow Credit Bank dependent upon certain matters outside of Business Pavlovo-2 cottage community is located US and Japan. The Group also uses some Canada was favourable, and this fact (short-term liability of USD 46 165 of its direct control, including the matter 14 km from Moscow following Novorizhs- of the produced houses for constructing stipulated the absence of significant thousand as of 31 December 2011). The of availability of financing. Management koye Highway and includes three types own real estate property in the Russian risks, aligned with assets impairment, attracted loans can also be partially believes that the matters referred to These consolidated financial state- of development: cottage development Federation. credit, currency and interest risks used for repayment of other loans in above will ensure that the Group will ments have been prepared in accor- consisting of 146 single-family houses, 71 2012 unless these loans are restruc- continue its operation on the basis of dance with International Financial Re- townhouses with 290 apartments and 8 Operating environment Going concern tured. Period of repayment of these going concern concept and accordingly porting Standards (IFRS) for JSC OPIN low-height multi-family houses with 380 of the Group The consolidated financial statements loans is from 2-d quarter of 2013 up to these consolidated financial statements (“the Company”) and its subsidiaries apartments. Economics of the Russian Federation of the Group have been be prepared the 2-d quarter of 2014. have been prepared on that basis and (together referred to as the “Group”) displays certain characteristics of an based on the going concern assumption as such no adjustments to the carrying for the year ended 31 December 2011. Pestovo Cottage emerging market. Tax, currency and envisaging realisation of assets and ⦁⦁ The Group negotiates with the credi- value of the Group’s assets and liabilities Community customs legislation of the Russian Feder- repayment of debt in the normal course tors about prolongation of short-term are required. The Group’s main activities include Pestovo Cottage Community is located ation is subject to varying interpretations of business. loans and borrowings. In January 2012 development and investment opera- 22 km from Moscow following Dmi- and contributes to the challenges faced the Group prolonged maturity period tions in the Russian real estate market. trovskoye Highway. The community is by companies operating in the Russian In making this judgement, manage- to one year for the one of the non bank The Company was incorporated in located on the shore of the Pestovo Water Federation (Note 33). ment considered the Group’s financial borrowing in the amount of USD 18 Moscow, Russian Federation, on 4 Reservoir and consists of 415 single-fam- position, current intentions, profitabil- 323 thousand. September 2002 as an open joint-stock ily houses. The international sovereign debt crisis, ity of operations and access to financial company under the laws of the Russian stock market volatility and other risks resources and also the analysis of the ⦁⦁ The Group will continue to generate Federation. The principal operating Martemianovo could have a negative effect on the financial crisis influence on future opera- cash from its development activities office of the Company is located at Cottage Community Russian financial and corporate sectors. tions of the Group and sale of cottages and land plots 13/1 Tverskoy blvd., Moscow, 123104, Martemianovo Cottage Community is Management made provisions for impair- under current projects which, due Russian Federation. located 27 km from the Moscow Ring ment of property, plant and equipment At 31 December 2011, the Group had to high level of completeness, are Road following Kievskoe Highway. In the (Note 5), inventory write-down (Note 8) net current liabilities of USD 262 590 expected to generate positive net The controlling shareholder of the Com- reporting period the Group offered for and adjusted fair value of investment thousand (calculated without invento- cash flows of USD 30 000–40 000 pany is Onexim Holdings Limited. The sale land plots without cottages as well properties (Notes 6 and 7) by considering ries with period of realisation above one thousand in 2012. ultimate beneficiary of Onexim Holdings as cottages under construction in this the economic situation and outlook at the year). The net cash inflow from operating Limited is Mikhail D. Prokhorov. cottage community. The total area of the end of the reporting period. activities for 2011 amounted to USD 4 100 land in this cottage community is 128 thousand. Loans and borrowings of USD hectares as at 31 December 2011 and 2010. 286 285 thousand which are repayable by 31 December 2012 were included in the current liabilities.

130 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 131 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.2 Basis of Consolidated Financial 6 CONSOLIDATED 6.2 Basis of Consolidated Financial FINANCIAL STATEMENTS Statements Preparation FINANCIAL STATEMENTS Statements Preparation and Significant Principles and Significant Principles of Accounting Policies of Accounting Policies

Basis of Consolidated Basis of consolidated Changes in the ⦁⦁ All items included in the consolidated lation purposes. The average exchange power to govern the financial and oper- financial statements accounting policies statement of changes in equity, other rates for the years ended 31 December ating policies of an entity so as to obtain Financial Statements preparation In these consolidated financial statements than net profit, are translated at 2011 and 2010 were CAD 1,01 and CAD benefits from its activities. Preparation and These consolidated financial statements the Group used the same accounting historical exchange rates; 0,97 to USD 1, respectively. Significant Principles have been prepared in accordance with policies as those used in preparation of the The financial results of subsidiaries IFRS under the historical cost convention consolidated financial statements for the ⦁⦁ All income and expenses in the The RR is not a freely convertible curren- acquired or disposed of during the year of Accounting Policies except for: year ended 31 December 2010 except for a) consolidated income statement are cy outside the territory of the Russian are included in the consolidated income changes in the accounting policy and con- translated at exchange rates in effect Federation. Accordingly, translation of statement from the effective date of ⦁⦁ valuation of subsidiaries at fair value solidated financial statements presentation when the transaction occurred. For amounts in RR into USD should not be acquisition or up to the effective date of at the date of acquisition in accor- described in Note 2, and b) changes in those transactions that occurred even- considered as a representation that RR disposal, as appropriate. dance with IFRS 3, Business Combi- accounting policies that were implemented ly over the period an average exchange amounts have been, or in the future will nations; because of the adoption of new and revised rate for the period is applied; be converted into USD at the exchange Subsidiaries’ financial statements are standards and interpretations (Note 3). rate shown or at any other exchange rate. prepared for the same reporting period ⦁⦁ valuation of investment property at ⦁⦁ Resulting exchange differences are as the Company’s financial statements. fair value under IAS 40, Investment Functional and recognised in other comprehensive Foreign currency If required, subsidiaries’ financial Property; presentation currency income line and accumulated in the translation statements are restated in order to bring The functional currency of the Group’s consolidated statement of changes in Monetary assets and liabilities are trans- them into compliance with the Group’s ⦁⦁ valuation of inventories at net realis- entities except for Growth Technologies equity as “Translation Difference”; lated into each entity’s functional cur- accounting policies. able value if it was lower than their (Russia) Limited, Onigomati Invest- rency at the official exchange rate of the original cost under IAS 2, Inventories; ment Limited, Opin Capital Inc. and ⦁⦁ In the consolidated statement of cash Central Bank of the Russian Federation All intra-group transactions, balances and Viceroy Homes Limited, is Russian flows, cash balances at the beginning (“CBRF”) and Bank of Canada at the re- any unrealised profits or losses arising ⦁⦁ valuation of financial instruments at rouble (“RR”). The functional currency and the end of each year presented are spective reporting dates. Foreign exchange from intra-group transactions are fully amortised cost in accordance with IAS of Growth Technologies (Russia) Limited translated at exchange rates in effect gains and losses resulting from settlement eliminated during consolidation process. 39, Financial Instruments: Recogni- and Onigomati Investment Limited is US at the beginning and at the end of of transactions and from translation of tion and Measurement. dollar. The functional currency of Viceroy each reporting period, respectively. All monetary assets and liabilities into a sep- The Group did not have non-controlling Homes Limited and Opin Capital Inc. is cash flows are translated at exchange arate entity’s functional currency at year- interest in 2011 and 2010. Hereafter is a summary of the significant Canadian dollar (“CAD”). Growth Tech- rates in effect when the cash flows end official exchange rates of the CBRF are accounting policies applied by the Group nologies (Russia) Limited and Onigomati occurred. For those cash flows that presented separately in the consolidated Business combination in preparing these consolidated financial Investment Limited are incorporated in occurred evenly over the period, an income statement. Translation at year-end Acquisitions of businesses are accounted statements. Cyprus; Viceroy Homes Limited and Opin average exchange rate for the period is rates does not apply to non-monetary for using the acquisition method. The Capital Inc are incorporated in Canada. applied. Resulting exchange differ- items that are measured at historical premium paid for acquired subsidiary is Statutory accounting principles and ences are presented separately from cost. Non-monetary items measured at measured at the fair value of the assets procedures in the countries where the The presentation currency of the Group is cash flows from operating, investing fair value in foreign currency, including given up, equity instruments issued and Group’s subsidiaries are incorporated US dollar because management believes and financing activities as “Effect of equity investments, are translated using liabilities incurred or assumed, includ- substantially differ from those gener- the use of US dollars is more convenient Currency Exchange Rates”. the exchange rates at the date when the ing fair value of assets or liabilities from ally accepted under IFRS. Accordingly, and relevant for users of the consolidated fair value was determined. Effects of contingent consideration arrangements consolidated financial statements of the financial statements. As at 31 December 2011 and 2010, ex- exchange rate changes on non-monetary but excluding acquisition related costs Group, which has been prepared based on change rates of RR 32,20 and RR 30,48 to items measured at fair value in foreign such as advisory, legal, valuation and the local statutory accounting records of The translation into US dollars of the USD 1 were used, respectively for trans- currency are recorded as part of the fair similar professional services. Acquisition Group’s entities domiciled in the Russian financial statements of the Group’s lation purposes. The average exchange value gain or loss. transaction costs incurred for issuing Federation and Canada, were adjusted to subsidiaries with a functional currency rates for the years ended 31 December equity instruments are deducted from be presented in accordance with IFRS. other than US dollars is made as follows: 2011 and 2010 were RR 29,39 and RR 30,37 Principles of consolidation equity; acquisition transaction costs to USD 1, respectively. The consolidated financial statements incurred for issuing debt are deducted This consolidated financial statement ⦁⦁ All assets and liabilities, both mone- incorporate the financial statements of from their carrying amount and all other is presented in thousands of US dollars tary and non-monetary, are translated As at 31 December 2011 and 2010, ex- the Company and entities controlled by transaction costs associated with the (“USD”), except for earnings per share at the closing exchange rates at each change rates of CAD 0,98 and CAD 1,01 to the Company (its subsidiaries). Control acquisition are expensed. indicator, or unless otherwise stated. reporting date; USD 1 were used, respectively, for trans- is achieved where the Company has the

132 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 133 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.2 Basis of Consolidated Financial 6 CONSOLIDATED 6.2 Basis of Consolidated Financial FINANCIAL STATEMENTS Statements Preparation FINANCIAL STATEMENTS Statements Preparation and Significant Principles and Significant Principles of Accounting Policies of Accounting Policies

Goodwill is measured by deducting the Goodwill This means that amounts previously rec- ation of these assets, on the same basis Capital advances net assets of the acquiree from the ag- Goodwill arising on acquisition is ognised in other comprehensive income as for other property assets, commences Capital advances represent amounts gregate of the consideration transferred recognised as an asset and initially are transferred to profit or loss. when the assets are put into operation. paid to vendors for capital construc- for the acquiree, the amount of non-con- measured at cost calculated as described tion, acquisition of property, plant and trolling interest in the acquiree and the above. Goodwill is subsequently mea- Intangible assets Depreciation on property, plant and equipment, land plots and investment fair value of the acquirer’s previously sured at cost less any accumulated Intangible assets are initially measured equipment is applied to write the asset property. Capital advances are carried at held equity interest before the acquisi- impairment losses. at purchase cost and are amortised on a off over its estimated useful life. Depre- actual cost less any accumulated impair- tion date. Any negative amount (“neg- straight-line basis over their estimated ciation is applied on a straight-line basis ment loss. ative goodwill”) is recognised in profit For the purpose of impairment testing, useful lives, which is in a range of 2–5 using the following useful lives: or loss, after management reassesses goodwill is allocated to each of the years. The estimated useful life and amor- Investment property whether it identified all the assets ac- Group’s cash-generating units expected tisation method are reviewed at the end Useful life in years Investment property is a property (land quired and all liabilities and contingent to benefit from the synergies of the com- of each annual reporting period, with the or building — or part of a building — or liabilities assumed and reviews appropri- bination. Cash-generating units to which effect of any changes in estimate being both) held by the Group to earn rentals ateness of their measurement. goodwill has been allocated are tested for accounted for on a prospective basis. Premises 40 or for capital appreciation or both. At impairment annually, or more frequently the same time the Group itself does not Non-controlling interests that existed when there is an indication that the Property, plant Buildings 10-15 use its investment property. Investment at the acquisition date and entitled unit may be impaired. If the recoverable and equipment property also includes land plots with their holders to a proportionate share amount of the cash-generating unit is less Property, plant and equipment other than currently undetermined future use Machinery of the entity’s net assets in the event of than the carrying amount of the unit, owner-occupied property transferred from 5-20 which comprises land for which the and equipment liquidation may be initially measured the impairment loss is allocated primarily investment properties is carried at histori- Group has not determined whether it either at fair value or at the non-con- to reduce the carrying amount of any cal cost less accumulated depreciation and will use the land as owner-occupied trolling interests’ proportionate share of goodwill allocated to the unit and then to any accumulated impairment loss. The ac- Transport 5 property or treat it as land held for sale in the recognised amounts of the acquiree’s other assets of the unit pro-rata carrying tual cost of property, plant and equipment the ordinary course of business. identifiable net assets. The choice of amount of each asset in the unit. An includes major expenditures for improve- Furniture 7-3 measurement basis is made on a transac- impairment loss recognised for goodwill ments and replacements that extend the and office equipment Investment property is originally tion-by-transaction basis. is not reversed in a subsequent periods. useful life of an asset or increase asset’s recorded at cost. Subsequent expenditure revenue generating capacity. Repairs and relating to investment property is added Other types of non-controlling interests On disposal of a subsidiary, the attribut- maintenance expenditures that do not to the carrying amount of the investment are measured at fair value or, when able amount of goodwill is included in meet the foregoing criteria for capital- The estimated useful life and amortisa- property only when it is probable that applicable, on the basis specified in the determination of the profit or loss on isation are charged to the consolidated tion methods are reviewed at the end of future economic benefits associated with another IFRS. disposal. income statement as incurred. each annual reporting period, with the the expenditure will flow to the Group, effect of any changes in estimate being and the cost can be measured reliably. If the initial recognition of a business Disposal of subsidiaries Owner-occupied property transferred accounted for on a prospective basis. All other subsequent expenditures are combination is not completed as at the When the Group ceases to have control from investment properties carried at recognised as expenses in the period in end of the reporting period in which over the subsidiary, any retained in- fair value is transferred to property, The result arising on the disposal of an which they are incurred. the transaction occurs the consolidated terest in the entity is remeasured at its plant and equipment at cost that equals asset is determined as the difference financial statements present estimated fair value, with the change in carrying its fair value at the date of such transfer between the sales proceeds and the The Group has made elected to use the fair amounts on items whose measurement amount recognised in profit or loss. The and subsequently accounted for at this carrying amount of the asset and is value model to measure investment prop- is not yet completed. These estimated fair value is the initial carrying amount cost less accumulated depreciation and recognised in the consolidated statement erty subsequent to initial recognition. amounts are adjusted (additional assets recognized for the purposes of subsequent- accumulated impairment losses. of comprehensive income. And as the result investment property is and liabilities may be recognised as well) ly accounting for the retained fraction as stated at fair value in the Group’s consol- during a measurement period (see the an associate, joint venture or financial Construction in progress includes Leasehold improvements are amortised idated statement of financial position. above) as the Company searches out facts asset. In addition, any amounts previ- costs directly related to construction of over the useful life of the related leased Gains and losses arising from changes in and circumstances existing at the acqui- ously recognised in other comprehensive property, plant and equipment includ- assets. Expenses related to repairs and the fair value of investment property are sition date that would have impacted the income in respect of that entity are ing an appropriate allocation of directly renewals are charged when incurred and included in the consolidated income state- amounts recognised as at the date if they accounted for as if the Group had directly attributable variable overheads that are included in operating expenses unless ment in the year in which they arise. had been known at that time. disposed of the related assets or liabilities. incurred during construction. Depreci- they qualify for capitalisation.

134 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 135 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.2 Basis of Consolidated Financial 6 CONSOLIDATED 6.2 Basis of Consolidated Financial FINANCIAL STATEMENTS Statements Preparation FINANCIAL STATEMENTS Statements Preparation and Significant Principles and Significant Principles of Accounting Policies of Accounting Policies

Fair value of investment property is property only when it is probable that of two values: the acquisition cost or flows are discounted to their present value Taxation the price at which the property could future economic benefits associated with possible net realisable value. using a pre-tax discount rate that reflects Income tax expense represents the be exchanged between knowledgeable, the expenditure will flow to the Group, current market assessments of the time sum of the tax currently payable and independent and willing parties in an and the cost can be measured reliably. When recognising inventories write off value of money and the risks associated deferred tax. arm’s length transaction. A “willing All other subsequent expenditures are in cost of sale the Company measures with the asset for which the estimates of seller” is not a forced seller prepared to recognised as an expense in the period in these inventories considering cost future cash flows have not been adjusted. Current income tax sell at any price. The best evidence of which they are incurred. identified on a property-by-property basis The tax currently payable is based on fair value is given by current prices in an for cottages and on the average weight- If an asset does not generate a cash flow taxable profit for the accounted period. active market for similar property in the The Group has decided to use the fair ed cost method for flats in low-height independent from other assets, for the Taxable profit differs from profit reported same location and condition. value model to measure investment buildings and townhouses. purpose of testing for impairment, assets in the consolidated income statement property under development subsequent are combined into the smallest group for because it excludes items of income Valuation techniques to measure to initial recognition. As the result the Cost of land plots relating to townhouses which there is a cash flow independent or expense that are never taxable or fair value and main assumptions are investment property under development and apartments is included in cost of from other assets or groups of assets; deductible in other periods. The Group’s disclosed in Note 4, Section “Fair Value is stated at fair value in the Group’s con- residential property sold upon sale of and in relation to such group — value in liability for current tax is calculated of Investment Property and Investment solidated statement of financial position. townhouses and apartments and pro rata use is determined. Where a reasonable using tax rates that have been enacted Property under Development”. Gains and losses arising from changes a portion of townhouses and apartments and consistent basis of allocation can by the period end in accordance with the in the fair value of investment property sold to the total tenancy in common. be identified, corporate assets are also laws of the Russian Federation, Canada, Transfers to, or from, investment under development are included in the allocated to individual cash-generating US and Cyprus. The Group operates and property are made when, and only consolidated income statement in the Net realisable value represents the units. Otherwise cash generating units owns property on the USA territory. when, there is a change in use, mostly year in which they arose. estimated selling price for inventories are combined into larger groups of assets evidenced by: less all estimated costs of completion for which a reasonable and consistent Drefer ed tax Valuation techniques to measure (development) and costs necessary to allocation basis can be identified. Deferred income tax is recognised on dif- ⦁⦁ for a transfer from investment fair value and main assumptions are make the sale. ferences between the carrying amounts property to inventories or assets held disclosed in Note 4, Section “Fair Value If the recoverable amount of an asset of assets and liabilities in the consolidat- for sale — commencement of devel- of Investment Property and Investment The cost of finished goods and work in (or cash-generating group) is estimated ed statement of financial position and opment with a view for sale, based Property under Development”. progress includes an appropriate share of to be less than its carrying amount, the corresponding tax bases used in the on reassessment by management of production overheads based on normal the carrying amount of the asset computation of taxable profit. Deferred further use; Commercial property operating capacity. (cash-generating group) is reduced to its tax liabilities are generally recognised under development recoverable amount. Impairment loss is for all taxable temporary differences, ⦁⦁ for a transfer from inventories to in- Commercial property under development Impairment of tangible a recognised in the consolidated income and deferred tax assets are generally vestment property — commencement represents buildings that are being nd intangible assets statement at a time. recognised for all deductible temporary of an operating lease with third party. constructed for future use as investment excluding goodwill differences to the extent that it is proba- property. When the construction is com- At each period end, the Group reviews Where an impairment loss subsequent- ble that taxable profits will be available Investment property pleted, such buildings are transferred to the carrying amounts of its tangible and ly reverses, the carrying amount of against which those deductible tempo- under development investment property. intangible assets to determine whether the asset (cash-generating group) is rary differences can be utilized. Such Investment property under development there is any indication that those assets increased to the revised estimate of its assets and liabilities are not recognised includes commercial property under de- Inventories have suffered an impairment loss. If any recoverable amount, but in a way that if the temporary differences arise from velopment and land under development Inventories are measured at the lowest such indication exists, the recoverable the increased carrying amount does goodwill or from the initial recognition for commercial purposes. of two values: the acquisition cost or amount of the asset is estimated in order not exceed the carrying amount that (other than in a business combination) of possible net realisable value. Inventories to determine the extent of the impair- would have been determined had no assets and liabilities in a transaction that Investment property under development transferred from investment property ment loss. impairment loss been recognised for the affects neither the taxable profit nor the is originally recorded at cost. Subsequent or investment property under develop- asset (cash-generating group) in prior accounting profit. expenditure relating to an investment ment carried at fair value are recorded Recoverable amount is the highest of net years. Recovery of impairment loss is property under development is added to at fair value at the date of transfer and realisable value and value in use. In assess- recognised in the consolidated income the carrying amount of the investment subsequently are measured at the lowest ing value in use, the estimated future cash statement at a time.

136 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 137 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.2 Basis of Consolidated Financial 6 CONSOLIDATED 6.2 Basis of Consolidated Financial FINANCIAL STATEMENTS Statements Preparation FINANCIAL STATEMENTS Statements Preparation and Significant Principles and Significant Principles of Accounting Policies of Accounting Policies

Deferred tax balances are measured at tax to insignificant risk of changes in value. possible alternative would result in sig- deferred at origination, if any), are not issue of financial asset, except for finan- rates enacted or declared at the reporting For the purpose of evaluation of financial nificantly different profit, income, total presented separately and are included in cial assets at a fair value through profit date, which are expected to apply to the instruments, cash relates to the category assets or total liabilities. the carrying values of related items in or loss which are initially recognised at period when the temporary differences “Loans issued and receivables”. the statement of financial position. their fair value. will reverse or the tax loss carry forwards Actual cost is the amount of cash or cash will be utilised. Financial instruments — equivalents paid or the fair value of the The effective interest method is a method Financial assets are classified into the key measurement terms other consideration given to acquire an of allocating interest income or interest following categories: financial assets Deferred tax assets and deferred tax Depending on their classification asset at the time of its acquisition and expense over the relevant period so as at fair value through profit or loss; liabilities are offset and reflected in con- financial instruments are carried at fair includes transaction costs. Measurement to achieve a constant periodic rate of investments held to maturity; avail- solidated financial statement when: value, actual cost, or amortised cost as at cost is only applicable to investments interest (effective interest rate) on the able-for-sale financial assets, loans and described below. in equity instruments that do not have carrying amount. The effective interest receivables. Their classification depends ⦁⦁ The Group has a legally enforceable a quoted market price and whose fair rate is the rate that exactly discounts on their substance and purpose for which right to set off current tax assets Fair value is the amount for which an value cannot be reliably measured and estimated future cash payments or such financial assets are used and is against current tax liabilities; asset could be exchanged, or a liability derivatives that are linked to and must receipts (excluding future credit losses) determined upon initial recognition. settled, between knowledgeable, willing be settled by delivery of such unquoted through the expected life of the financial ⦁⦁ The deferred tax assets and the de- parties in an arm’s length transaction. equity instruments. instrument or a shorter period, if appro- Investments held ferred tax liabilities relate to income Fair value is the current bid price for priate, to the net carrying amount of the to maturity taxes levied by the same taxation financial assets and current asking price Transaction costs are incremental costs financial instrument. The effective inter- Debentures with fixed payments and authority. for financial liabilities which are quoted that are directly attributable to the ac- est rate discounts cash flows of variable fixed maturity dates that the Group has in an active market. For assets and quisition, issue or disposal of a financial interest instruments to the next interest the positive intent and ability to hold to Current and deferred tax are recognized liabilities with offsetting market risks, instrument. Incremental cost is one repricing date except for the premium or maturity are classified as held-to-ma- as an expense or income in the consol- the Group may use mid-market prices that would not have been incurred if the discount which reflects the credit spread turity investments. Held-to-maturity idated income statement, except when as a basis for establishing fair values for transaction had not taken place. Transac- over the floating rate specified in the investments are recorded at amortised they relate to items included to other the offsetting risk positions, and apply tion costs include fees and commissions instrument, or other variables that are cost using the effective interest method comprehensive income or directly to the bid or asking price to the net open paid to agents (including employees act- not reset to market rates. Such premi- less any impairment, with revenue equity, in which case the tax is also rec- position as appropriate. ing as selling agents), advisors, brokers ums or discounts are amortised over the recognised on an effective yield basis. ognised in other comprehensive income and dealers, levies by regulatory agencies whole expected life of the instrument. or directly in equity, or where they arise A financial instrument is regarded as and securities exchanges, and transfer The present value calculation includes all Loans and receivables from the initial accounting for a business quoted in an active market if quoted taxes and duties. Transaction costs do fees paid or received between parties to Trade receivables, loans, and other combination. In the case of a business prices are readily and regularly available not include debt premiums or discounts, the contract that are an integral part of receivables that have fixed or determin- combination, the tax effect is taken into from an exchange or other institution financing costs or internal administra- the effective interest rate. able payments that are not quoted in account in calculating goodwill or in and those prices represent actual and tive or holding costs. an active market are classified as loans determining the excess of the acquir- regularly occurring market transactions Income relating to debt instruments and receivables. Loans and receivables er’s interest in the net fair value of the on an arm’s length basis. Amortised cost is the amount at which is recorded using the effective interest are measured at amortised cost using acquiree’s identifiable assets, liabilities the financial instrument was recognised method except for financial assets at fair the effective interest method, less any and contingent liabilities over the cost of Valuation techniques such as discount- at initial recognition less any principal value through profit or loss. impairment. Interest income is rec- the business combination. ed cash flow models or models based repayments, plus accrued interest, and ognised by applying the effective interest on recent arm’s length transactions or for financial assets less any write-down Initial recognition rate, except for short-term receivables Cash and cash equivalents consideration of financial data of the for incurred impairment losses. Accrued and classification when the recognition of interest would Cash and cash equivalents include investees are used to fair value certain interest includes amortisation of transac- of financial assets be immaterial. cash on hand, current accounts with financial instruments for which external tion costs deferred at initial recognition Financial assets are recognised in the banks, and also short-term placements market pricing information is not avail- and any premium or discount to matu- Group’s consolidated statement of finan- Accounts receivable are stated at cost less with banks. Cash equivalents include able. Valuation techniques may require rity amount using the effective interest cial position, when the Group is a party any allowance for doubtful accounts. short-term placements with banks with assumptions not supported by observable method. Accrued interest income and to the contract in respect of applicable Such provisions reflect either specific original maturities of three months or market data. Disclosures are made in accrued interest expense, including financial instruments, and are initially cases or estimates based on evidence of less that are readily convertible to known these financial statements if changing both accrued coupon and unamortised recognised at fair value plus costs directly collection. amounts of cash and which are subject any such assumptions to a reasonably discount or premium (including fees attributed to the cost of acquisition or

138 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 139 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.2 Basis of Consolidated Financial 6 CONSOLIDATED 6.2 Basis of Consolidated Financial FINANCIAL STATEMENTS Statements Preparation FINANCIAL STATEMENTS Statements Preparation and Significant Principles and Significant Principles of Accounting Policies of Accounting Policies

Impairment impairment loss is reversed through prof- period of time to get ready for their classified as non-current upon initial rec- period and before the financial statements of financial assets it or loss to the extent that the carrying intended use or sale, are added to the ognition. Prepayments to acquire assets are authorised for issue are disclosed in Financial assets, other than those at fair amount of the investment at the date of cost of those assets until such time as the are transferred to the carrying amount the ”Events after the reporting date” note. value through profit or loss, are assessed impairment does not exceed what the assets are substantially ready for their of the asset once the Group has obtained for indicators of impairment at each amortised cost would have been had the intended use or sale. control of the asset and it is probable that Treasury shares reporting date. Financial assets are im- impairment not been recognised. future economic benefits associated with If the Company or its subsidiaries acquire paired where there is objective evidence The commencement date for capitalisa- the asset will flow to the Group. Other any shares in the Company, any contri- that, as a result of one or more events Derecognition tion is when (a) the Group incurs expendi- prepayments are written off to profit or bution paid, including any costs directly that occurred after the initial recognition of financial assets tures for the qualifying asset; (b) it incurs loss when the goods or services relating attributed to such transaction, less of the financial asset, the estimated The Group derecognises a financial asset borrowing costs; and (c) it undertakes to the prepayments are received. If there income tax, are deducted from the total future cash flows of the investment have when (a) the assets are repaid or contrac- activities that are necessary to prepare the is an indication that the assets, goods amount of equity payable to the Compa- been impacted. tual rights to the cash flows from such asset for its intended use or sale. or services relating to a prepayment will ny’s shareholders up to the time of re- asset expire; or (b) the Group transfers not be received, the carrying value of the demption, re-issue or sale of such shares. For certain categories of financial assets, the title to cash flows from financial The Group capitalises borrowing costs prepayment is written down accordingly If such shares are subsequently sold or such as trade receivables, assets that are assets or executes a transfer agreement that would have been avoided if it had and a corresponding impairment loss is re-issued, any contribution received, less assessed not to be impaired individually and (i) also transfers substantially all the not made capital expenditure on quali- recognised in profit or loss for the year. any additional costs associated with the are subsequently assessed for impairment risks and rewards associated with owner- fying assets. Borrowing costs capitalised transaction, and respective income tax, on a collective basis. Objective evidence of ship of the asset, or (ii) the Group neither are calculated at the Group’s average Offsetting is included in the equity payable to the impairment for a portfolio of receivables transfers nor retains substantially all refinancing rate (the weighted average Financial assets and liabilities are offset Company’s shareholders. could include the Group’s past experience the risks and rewards of ownership, but interest cost is applied to the expendi- and the net amount reported in the of collecting payments, an increase in the loses control over the transferred asset. tures on the qualifying assets), except statement of financial position only Leases number of delayed payments in the port- Control is retained if the counterparty to the extent that funds are borrowed when there is a legally enforceable right Leases under which the lessee assumes folio past the average credit period, as does not have the practical ability to sell specifically for the purpose of obtaining to offset the recognised amounts, and substantially all the risks and rewards well as observable changes in national or the asset in its entirety to an unrelated a qualifying asset. Where this occurs, there is an intention to either settle on a of ownership are classified as finance local economic conditions that correlate third party without needing to impose actual borrowing costs incurred less net basis, or to realise the asset and settle leases. All other leases are classified as with default on receivables. additional restrictions on the sale. any investment gain on the temporary the liability simultaneously. operating leases. investment of those borrowings are The carrying amount of the financial Financial liabilities capitalised. Share capital and Group as a lessor asset is reduced by the impairment loss Financial liabilities, including borrow- additional paid-in capital Rental income from operating leases is directly for all financial assets with the ings, are initially measured at fair value, All other borrowing costs are recognised Share capital is recognised at actual cost. recognised on a straight-line basis over exception of trade receivables, where the netted of direct transaction costs, and as an expense in the period in which they Share capital contributions made in the the term of the relevant lease. Initial carrying amount is reduced through the subsequently measured at amortised cost are incurred. form of assets other than cash are stated direct costs incurred in negotiating and use of an allowance account. When a using the effective interest method. at their fair value at the date of contri- arranging an operating lease are added to trade receivable is considered uncollect- The Group does not capitalize borrowing bution. Excess of fair value of funds the carrying amount of the leased asset ible, it is written off against the allow- Disposal of financial costs attributable to qualifying assets received above par value is reflected as and recognised on a straight-line basis ance account. The subsequent return liabilities that are carried at fair value — invest- additional capital. over the lease term. of the amounts already written off are The Group derecognises financial liabil- ment property and investment property credited against the allowance. Changes ities when, and only when, the Group’s under development. External costs directly attributable to Group as a lessee in the carrying amount of the allowance obligations are discharged, cancelled or the issue of new shares, other than in a Assets held under finance leases are ini- account are recognised in the consolidat- expire. Prepayments business combination, are deducted from tially recognised as assets of the Group ed statement of comprehensive income. Prepayments are carried at actual cost equity net of any related income taxes. at their fair value at the inception of Capitalisation less provision for impairment. Prepay- the lease or, if lower, at the present If, in a subsequent period, the amount of borrowing costs ments are classified as non-current when Dividend income value of the minimum lease payments. of the impairment loss decreases and the Borrowing costs directly attributable to the goods or services relating to the Dividends are recorded as a liability and The corresponding liability to the lessor decrease can be related objectively to an the acquisition, construction or pro- prepayment are expected to be obtained deducted from equity in the period in is included in the consolidated state- event occurring after the impairment was duction of qualifying assets, which are after one year, or when the prepayment which they are declared and approved. ment of financial position as a finance recognised, the previously recognised assets that necessarily take a substantial relates to an asset which will itself be Any dividends declared after the reporting lease payable.

140 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 141 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.2 Basis of Consolidated Financial 6 CONSOLIDATED 6.2 Basis of Consolidated Financial FINANCIAL STATEMENTS Statements Preparation FINANCIAL STATEMENTS Statements Preparation and Significant Principles and Significant Principles of Accounting Policies of Accounting Policies

Lease payments are apportioned between Warranty provision accrued in the Revenue is recognised net of VAT and Cottages construction contracts stipulate Employee benefits finance charges and reduction of the lease reporting period is recognised within the discounts. constriction period, which are agreed Wages, salaries, contributions to the obligation so as to achieve a constant rate cost of sales of property and cost under with customers. On occasion situations Russian Federation state pension and of interest on the remaining balance of construction contracts. Construction contracts happened, when period of construction social insurance funds, paid annual leave the liability. Finance charges are charged The Group concludes contracts with its is violated due to the different reasons, and sick leave, bonuses, and non-mon- directly to profit or loss, unless they are Value added tax clients for construction of houses and and in result customer has the right etary benefits are accrued in the year directly attributable to qualifying assets, Value added tax (VAT) related to sales communal infrastructure on land plots to terminate the contract. At the every in which the associated services are in which case they are capitalised in ac- is payable to tax authorities on the owned by the Group. A construction balance sheet date in operational con- rendered by the employees of the Group. cordance with the Group’s general policy earliest of (a) collection of receivables contract is a contract specifically nego- struction contracts, Group detects con- The Group has no legal or constructive on borrowing costs. Contingent lease from customers or (b) delivery of goods tiated for the construction of an asset or struction contracts in respect of which obligation to make pension or similar payments are recognised as expenses in or services to customers. Input VAT is a combination of assets that are closely non-compliance with construction benefit payments beyond statutory insur- the periods in which they are incurred. generally recoverable against output VAT interrelated or interdependent in terms terms has been identified or expected ance contributions. upon receipt of the VAT invoice. The tax of their design, technology and function and estimate probability of termination The assets acquired under finance leases authorities permit the settlement of VAT or their ultimate purpose or use. Revenue of such contracts on the basis of histor- Contingencies are depreciated over their useful life or on a net basis. VAT related to sales and from construction contracts comprises ical data on actual terminations. Based and commitments the shorter lease term if the Group is purchases is recognised in the statement the initial amount of revenue agreed in on the results of such estimation, the Contingent liabilities are not recognised not reasonably certain that it will obtain of financial position on a gross basis the construction contract and variations Group suspends recognition of revenue in the consolidated financial statements ownership by the end of the lease term. and disclosed separately as an asset in contract work, claims and incentive and costs under construction contracts, unless it is probable that an outflow and liability. Where provision has been payments to the extent that it is probable for which probability of contract of resources will be required to settle Operating lease payments are recognised made for impairment of receivables, that they will result in revenue; and they termination is high and reverses earlier the obligation and a reliable estimate as expenses on a straight-line basis impairment loss is recorded for the gross are capable of being reliably measured. recognised revenue and costs under such can be made. A contingent asset is not over the lease term. Contingent lease amount of the debtor, including VAT. construction contracts in the consolidat- recognised in the consolidated financial payments arising under operating leases The Group concludes contracts in which ed income statement. statements but disclosed when an inflow are recognised as expenses in the period Revenue recognition the contractor agrees to a fixed contract of economic benefits is probable. in which they are incurred. The Group recognises revenue from sale price, or a fixed rate per unit of output, Where contract costs incurred to date of residential properties when there is which in some cases is subject to cost plus recognised profits less recognised Earnings per share Provisions a sufficient probability that significant escalation clauses. Contractual costs losses exceed progress billings, the sur- Earnings per share are determined by Provisions are recognised when the risks and rewards of ownership are comprise costs that relate directly to the plus is shown as amounts due from cus- dividing the profit or loss attributable Group has a present legal or constructive transferred to the buyer, recovery of the specific construction contract; costs that tomers for contract work (receivables). to shareholders of the Company by the obligation as a result of past events, consideration is probable, the associated are attributable to contract activity in For contracts where progress billings ex- weighted average number of partici- and it is probable that an outflow of costs and possible return of property can general and can be allocated to the con- ceed contract costs incurred to date plus pating shares outstanding during the resources embodying economic benefits be estimated reliably, and there is no tract; and other costs as are specifically recognised profits less recognised losses, reporting year. will be required to settle the obligation continuing management involvement chargeable to the customer under the the surplus is shown as the amounts and a reliable estimate of the obligation with the property, and the amount of terms of the construction contract. due to customers for contract work can be made. revenue can be measured reliably. (payables). Amounts received before the When the outcome of a construction con- related work is performed are included in The amount recognised as a provision is Revenue from realisation of frame-panel tract can be estimated reliably, contract the consolidated statement of financial the best estimate of the consideration houses recognised in total revenue in revenue and associated contract costs position, as advances received from required to settle the moment, when risks and rewards are recognised as revenue and expenses, customers. Amounts billed for work per- the present obligation at the period end, aligned with the object are transferred. respectively, by reference to the stage of formed but not yet paid by the customer taking into account the risks and un- Usually it’s happened during moment completion of the contract activity at the are included in the consolidated state- certainties surrounding the obligation. of goods shipment. In case if Group take period end, measured as the proportion ment of financial position as receivables Where a provision is measured using the responsibility to deliver goods to the that contract costs incurred for work under construction contracts. cash flows estimated to settle the present warehouse of Buyer, revenue is rec- performed to date bear to the estimated obligation, its carrying amount is the ognised at the moment of goods transfer total contract costs. An expected loss on a present value of those cash flows. in destination place. construction contract is recognised as an expense immediately.

142 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 143 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.2 Basis of Consolidated Financial 6 CONSOLIDATED 6.2 Basis of Consolidated Financial FINANCIAL STATEMENTS Statements Preparation FINANCIAL STATEMENTS Statements Preparation and Significant Principles and Significant Principles of Accounting Policies of Accounting Policies

Uncertain tax positions Based on current management structure, Below, in table, presented effect of this adjustment on comparative data from Presentation of revenue The Group’s uncertain tax positions are the Group has identified four reportable 2010 consolidated statement of comprehensive income: from sale and cost of sales reassessed by management at the end segments: land holdings, residential of residential property, of each reporting period. Liabilities are property, fabricated homes and commer- land plots and goods recorded for tax positions that are deter- cial property development. The Group’s In 2011, the Group management revised Caption of the consolidated 2010 Reclassi- 2010 (after mined by management as more likely operations are based in the Russian its accounting policy applicable to statement of comprehensive (before fication reclassifi- than not to result in additional tax liabil- Federation, Canada, US and Japan (reali- presentation of revenue from sales of income reclassi- cation) ities being levied if the positions were to sation of prefab buildings). residential property, land and goods. (in thousands of US dollars) fication) be challenged by the tax authorities. The As the Group’s residential property and assessment is based on the interpretation Inter-segment transactions: segment land represent a homogeneous popula- of tax laws that have been enacted or revenue, segment expenses and segment tion of inventory in the Group’s cottage substantively enacted at the end of the performance include transfers between Revenue from sale of residential - 102 154 102 154 communities, the Group decided to reporting period and any known court or operating segments. Such transfers are property and land plots present revenue from their sale and their other rulings on such issues. Liabilities accounted for at competitive market pric- cost, respectively, as a single line in the for penalties, interest and taxes other es charged to unaffiliated counteragents Revenue from sales of goods 99 565 (60 458) 39 107 consolidated income statement. than on income are recognised based for similar services. Those transfers are on management’s best estimate of the eliminated on consolidation. Revenue from land plots sold 41 696 (41 696) - expenditure required to settle the obligations at the end of reporting period. Expenses, which cannot be directly attributed to a segment, are not allocated Total 141 261 - 141 261 S egmental information to segments. Segment reporting is presented on the basis of management’s perspective and Amendment of the Cost of sales of residential property and - 76 488 76 488 relates to the parts of the Group that are consolidated financial land plots defined as operating segments. Oper- statements after issue ating segments are identified on the Any restatements to these consolidated Cost of goods sold 80 820 (42 592) 38 228 basis of managerial reports used by the financial statements may be made only Group’s chief operating decision maker if approved by the Group management Cost of land sold 33 896 (33 896) - to oversee operations and make decisions which authorised these consolidated on allocating the resources. The Group financial statements for issue. has identified the General Director as Total 114 716 - 114 716 its chief operating decision maker and Adjustments the managerial reports used by the top Where necessary, corresponding figures

management team to oversee operations have been adjusted to conform to the pre- and make decisions on allocating the sentation of the current year amounts. resources serve as the basis of information presented. These managerial reports are prepared on the same basis as these consolidated financial statements.

144 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 145 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.2 Basis of Consolidated Financial 6 CONSOLIDATED 6.2 Basis of Consolidated Financial FINANCIAL STATEMENTS Statements Preparation FINANCIAL STATEMENTS Statements Preparation and Significant Principles and Significant Principles of Accounting Policies of Accounting Policies

Reclassification of long- Re classification of Corresponding reclassification, done in the consolidated statement of financial term loan into short-term inventory from non- position as at 31 December 2010 and 1 January 2010 presented in the tables below: As at 31 December 2010, the Group dis- current to current rupted a financial covenant related to the In the consolidated financial state- amount of net assets under a long-term ment at 31 December 2010 the Group Caption of the consolidated 31 December Reclassifi- 31 December loan agreement with ING Bank N. V. In recognized inventories with the period statement of financial position 2010 (before cation 2010 (after result, long term loan with ING Bank N.V of realization above one year within (in thousands of US dollars) reclassifica- reclassifi- in the amount of USD 99 765 thousand, non-current assets. In these consolidat- tion) cation) presented in consolidated financial ed financial statements comparative in- statement at 31 December 2010 as long formation as at 1 January and 31 Decem- term, should be presented as short term, ber 2010 has been adjusted to recognise Non-current assets 309 646 (309 646) - due to the creditor’s right to claim this inventories with period of realization Inventories loan back because of covenant breach. In above one year within current assets as these consolidated financial statements these inventories will be realized within comparative data at 31 December 2010 one operating cycle. Total non-current assets 1 457 477 (309 646) 1 147 831 was adjusted to reflect this loan within short-term loans and borrowings. Current assets - 309 646 309 646 Inventories with period of realization above one year

Below in the table presented effect of this adjustment on comparative data at 31 December 2010 in the consolidated statement of financial position: Total current assets 272 306 309 646 581 952

Caption of the consolidated 31 December Reclassifi- 31 December statement of financial position 2010 (before cation 2010 (after (in thousands of US dollars) reclassifica- reclassifica- tion) tion) Caption of the consolidated 1 January Reclassifi- 1 January statement of financial position 2010 (before cation 2010 (after (in thousands of US dollars) reclassifica- reclassifi- tion) cation) Long-term loans and borrowings 117 225 (99 765) 17 460

Non-current assets 417 483 (417 483) - Total long-term liabilities 221 174 (99 765) 121 409 Inventories

Short-term loans and borrowings 228 207 99 765 327 972 Total non-current assets 1 969 091 (417 483) 1 551 608

Total short-term liabilities 458 997 99 765 558 762 Current assets - 417 483 417 483 Inventories with period of realization above one year

Total current assets 377 519 417 483 795 002

146 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 147 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.2 Basis of Consolidated Financial 6 CONSOLIDATED 6.2 Basis of Consolidated Financial FINANCIAL STATEMENTS Statements Preparation FINANCIAL STATEMENTS Statements Preparation and Significant Principles and Significant Principles of Accounting Policies of Accounting Policies

The effect of this adjustment to presentation of data in the consolidated Presentation The effect of this adjustment to presentation of data in the consolidated The consolidated statement of financial financial statements as at 31 December and at 1 January 2010 is disclosed of consolidated statement statement of comprehensive income for 2010 is disclosed in the table below: position as of 1 January 2010 is present- in the table below: of comprehensive income ed in these financial statements as a Starting from the year of 2011 the Group’s result of the above described changes in management made a decision to present presentation. The requirement to present Caption of the consolidated state- 2010 (before Adjustment 2010 the consolidated statement of compre- the additional opening statement of Caption of the consolidated 31 December Reclassifi- 31 December ment of comprehensive income adjustment) (restated) statement of financial position 2010 (before cation 2010 (after hensive income as one statement in (in thousands of US dollars) financial position, when the entity has (in thousands of US dollars) reclassifica- reclassifi- which profit/ (loss) for the period and made a restatement or reclassification, tion) cation) other comprehensive profits/ (losses) are extends to the information in the related both presented. notes. The Group’s management consid- Loss from changes in the fair value (438 463) (18 611) (457 074) ered materiality and concluded that it is of investment property Revaluation reserve 95 680 (95 680) - Re classification sufficient for the Group to present such of revaluation reserve information only in those notes that The Group transferred the revaluation Loss before tax (593 590) (18 611) (612 201) have been impacted by a restatement or a Uncovered loss (887 949) 95 680 (792 269) reserves, relating to land classified reclassification, and state in the consoli- as inventories and booked before the dated financial statements that the other land was transferred to inventories, to Income taxes 83 836 3 722 87 558 notes have not been impacted by the uncovered loss within equity. Due to this restatement or reclassification. Therefore, Total (792 269) - (792 269) correction, the Group restated its com- in management’s view, the omission of parables in the consolidated statement Net loss for the year (509 754) (14 889) (524 643) the notes to the consolidated statement of of financial position as at 1 January 2010 financial position as of 1 January 2010 is and 31 December 2010. not material. Decrease of revaluation reserve Caption of the consolidated 1 January Reclassifi- 1 January Reflection resulting from change of investment (18 611) 18 611 - The reclassifications in the consolidated statement of financial position 2010 (before cation 2010 (after of a decrease in the fair property fair value statement of financial position had an (in thousands of US dollars) reclassifica- reclassifi- impact on information in Notes 8 and 17 tion) cation) value of investment property and had no impact on any other captions In consolidated financial statements for Deferred income tax related to in the consolidated statement of finan- the year, ended 31 December 2010, the decrease of revaluation reserve cial position and related note disclosures. Revaluation reserve 133 676 (133 676) - 3 722 (3 722) - Group reflected loss from a decrease in resulting from change of investment the fair value of investment property, property fair value related to the allowance, which had been Uncovered loss (411 749) 133 676 (278 073) created in period of recognition of these objects in inventories, as part of other Total other comprehensive losses (21 114) 14 889 (6 225) aggregate losses in other statement of Total (278 073) - (278 073) comprehensive income. While preparing these consolidated financial statements Total comprehensive and in connection with the above re- (530 868) - (530 868) loss for the year classification this loss was recognised in profit or loss in the consolidated statement of comprehensive income.

148 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 149 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.3 Adoption of New and Revised 6 CONSOLIDATED 6.3 Adoption of New and Revised FINANCIAL STATEMENTS International Financial Reporting FINANCIAL STATEMENTS International Financial Reporting Standards and Interpretations Standards and Interpretations

Adoption of New Standards and Improvements to International Financial before the effective date of revised Standards and Interpretations Interpretations which Reporting Standards (issued in May 2010 IFRS 3 (issued in January 2008) will be in issue not yet adopted and Revised International became effective in the and effective from 1 January 2011). accounted for in accordance with the Financial Reporting reporting year The improvements consist of a mixture guidance in the previous version of IFRS At the date of approval of the Group’s consolidated financial statements, Standards In the reporting period, the Group of substantive changes and clarifications 3; IFRS 7 was amended to clarify certain the following new and revised Standards and Interpretations have been issued, adopted all new International Financial in the following standards and inter- disclosure requirements, in particular but are not effective for the current year: and Interpretations Reporting Standards (“IFRS”) and Inter- pretations: IFRS 1 was amended (i) to (i) by adding an explicit emphasis on pretations (“IFRIC”) issued by the Inter- allow carrying amounts under previous the interaction between qualitative national Accounting Standards Board accounting standards to be used as and quantitative disclosures about the New or revised IFRS Effective for (“IASB”) and the International Financial deemed cost of an item of property, nature and extent of financial risks, (ii) and Interpretations issued by IASB annual Reporting Interpretations Committee plant and equipment or an intangible by removing the requirement to disclose periods (“IFRIC”) of the IASB that are relevant to asset if that item was used in opera- carrying amount of renegotiated beginning its operations, and that became effective tions subject to rate regulation, (ii) to financial assets that would otherwise be on or after for periods beginning on 1 January 2011. allow an event driven revaluation to be past due or impaired, (iii) by replacing used as deemed cost of property, plant the requirement to disclose fair value of IAS: Amendment to IAS 24, Related Party and equipment even if the revaluation collateral by a more general requirement Amendments to IAS 1, Presentation of financial statements 1 July 2012 Disclosures (issued in November 2009 and occurs during a period covered by the to disclose its financial effect, and (iv) by The amendments relate to changes in presentation of items in the statement effective for annual periods beginning on first IFRS financial statements and clarifying that an entity should disclose of comprehensive income. The amendments require entities to separate items or after 1 January 2011). (iii) to require a first-time adopter to the amount of foreclosed collateral presented in other comprehensive income into two groups, based on whether IAS 24 was revised in 2009 by: (a) explain changes in accounting policies held at the reporting date and not the or not they may be reclassified to profit or loss in the future. simplifying the definition of a related or in the IFRS 1 exemptions between amount obtained during the reporting Amendments to IAS 12, Income Taxes — Recovery of Underlying Assets 1 January 2012 party, clarifying its intended meaning its first IFRS interim report and its first period; IAS 27 was amended by clarify- The amendment introduced a rebuttable presumption that an investment and eliminating inconsistencies; and by IFRS financial statements; IFRS 3 was ing the transition rules for amendments property carried at fair value is recovered entirely through sale. This presumption is rebutted if the investment property is held within a business (b) providing a partial exemption from amended (i) to require measurement to IAS 21, 28 and 31 made by the revised model whose objective is to consume substantially all of the economic benefits the disclosure requirements for govern- at fair value (unless another measure- IAS 27 (as amended in January 2008); embodied in the investment property over time, rather than through sale. ment-related entities. These amendment basis is required by other IFRS IAS 34 was amended to add additional Amendment to IAS 19, Employee Benefits 1 January 2013 ments did not have an impact on these standards) of non-controlling interests examples of significant events and The Amendment makes changes to the recognition and measurement consolidated financial statements. that are not present ownership interest transactions requiring disclosure in a of defined benefit pension expense and termination benefits, and to the or do not entitle the holder to a propor- condensed interim financial report, disclosures for all employee benefits. tionate share of net assets in the event including transfers between the levels Revised IAS 27, Consolidated and separate financial statements 1 January 2013 Its objective is now to prescribe the accounting and disclosure requirements of liquidation, (ii) to provide guidance of fair value hierarchy, changes in clas- for investment in subsidiaries, joint ventures and associates when an sification of financial assets or changes on acquiree’s share-based payment entity prepares separate financial statements. The guidance on control and arrangements that were not replaced or in business or economic environment consolidated financial statements was replaced by IFRS 10, Consolidated were voluntarily replaced as a result of a that affect the fair values of the entity’s Financial Statements business combination and (iii) to clarify financial instruments; and IFRIC 13 Revised IAS 28, Investments in Associates and Joint Ventures 1 January 2013 that the contingent considerations from was amended to clarify measurement The change relates to equity accounting for joint ventures — this requirement business combinations that occurred of fair value of award credits. The above is now included in IAS 28 as this method is applicable both for joint ventures and associates. amendments to IFRS 7 resulted in addi- Offsetting Financial Assets and Financial Liabilities — Amendments to IAS 32 1 January 2014 tional and revised disclosures but they The amendment added application guidance to IAS 32 to address did not have a material impact on as- inconsistencies identified in applying some of the offsetting criteria. This sessment or recognition of transactions includes clarifying the meaning of ‘currently has a legally enforceable right of reported in these consolidated financial set-off’ and that some gross settlement systems may be considered equivalent statements. Other amendments did not to net settlement. have an impact on these consolidated financial statements.

150 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 151 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.3 Adoption of New and Revised 6 CONSOLIDATED 6.3 Adoption of New and Revised FINANCIAL STATEMENTS International Financial Reporting FINANCIAL STATEMENTS International Financial Reporting Standards and Interpretations Standards and Interpretations

At the date of approval of the Group’s consolidated financial statements, At the date of approval of the Group’s consolidated financial statements, IFRIC 19, Extinguishing Financial Liabili- the following new and revised Standards and Interpretations have been issued, the following new and revised Standards and Interpretations have been issued, ties with Equity Instruments. but are not effective for the current year: but are not effective for the current year: This IFRIC clarifies the accounting when an entity renegotiates the terms of its debt with the result that the liability is

New or revised IFRS Effective for extinguished through the debtor issuing and Interpretations issued by IASB annual New or revised IFRS Effective for its own equity instruments to the credi- periods and Interpretations issued by IASB annual tor. A gain or loss is recognised in profit or beginning periods loss based on the fair value of the equity on or after beginning instruments compared to the carrying on or after amount of the debt. This Interpretations

did not have an impact on the consolidat- IFRS: ed financial statements. IFRS 9, Financial Instruments: Classification and Measurement. 1 January 2015 IFRS 12, Disclosure of Interest in Other Entities 1 January 2013 IFRS 9 was issued in November 2009 and replaced those parts of IAS 39 IFRS 12 requires entities to disclose information that helps financial statement The Group has not early adopted these readers to evaluate the nature, risks and financial effects associated with relating to the classification and measurement of financial assets. IFRS new and revised standards. An impact of 9 was further amended in October 2010 to address the classification and the entity’s interests in subsidiaries, associates, joint arrangements and adoption of these Standards and Inter- measurement of financial liabilities and in December 2011 in respect of the unconsolidated structured entities. following changes: (i) effective date for annual periods beginning on or after 1 To meet these objectives, the new standard requires disclosures in a number of pretations on the consolidated financial January 2015 and (ii) adding transition disclosures. The main differences from areas, including significant judgements and assumptions made in determining statements of future periods is currently IFRS 39 are as follows: whether an entity controls, jointly controls or significantly influences its being assessed by management. Financial assets are required to be classified into two measurement interests in other entities, extended disclosures on share of non-controlling categories: those to be measured subsequently at fair value, and those to interests in bank activities and cash flows, summarised financial information be measured subsequently at amortised cost. The decision is to be made of subsidiaries with material non-controlling interests, and detailed at initial recognition. The classification depends on the entity’s business disclosures of interests in unconsolidated structured entities. model for managing its financial instruments and the contractual cash IFRS 13, Fair Value Measurement 1 January 2013 flow characteristics of the instrument. Aims to improve consistency and reduce complexity by providing a revised An instrument is subsequently measured at amortised cost only if it is a definition of fair value, debt instrument and both (i) the objective of the entity’s business model is and a single source of fair value measurement and disclosure requirements for to hold the asset to collect the contractual cash flows, and (ii) the asset’s use across IFRSs. contractual cash flows represent only payments of principal and interest (that is, it has only “basic loan features”). All other debt instruments are to Disclosures — Transfers of Financial Assets — Amendments to IFRS 7 1 July 2011 be measured at fair value through profit or loss. All equity instruments are to be measured subsequently at fair value. The amendment requires additional disclosures in respect of risk exposures Equity instruments that are held for trading will be measured at fair value arising from transferred financial assets. The amendment includes a through profit or loss. For all other equity investments, an irrevocable requirement to disclose by class of asset the nature, carrying amount and election can be made at initial recognition, to recognise unrealised and a description of the risks and rewards of financial assets that have been realised fair value gains and losses through other comprehensive income transferred to another party, yet remain on the entity’s balance sheet. rather than profit or loss. There is to be no recycling of fair value gains and Disclosures are also required to enable a user to understand the amount of losses to profit or loss. This election may be made on an instrument-by- any associated liabilities, and the relationship between the financial assets instrument basis. Dividends are to be presented in profit or loss, as long as and associated liabilities. Where financial assets have been derecognised, they represent a return on investment. but the entity is still exposed to certain risks and rewards associated with the transferred asset, additional disclosure is required to enable the effects of IFRS 10, Consolidated financial statements those risks to be understood. IFRS 10 changes the definition of control so that the same criteria are applied 1 January 2013 to all entities to determine control. Disclosures — Offsetting Financial Assets and Financial Liabilities — 1 January 2013 IFRS 11, Joint Arrangements 1 January 2013 Amendments to IFRS 7 Changes in the definitions have reduced the number of “types” of joint The amendment requires disclosures that will enable users of an entity’s arrangements to two: joint operations and joint ventures. The existing policy financial statements to evaluate the effect or potential effect of netting choice of proportionate consolidation for jointly controlled entities has been arrangements, including rights of set-off. eliminated. Equity accounting is mandatory for participants in joint ventures.

152 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 153 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.4 Critical Accounting Estimates and 6 CONSOLIDATED 6.4 Critical Accounting Estimates and FINANCIAL STATEMENTS Judgements in Applying Accounting FINANCIAL STATEMENTS Judgements in Applying Accounting Policies Policies

Critical Accounting The preparation of consolidated financial F air value of investment Management’s assessment of fair value The following major assumptions were used by management in their analysis: statements in conformity with IFRS property and investment of agricultural land plots included in the Estimates and Judgements requires management to make estimates property under Group’s investment property has been and assumptions that affect the carrying performed by using the sales comparison in Applying Accounting development Assumption 31 December 2011 Policies amounts of assets and liabilities, reve- In compliance with its accounting poli- method, which involves a review of nues and expenses and the disclosure of cies, the Group is required to recognise available data on sales offers of compara- contingent assets and liabilities that are investment property and investment ble properties and making adjustments Source of cash inflows Sale of land not readily apparent from other sources. property under development at fair in the prices to reflect the differences The estimates and associated assump- values, which are derived from a number between the properties offered and the tions are based on historical experience of sources, namely market prices, inde- properties owned by the Group. Key Discount rate 11%-23% and other factors that are considered to pendent appraisers and management assumptions within the valuation model be relevant. Actual results ultimately estimates. These estimates are based include the adjustments applied for may differ from those estimates. on valuation techniques which require comparability purposes, the time period Expected period of sale of land 2012–2026 judgement in predicting future cash over which land assets could optimally be The estimates and underlying assump- flows and developing other assumptions. realized (sold), future price growth, and Land selling price in 2012, USD per 1,00 square metres 284–49 500 tions are reviewed by the Group on an Due to absence of an active market for the discount rate. (the price range reflects locations of land) ongoing basis. Revisions to accounting certain of the Group’s assets, the estima- estimates are recognised in the period tion of fair value of these assets include For the purpose of fair value of the land in which the estimate is revised if the assumptions not directly supportable by plots, being investment property, the Projected increase in selling prices 6%-8% growth in 2012– revision affects only that period or in the observed market prices or rates. Group management considers these land 2018, then decreasing period of the revision and future periods plots on an aggregate basis and presumes to 3% (Odintsovsky if the revision affects both current and Investment property is revalued annual- that all the land plots owned by the District — remaining at future periods. ly as at 31 December of the reporting year. Group, will not be realized at once. the level of 4%)

The fair value of investment property (entirely represented by land plots) included in the consolidated financial statements at 31 December 2011 and 31 December 2010 The carrying amounts of the Group’s assets carried at fair value (where is the result of a management valuation. Assumption 31 December 2010 gains and losses arising from changes in the fair value are recognised in the The Group engaged an international valu- consolidated income statement) as of 31 December 2011 and 2010 are as follows: ation company to prepare valuation of its land assets using the sales comparison Source of cash inflows Sale of land method. As a result of review of the in-

(in thousands of US dollars) 31 December 31 December dependent valuer’s report, management 2011 2010 of the Group revised certain of the key Discount rate 14%-20% assumptions within a similar model due to the significant uncertainty associated with the estimation of the timing of the Expected period of sale of land 2011–2025 Investment property (Note 6) 932 131 874 294 future cash flows generated by this land. The revisions reflected a longer time Land selling price in 2012, USD per 1,00 square metres 296–52 000 period to optimally realise land assets Investment property under development - 50 000 (the price range reflects locations of land) and a reduced level of future price growth (Note 7) which resulted in lower valuation of the land plots compared to the figure gener- Projected increase in selling prices 7% in 2012–2013, then ated by the independent valuer. decreasing to 2%

154 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 155 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.4 Critical Accounting Estimates and 6 CONSOLIDATED 6.4 Critical Accounting Estimates and FINANCIAL STATEMENTS Judgements in Applying Accounting FINANCIAL STATEMENTS Judgements in Applying Accounting Policies Policies

Due to considerable uncertainty related Assumptions used by the Group’s 6 223 thousand or decreased by USD 7 841 timations of final outcome on contracts, The determination of impairment of to estimation of future cash flows, man- management for determining the thousand (31 December 2010: increased management has analysed historical property, plant and equipment in- agement carried out a sensitivity analysis fair value of investment property and by USD 3 274 thousand or decreased by contract performance, including the volves the use of estimates that include of fair value of land plots. It was iden- investment property under development USD 3 597 thousand), accordingly. historical level of contract cancellations the cause, timing and amount of the tified that the estimation was sensitive are applicable at a specific date and and the outcomes on claims arising from impairment. Impairment may be based to the following assumptions: increase depend on market conditions. During Recognition contract delay. It has also assessed the on a number of factors, such as chang- and decrease of selling prices by 5%, a 1% 2010, the real estate market in Moscow of revenue under cottage position regarding any claims arising es in current competitive conditions, change in the discount rate and selling experienced a stabilisation in rental construction contracts subsequent to the reporting date. expectations of growth in the industry, periods becoming one year longer. If the rates and in demand. During 2011, The Group operates a large number of increased cost of capital, changes in the selling price of land increased /decreased there was improvement on real estate construction contracts in respect of cot- Following a detailed review of the future availability of financing, tech- by 5%, the carrying value of investment market. Access to finance continues to tage construction. In order to determine Group’s construction contracts, manage- nological obsolescence, discontinuance property would have increased/decreased be restricted. Significant uncertainties whether the revenue under such con- ment is satisfied that the revenue and of service, current replacement costs by USD 52 838 thousand (31 December remain, particularly in respect of the tracts should be recognised as revenue profit for such contracts in the reporting and other changes in circumstances 2010: USD 50 680 thousand). If the length Group’s land bank where no active under construction contracts or revenue period were recognised appropriately. that indicate impairment exists. The of selling period increased for one year, market can be observed. from sales of goods, management determination of the recoverable amount the carrying value of investment property assessed such criteria as the customer’s Recognition of revenue of a cash-generating unit involves would have decreased by USD 111 805 Assessment of net ability to impact construction details from sales of land plots, the use of estimates by management. thousand (31 December 2010: USD 105 272 realisable value of the cottage and determined that the finished cottages, town Methods used to determine the value in thousand). If the discount rate increased/ of inventories customer has such ability upon signing houses and apartments use include discounted cash flow-based decreased by 1%, the carrying value of in- Estimates of net realisable value of the contract prior to certain stage of The Group determines the time of methods, which require the Group vestment property would have decreased/ inventories are based on the most construction. This threshold was deter- recognition of revenue from sales of land to make an estimate of the expected increased by USD 47 490 thousand (31 reliable evidence available at the time mined at the level of 70% completion of plots, completed cottages, town houses future cash flows from the cash-gener- December 2010: USD 47 683 thousand). the estimates are made. These estimates property. Therefore, if the contract is and apartments in cottage communities ating unit and also to choose a suitable take into consideration fluctuations of signed prior to achievement of 70% com- based on their analysis of the time of discount rate in order to calculate the The fair value of properties under prices and inventory cost, among other pletion of the cottage, such contract is transfer of key risks and rewards to the present value of those cash flows. These development is based on the income things, relating to events occurring sub- classified as construction contract (IFRS customer. estimates, including the methodologies approach. In accordance with this sequent to the period end to the extent (IAS) 11 ‘Construction contracts’) and rev- used, may have a material impact on the approach, the value is determined that such events confirm conditions enue and cost associated therewith are Impairment of property, fair value and, ultimately, the amount of based on estimated future cash receipts existing at the end of the period. recognised in proportion to its comple- plant and equipment any impairment. generated by the asset and the related tion. If the contract is signed after 70% of Determining whether property, plant costs. The principal assumptions un- In assessing net realisable value of the completion is achieved, IAS 18 ‘Revenue’ and equipment are impaired requires an Claims provisions derlying the estimation of the fair value land plots and cottage communities in- is applied instead of IAS 11. estimation of the value in use of an asset The consolidated statement of financial are those related to: expected capital cluded in the Group’s inventory balance, or a cash-generating unit. In assessing position as at 31 December 2011 and 2010 expenditures, the expected receipt of management used selling prices as per If the contract is classified as a con- value in use, the estimated future cash includes claims provision amounting contractual rentals, expected future current price lists as adjusted for expect- struction contract, then determination flows are discounted to their present to USD 4 255 thousand and USD 7 247 market rentals; expected vacancy rates, ed discounts granted to customers. of the outcome of the contract fulfil- value using a pre-tax discount rate that thousand respectively. This provision future maintenance requirements, and ment requires assessment of costs to reflects current market assessments reflects the best estimation of manage- discount and capitalisation rates. Based on the assessment of invento- complete, the customers’ ability to of the time value of money and the ment in respect of potential losses related ries as of 31 December 2011 and 2010, comply with the payment terms of the risks specific to the asset for which the to the risk of cancellation of construction The fair value of commercial property management of the Group believes that contract, and the consequences of any estimates of future cash flows have not contracts with customers. The final -ex under development (represented by all necessary adjustments have been delays by the Group in completing its been adjusted. As at 31 December 2011 pected outcome of construction contracts A. I. Raikin retail and office centre made to state inventories at their net contract obligations. no signs of impairment were observed. depends on a number of factors. If the in Moscow) included in the Group’s realisable value where it is lower than The discount rate as at 31 December 2010 level of claims to the Group increases in consolidated financial statements at 31 cost in the Group’s consolidated state- Management considered the detailed cri- was 15%. In 2010, the Group recognised the future, the effective liabilities may be December 2010 is the result of a management of financial position. If selling teria for the recognition of revenue from an impairment loss from property, plant considerably higher. ment valuation of cost of potential sale prices increased or decreased by 5% as of construction contracts in terms of assess- and equipment amounting to USD 8 361 of current object. In 2011 this object was 31 December 2011, the carrying value of ment of probability of completion of such thousand. sold (Note 7). inventories would be increased by USD contract. In order to make the above es-

156 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 157 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.4 Critical Accounting Estimates and 6 CONSOLIDATED 6.5 property, Plant and Equipment FINANCIAL STATEMENTS Judgements in Applying Accounting FINANCIAL STATEMENTS Policies

Current taxes Deferred income tax Property, Plant and Equipment Russian tax, currency and customs Deferred tax assets are reviewed at each legislation is subject to varying inter- period end and reduced to the extent that pretations which changes occurring it is no longer probable that sufficient frequently. Further, the interpretation taxable profit will be available to allow (in thousands of US dollars) Land and Fittings and Trans-port, Furniture Construc- Total buildings fixtures machinery and office tion in of tax legislation by tax authorities as all or part of the deferred tax asset to be and equip- equipment progress applied to transactions and activity of utilised. The estimation of that prob- ment the Group’s entities may not coincide ability includes judgements based on Cost with that of management. As a result, the expected performance of the Group. 16 248 2 601 19 319 3 098 6 206 47 472 tax authorities may challenge transac- Various factors are considered to assess Balance at 1 January 2010 tions and the Group’s entities may be the probability of the future utilization of Additions 4 452 25 36 35 1 601 6 149 assessed additional taxes, penalties and deferred tax assets, including past operat- Assets put into operation - - - 12 (12) interest, which can be significant. In ing results, operational plan, expiration Disposals - (1 250) (620) (633) (1 190) (3 693) Russia periods remain open to review by of tax losses carried forward, and tax Disposal of subsidiaries (Note 30) - (52) (417) (259) (1 077) (1 805) the tax and customs authorities with re- planning strategies. If actual results differ Transfer to investment property (Note 6) (12) - - - - (12) spect to tax liabilities for three calendar from these estimates or if these estimates Transfer to inventories - - - - (76) (76) years preceding the year of review. Under must be adjusted in future periods, the fi- Translation difference 905 48 1 020 20 (41) 1 952 certain circumstances reviews may cover nancial position, results of operations and Balance at 31 December 2010 21 593 1 372 19 338 2 273 5 411 49 987 early periods. cash flows may be negatively affected. In Additions 189 77 436 393 2 803 3 898 the event that the assessment of future Assets put into operation - - - 2 (2) - utilization of deferred tax assets must be Transfer to investment property (Note 6) (4 561) - - - - (4 561) reduced, this reduction will be recognised Disposals (4 434) (222) (324) (5) (453) (5 438) in the consolidated statement of compre- Translation difference (99) (39) (452) (129) (486) (1 205) hensive income. Balance at 31 December 2011 12 688 1 188 18 998 2 534 7 273 42 681

The Group recognises deferred taxation Accumulated depreciation on fair value changes to investment Balance at 1 January 2010 1 210 1 799 10 233 1 734 2 703 17 679 property assets at the Russian statutory Accrued for the year 602 203 2 614 449 - 3 868 rate. Tax that is ultimately payable upon Recognition of loss from impairment of premises, plant and - - 6 151 - 2 210 8 361 realisation of the assets can be affected equipment by the specific tax regulations applicable Disposals - (1 250) (446) (366) (1 161) (3 223) to the disposal transaction and may vary Disposal of subsidiaries (Note 30) - (52) (338) (231) (1 077) (1 698) depending upon a number of factors. The Translation difference 90 26 815 40 (22) 949 Group may also realise the value of an Balance at 31 December 2010 1 902 726 19 029 1 626 2 653 25 936 asset through the generation of income Accrued for the year 630 244 260 421 1 555 from holding the asset which may lead Disposals (544) (133) (315) (5) (453) (1 450) to a differing taxation treatment. Tax Translation difference (43) (25) (423) (97) (102) (690) ultimately payable upon realization of Balance at 31 December 2011 1 945 812 18 551 1 945 2 098 25 351 the asset may therefore differ from the Carrying amount amounts reflected in the consolidated 19 691 646 309 647 2 758 24 051 financial statements. At 31 December 2010 At 31 December 2011 10 743 376 447 589 5 175 17 330

158 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 159 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.5 Property, Plant and Equipment 6 CONSOLIDATED 6.6 Investment Property FINANCIAL STATEMENTS FINANCIAL STATEMENTS

As of 31 December 2011, no property, plant and equipment were pledged as collateral Investment Investment Property under loans and borrowings received by the Group. In 2011, the Group capitalised interest on loans within construction in progress of USD 308 thousand (2010: 0). Property

(in thousands of US dollars) 2011 2010 In 2011, the Group did not identify any signs of impairment of property, plant and equipment.

In 2010, the Group reviewed the recoverable amount of its property, plant and equip- Balance at 1 January 874 294 1 272 899 ment. The recoverable amount of property, plant and equipment was determined The Group’s investment property is on the basis of their value in use. As a result of this review, the Group recognised an represented by land with indefinite future Additions 599 78 178 impairment loss from property, plant and equipment of USD 8 361 thousand, Part use located in different Russian regions. of this loss in amount USD 6 151 thousand refer to premises and buildings owned by The basis of fair valuation of investment Transfer from property, plant and equipment 4 561 12 the Group and located in Canada. This property refers to the ‘frame-panel houses’ property and valuation assumptions are segment. Its cost was determined by evaluating future cash flows using a 15% dis- summarised in Note 4. Disposals (1 093) (28 298) count rate. The remaining amount of USD 2 210 thousand refers to a fully impaired commercial property development project. Changes in fair value as a result of revaluation 110 444 (443 539)

Translation difference (56 674) (4 958)

Balance at 31 December 932 131 874 294

At 31 December 2011, investment proper- During 2011, the Group sold 3 ha of ty with a carrying value of USD 249 385 land located in Mytishinsky District thousand (31 December 2010: USD 135 455 and transferred 25 ha of land located in thousand) was transferred as collateral Dmitrovsky Region to individuals free of for received loans (Note 17). charge. Total loss from these transactions amounted to USD 839 thousand. This During 2011, the Group incurred loss was reflected in losses from disposal operating expenses of USD 622 thousand of investment property and investment (2010: USD 1 223 thousand) with regard property under development in the to investment property. These expenses consolidated statement of comprehensive mainly include land tax. income.

160 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 161 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.6 Investment Property 6 CONSOLIDATED 6.7 Investment Property FINANCIAL STATEMENTS FINANCIAL STATEMENTS under Development

The carrying amounts of land by region are as follows: Investment

Property under (in thousands of US dollars) 2011 2010 Development 31 December 2011 31 December 2010 Type Area, ha Net book value Area, ha Net book value of authorized Balance at 1 January 50 000 53 300 (in thousands (in thousands use of US dollars) of US dollars) Additions 155 10 631

Klinsky District Moscow Region 10 676 261 520 10 676 262 300 A/c, SPT Disposals (51 616) - The basis of fair valuation of investment Mytishinsky District, Moscow Region 1 124 297 015 1 110 228 410 A/c, IHC properties and valuation assumptions are summarised in Note 4. In September 2011, Changes in fair value - (13 535) Dmitrovsky District, Moscow Region 7 488 276 802 7 513 292 020 A/c the only project disposed from investment property under development was A.I. Raikin Kalyazinsky District, Tver Region 3 986 10 050 3 986 8 730 A/c, IHC Retail and Entertainment Centre. This Translation difference 1 461 (396) property was sold to a third party for USD Kashinsky District Tver Region 7 975 34 328 7 975 27 965 A/c 50 000 thousand. The loss from the disposal of this property was USD 1 616 thousand. Balance at 31 December - 50 000 Kesovogorsky District, Tver Region 3 635 3 176 3 635 3 003 A/c

Odintsovsky District, Moscow Region 30 45 700 30 48 657 A/c, LHC

Suzdalsky District, Vladimir Region 611 1 191 611 1 097 A/c

Yuriev-Polsky, Vladimir Region 2 848 2 349 2 848 2 112 A/c

Total 38 373 932 131 38 384 874 294

During 2010 the Group sold 836 ha of land with carrying amount of USD 28 219 thou- A/c- for agricultural use; sand located in Dmitrovsky Region to a related party and 29 ha of land with carrying SPT - specially protected territories; amount of USD 79 thousand located in Mytischy Region to a third party. The gain from IHC - individual housing construction; sale to the third part amounted to USD 311 thousand. The loss from the sale of land to LHC - low-height housing construction the related party amounted to USD 27 348 thousand (Note 30).

162 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 163 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.8 Inventories 6 CONSOLIDATED 6.8 Inventories FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Inventories Inventories recorded at cost and net realisable value are as follows: Residential property under development held for sale, includes cottages, apart- (in thousands of US dollars) 31 Decem- 31 Decem- ments in low-height buildings, town- ber 2011 ber 2010 houses and other residential properties (in thousands of US dollars) 31 December 31 December under construction and development 2011 2010 forming a part of the Group’s cottage Inventories with period of realization above one year communities (Note 1).

Land under development held for sale (a) 158 902 189 331 At cost 291 848 437 142 Residential property under development held for sale includes property in respect Residential property under development 96 414 104 833 At net realisable value 73 742 76 546 held for sale (b) of which the Group has concluded construction contracts with a completion Total 365 590 513 688 Infrastructure (c) 25 622 15 482 degree of more than 70% and property which the Group builds for sale without Total inventories with period of realization construction contracts. 280 938 309 646 above one year During 2011, the Group capitalised (a) Land under development held for sale borrowing costs of USD 19 954 thousand (c) Infrastructure Inventories with period of realization during the year (2010: USD 3 757 thousand) within Land under development held for sale inventories. includes land in the Group’s cottage Infrastructure includes cottage com- Land under development held for sale (a) 25 210 41 322 communities (Note 1) and comprises the munities’ infrastructure facilities to be In 2011, the Group recognised a decrease following main groups: subsequently sold or transferred to com- Residential property under development 24 350 45 855 in the value of inventories of USD 39 851 mercial organisations or non-commercial held for sale (b) thousand (2010: USD 43 326 thousand). ⦁⦁ land plots with houses which the partnerships. Net realisable inventory provision com- Group builds under construction Infrastructure (c) 1 141 10 576 prised at 31 December 2011 USD contracts; (d) Finished goods 54 823 thousand. (31 December 2010: USD Finished products (d) 30 813 101 196 43 173 thousand). ⦁⦁ land plots offered by the Group for sale Finished goods include cottages, without construction contracts. apartments in low-height buildings and 3 138 5 093 Other inventories At 31 December 2011, inventories with a townhouses whose construction was carrying value of USD 86 224 thousand (31 (b) Residential property under develop- completed as at the reporting date. Total inventories with period of realization 84 652 204 042 December 2010: USD 151 137 thousand) ment held for sale during the year were provided as collateral for received loans (Note 17).

Total inventories 365 590 513 688

164 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 165 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.9 Investments Held to Maturity 6 CONSOLIDATED 6.10 Prepayments FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Investments Held Prepayments

to Maturity (in thousands of US dollars) 31 December 31 December (in thousands of US dollars) 31 December 31 December 2011 2010 2011 2010

Promissory notes issued by banks 9 523 - Prepayments 23 897 21 674 (neither overdue nor impaired) (Standard&Poor’s RUA+ rated) Less provision for impairment of (8 093) (3 071) prepayments

Total investments held to maturity 9 523 - Total prepayments 15 804 18 603

Movements in the doubtful debt provisions for 2011 and 2010 are as follows:

(In thousands of US dollars) 2011 2010

Balance at 1 January 3 071 7 898

Accrual of provision for impairment 7 053 3 082 during the year

Bad debts written off (1 356) -

Disposal of subsidiaries (Note 30) - (7 749)

Translation difference (675) (160)

Balance at 31 December 8 093 3 071

Changes in the provisions for advances issued during the reporting period are recorded in other expenses (Note 28).

166 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 167 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.11 Receivables 6 CONSOLIDATED 6.11 Receivables FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Receivables The analysis by credit quality of receivables at 31 December 2011 and 31 December 2010 is as follows: (in thousands of US dollars) 31 December 31 December 2011 2010

(in thousands of US dollars) 31 Decem- 31 Decem-

Financial assets within receivables ber 2011 ber 2010

At 31 December 2011 accounts receivable in amount of USD 18 087 Receivables under construction contracts 13 999 27 881 Neither past due nor impaired 18 087 30 740 thousand (31 December 2010: USD (Note 22) 30 740 thousand) was not overdue or impaired, and there were not Total neither past due nor impaired 18 087 30 740 any cases of delays with payment Trade receivables 3 793 2 448 previously. These debtors don’t have an external individual credit rating. Past due but not impaired The Group evaluated these debtors as Other receivables 886 508 sustainable. - less than 180 days overdue 286 - The analysis of financial risks with Provision for doubtful debts (143) (97) regard to financial assets within receivables is provided in Note 34 - from 181 to 360 days overdue 162 - Total financial assets within receivables 18 535 30 740 According to the Group’s management opinion, the estimated fair Total past due but not impaired 448 - value of financial assets within Value added tax recoverable 1 345 1 871 receivables approximates their carrying value. Past due and impaired Prepaid current income tax 1 050 4 023

- from 181 to 360 days overdue - 97 Deferred costs 311 736

- over 360 days overdue 143 - Other taxes prepaid 725 175

Total past due and impaired 143 97

Total receivables 21 966 37 545

Provision for impairment of receivables (143) (97)

Total financial assets within receivables 18 535 30 740

168 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 169 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.12 loans Issued 6 CONSOLIDATED 6.13 Cash and Cash Equivalents FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Loans Issued Cash and

Cash Equivalents 31 Decem- 31 Decem- (in thousands of US dollars) ber 2011 ber 2010

Short-term deposits with banks with a maturity of less than 3 months 16 924 7 479 (in thousands of US dollars) Interest rate Currency 31 December 31 December 2011 2011 At 31 December 2011, short-term rouble- denominated deposits with banks were Rouble-denominated accounts with banks 2 763 2 220 placed at 4,25–5,5% p. a. with a maturity Loans issued (unrated) 3,0%-11% US dollars, 8 867 - not later than 1 February of 2012 Russian roubles (31 December 2010: 2,7% p. a. with a Currency-denominated accounts with banks 1 784 2 407 maturity of 16 days).

According to the Group’s management Cash in hand 4 10 Total loans issued 8 867 - the estimated fair value of cash and cash equivalents does not differ significantly

from their carrying value. Total cash and cash equivalents 21 475 12 116

The analysis by credit quality of cash equivalents is provided in the table below:

(in thousands of US dollars) 31 December 2011 31 December 2010

Bank balanc- Term Bank balanc- Term es payable on deposits es payable on depos- demand demand its

Neither past due nor impaired

- RUAA+ rated by S&P 1 949 10 915 1 440 5 000

- A (positive) by Expert RA - 6 009 - -

- Unrated 2 598 - 3 187 2 479

Total cash equivalents 4 547 16 924 4 627 7 479

170 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 171 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.14 Share Capital 6 CONSOLIDATED 6.15 Additional Capital FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Share Capital Additional

31 December 31 December Capital 31 December 31 December 2011 2010 (in thousands of US dollars) 2011 2010

Authorised Number of ordinary shares Revenue from issue of shares 1 916 947 1 916 947 authorised for issuance with nominal value RR 1 000 per share, pcs 25 280 221 17 180 000 In September 2011, an extraordinary In 2010, the additional remuneration Revenue from purchase of treasury shares 84 - meeting of shareholders of JSC programme for management determined on OPIN resolved to decrease JSC OPIN the basis of share prices, related to previous (Company) share capital through pur- periods, in the amount of USD 10 447 Including: Underwriters’ services (25 280) (25 280) chasing by the Company of a portion of thousand was transferred from additional shares for maintaining shares’ value. Number of treasury shares with nominal value paid-in capital to uncovered loss. The purchase price was determined on 59 428 - RR 1 000 per share, pcs Legal and consulting services (4 253) (4 253) the basis of market prices and amounted to RR 955.65 per Company’s one registered ordinary share. As a result of this transaction 59 428 ordinary shares Total additional capital 1 887 498 1 887 414 were bought out. Movements in share capital (in thousands of US dollars)

Ordinary shares issued and fully paid

At 1 January and 31 December 2010: 15 280 221 ordinary shares at par value of RR 1 000 each 570 570

Repurchase of treasury shares: 59 428 ordinary shares (1 903)

At 31 December 2011: 15 220 793 ordinary shares at par value of RR 1 000 each 568 667

172 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 173 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.16 Income Tax 6 CONSOLIDATED 6.16 Income Tax FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Income Tax The relationship between the income tax expense and the Group’s accounting profit for the years ended 31 December 2011 and 2010 is provided below: (in thousands of US dollars) 2011 2010

(in thousands of US dollars) 2011 2010 Deferred income tax 18 768 (95 142)

Current income tax 13 968 7 584 Profit/ (loss) before tax 65 172 (612 201)

At the Russian statutory income tax rate of 20% 13 035 (122 440) Total 32 736 (87 558)

Effect of the difference in tax rates in countries other than the Russian Federation 3 761 2 694 The Group’s income was subject to income tax on the basis of the following rates:

Tax effect of non-deductible expenses: (in thousands of US dollars) 2011 2010

Effect of exchange differences 2 173 1 847

Russian Federation 20% 20%

non-deductible expenses for sale of shares 2 419 652

Cyprus 10% 10%

intercompany transactions 1 923 22 071

USA 35% 35%

loss from construction contracts for the reporting period 3 438 65 Canada 26,5% 29%

interest on loans 1 430 -

The Group calculates income tax for the current period based on tax accounts main-

tained and prepared under the Russian tax regulations which may differ from IFRS. other 4 557 7 553

The Group is subject to certain permanent tax differences with regard to certain income and expense items due to the fact that certain income and expenses are not Income tax expense/ (credit) 32 736 (87 558) deductible.

Deferred tax reflects the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Temporary differences as at 31 December 2011 and 2010 relate mostly to different methods of income and expense recognition, as well as to recorded values of certain assets.

174 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 175 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.16 Income Tax 6 CONSOLIDATED 6.16 Income Tax FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Tax consequences of change of temporary differences between carrying amount of assets and liabilities in purpose of (in thousands of US dollars) 1 January Recognised Disposal of Charged to oth- 31 December preparation of the consolidated financial statements and their basis for calculation of income tax are presented below: 2010 in profit subsidiar- er comprehen- 2010 or loss ies sive income

(in thousands of US dollars) 31 December Recognised Translation 31 December Deferred tax assets 2010 in profit difference 2011 or loss Property, plant and equipment 579 241 9 (25) 804

Deferred tax assets Investment property 24 374 85 050 - (1 192) 108 232

Property, plant and equipment 804 157 (50) 911 Investment property under development 1 045 2 704 - (39) 3 710

Investment property 108 232 (22 280) (3 870) 82 082 Prior years’ losses carried forward 22 714 (20 743) 2 558 197 4 726

Investment property under development 3 710 (3 848) 138 - Receivables - 3 460 - - 3 460

Prior years’ losses carried forward 4 726 1 392 (383) 5 735 Payables 89 (107) (1) 19 -

Receivables 3 460 1 838 (352) 4 946 Total deferred tax assets 48 801 70 605 2 566 (1 040) 120 932

Total deferred tax assets 120 932 (22 741) (4 517) 93 674 Deferred tax liabilities

Deferred tax liabilities Inventories (57 886) 25 095 4 993 191 (27 607)

Inventories (27 607) 4 269 1 172 (22 166) Receivables (1 353) 833 556 (36) -

Payables, loans and borrowings (1 391) (296) 101 (1 586) Payables - (1 391) - - (1 391)

Total deferred tax liabilities (28 998) 3 973 1 273 (23 752) Total deferred tax liabilities (59 239) 24 537 5 549 155 (28 998)

Net deferred tax asset/ (liability) 91 934 (18 768) (3 244) 69 922 Net deferred tax (liability) /asset (10 438) 95 142 8 115 (885) 91 934

Reflected in the consolidated statement of financial position: Reflected in the consolidated statement of financial position:

Deferred tax asset 195 883 181 213 Deferred tax asset 127 366 195 883

Deferred tax liability (103 949) (111 291) Deferred tax liability (137 804) (103 949)

Net deferred tax asset 91 934 69 922 Net deferred tax (liability) /asset (10 438) 91 934

176 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 177 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.16 Income Tax 6 CONSOLIDATED 6.17 loans and Borrowings FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Tax loss carry forwards The Group also has unrecognised Loans and Borrowings The analysis of financial risks of loans In 2011, fixed interest rates for rouble-de- potential deferred tax assets in respect and borrowings received is provided in nominated bank loans varied between The Group has recognised potential deferred tax assets in respect of unused tax of deductible temporary differences of Note 34. The analysis of the fair value of 12,4% and 14% (2010: no rouble-denominat- loss carry forwards of USD 5 735 thousand (2010: USD 4 726 thousand). The tax USD 3 935 thousand (2010: USD 4 485 loans and borrowings received is provided bank deposits attracted). In 2011, fixed loss carry forwards expire as follows: thousand). ed in Note 35. interest rates for currency-denominated bank loans varied between 9% and 11% Drefer ed tax related (2010: between 9,75% and 11%). In 2011, the to subsidiaries floating interest rate for currency-denomi- (in thousands of US dollars) 31 December 31 December The Group has not recorded deferred tax nated bank loans varied from Libor plus 8% 2011 2010 (in thousands of US dollars) 31 December 31 December 1 January liabilities in respect of temporary dif- to Libor plus 10% (2010: Libor plus 10%). 2011 2010 2010 ferences of USD 143 687 thousand (2010: USD 145 573 thousand) on investments In 2011 fixed interest rate for curren- Tax loss carry-forwards expiring by the end of: in subsidiaries as the Group is able to cy-denominated borrowings was 15% control the timing of the reversal of Long-term bank loans 31 070 17 460 233 191 (2010: varied between 12% and 15%). In those temporary differences and does 2010 fixed interest rate for rouble-de- 31 December 2011 - 3 659 not intend to reverse them in the fore- nominated borrowings was 18%. seeable future. Long-term borrowings - - 67 016

31 December 2012 - - Total long-term loans and borrowings 31 070 17 460 300 207

31 December 2013 - - Short-term bank loans 203 632 270 154 94 330

31 December 2014 - - Short-term borrowings 82 653 57 818 7 747

31 December 2015 - - Total short-term loans and 286 285 327 972 102 077 borrowings 31 December 2016 4 787 5 328

Total loans and borrowings 317 355 345 432 402 284 31 December 2017 986 433

After 31 December 2017 22 902 16 885

Total tax loss carry forwards 28 675 26 305

178 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 179 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.17 loans and Borrowings 6 CONSOLIDATED 6.18 Payables FINANCIAL STATEMENTS FINANCIAL STATEMENTS

In 2011, as a result of the restructuring of the loan portfolio the Group incurred Payables additional expenses of 10% of the total loan portfolio as at 31 December 2011 related to (in thousands of US dollars) 31 December 31 December receipt of borrowed funds. These expenses are deducted from the debt principal and 2011 2010 depreciated over the life of the debt liabilities. This transaction significantly affected the effective interest rate. The above transaction was caused by liquidity deficit in the credit market at the time when the Group borrowed the funds. Trade payables to suppliers and service providers 11 475 19 637 At 31 December 2011, the long-term loan of USD 103 121 thousand (2010: USD 99 765 thousand) was reclassified into short-term loans due to non-compliance with financial covenants. After the reporting date this non-compliance was removed following Lease payable 699 - the restructuring aimed at repayment of this loan (Note 36).

At 31 December 2011, investment property with a carrying value of USD 249 385 thou- Other short-term payables 18 502 20 949 sand (2010: USD 135 455 thousand) was provided as collateral for received loans (Note 6).

At 31 December 2011, inventories with a carrying value of USD 86 224 thousand Total financial liabilities within payables 30 676 40 586 (2010: USD 151 137 thousand) were provided as collateral for received loans (Note 8).

JSC OPIN subsidiaries act as guarantors on loans received by JSC OPIN from ING Other long-term payables 125 - Bank N. V., VTB Bank (Deutschland) AG, Raiffeisenbank LLC, JSC ACB Rosbank and JSC Moscow Credit Bank. Advances received 2 894 6 621 At 31 December 2011, the total amount of undrawn credit facilities was USD 7 122 thousand (2010: nil). Payables on settlements with staff 681 151

Other liabilities under construction contracts 8 514 -

Total payables 42 890 47 358

The analysis of financial risks with regard to payables is provided in Note 34.

The Group’s management believes that the estimated fair value of the payables approximates their carrying value.

180 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 181 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.19 Provisions 6 CONSOLIDATED 6.20 Advances Received from Customers FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Provisions Litigation Guarantee commitments Advances Received At 31 December 2011, completion dates The Group has guarantee commitments (in thousands of US dollars) 31 31 under some of the Group’s construction on elimination of construction defects in from Customers December December projects expired. Previously, a number sold cottages, townhouses and apart- 2011 2010 of claims have been lodged against the ments. A provision of USD 3 644 thou- Group on the part of its customers as sand was recognised in the consolidated a result of such delays. The provision financial statements as at the end of 2011 represents the Group’s evaluation of lia- with regard to the expected number of Advances received for property under development 62 339 150 472 bilities under construction contracts and claims on guarantees which was deter- was calculated with due consideration of mined on the basis of the expected level the historical risk level and the current of costs for elimination of construction Advances received for property under development level of notices of claim. defects. It is expected that the balance as under construction contracts (Note 22) 5 383 16 186 of 31 December 2011 will be fully used or reversed by the end of 2016.

Total advances received from customers 67 722 166 658

(in thousands of US dollars) Litigation Guarantee Other Total commitments reserves

Balance at 31 December 2009 - - - -

Increase in provision charged to profit or loss 7 272 - - 7 272

Translation effect (25) - (25)

Balance at 31 December 2010 7 247 - - 7 247

Creation/ (recovery) of provisions recognized in profit and loss (1 608) 3 992 1 439 3 823

Utilisation of provision (1 246) - - (1 246)

Translation difference (138) (348) (125) (611)

Balance at 31 December 2011 4 255 3 644 1 314 9 213

182 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 183 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.21 Current Tax Liabilities 6 CONSOLIDATED 6.22 Construction Contracts FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Current Tax Liabilities Construction Contracts

(in thousands of US dollars) 31 31 (in thousands of US dollars) 31 31 December December December December 2011 2010 2011 2010

Current income tax liabilities 7 441 1 874 Cumulative incurred construction costs plus recognised profit less recognised losses as of the reporting date 80 954 92 684 Other taxes payable 1 803 7 653

Less: progress billings (80 852) (80 989)

Total current tax liabilities 9 244 9 527

Total 102 11 695

Receivables under construction contracts (Note 11) 13 999 27 881

Advances received under construction contracts included in advances received from customers for inventories (Note 20) (5 383) (16 186)

Loss recognised within other payables (Note 18) (8 514) -

Total 102 11 695

The Group conclude contracts for construction of cottages and objects of infrastructure. A part of contracts for construction of cottages and most of contracts for construction of objects of infrastructure are classified as contracts for which revenues and cost of sales are recognized at percentage of completion (Note 2).

184 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 185 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.23 Revenue from and Cost 6 CONSOLIDATED 6.24 Revenue from Sales of Residential FINANCIAL STATEMENTS of Construction Contracts FINANCIAL STATEMENTS Property and Land Plots

Revenue from Revenue from Sales and Cost of Construction (in thousands of US dollars) 2011 2010 of Residential Property (in thousands of US dollars) 2011 2010 Contracts and Land Plots

Revenue from cottage construction Cottages and land plots 95 298 61 259

Revenue recognition by completion percentage 1 449 10 632 Townhouses 72 763 37 292

Revenue adjustment for cancellable and potentially cancellable contracts and as a result of reviewed Apartments 55 627 3 603 assumptions on completion percentage and general costs (10 074) (31 395) Total revenue from sales of residential Revenue from infrastructure construction property and land plots 223 688 102 154

Revenue recognition by completion percentage 8 685 27 792

Revenue from construction contracts 60 7 029

Cost of cottage construction

Cost recognition by completion percentage (1 425) (8 296)

Cost adjustment for cancellable contracts and as a result of reviewed assumptions on completion percentage and general costs 2 430 18 671

Recognition of identified loss (756) -

Cost of infrastructure construction

Cost recognition by completion percentage (9 458) (27 505)

Recognition of identified loss (11 531) (3 359)

Cost of construction contracts (20 740) (20 489)

186 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 187 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.25 Cost of Sales by Nature 6 CONSOLIDATED 6.26 Selling, General FINANCIAL STATEMENTS FINANCIAL STATEMENTS and Administrative Expenses

Cost of Sales by Nature Cost of sold residential property and land plots in 2010 and 2011 by nature: Selling, General

and Administrative (in thousands of US dollars) 2011 2010 Expenses (in thousands of US dollars) 2011 2010

Payroll 13 556 8 071

Subcontractors services 105 922 40 678 Advertising 3 410 1 396

Rent 2 167 1 488 Cost of land plots 33 077 33 896

Consulting services 1 889 1 422

Indirect expenses 7 026 1 883 Land tax and property tax 1 764 2 876

Capitalized interest expenses 1 176 31 Insurance contributions to the pension fund 844 421

Insurance contributions to other non-budget funds 881 644 Total cost of sales of residential property and land

plots 147 201 76 488 Other expenses 9 680 9 952

Total selling, general and administrative expenses 34 191 26 270 Cost of goods sold includes:

(in thousands of US dollars) 2011 2010

Cost of materials 20 138 19 313

Payroll 8 736 8 851

Depreciation 1 388 2 926

Other expenses 8 401 7 138

Total cost of goods sold 38 663 38 228

188 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 189 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.27 Financial Costs 6 CONSOLIDATED 6.28 Other Expenses FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Financial Costs Other Expenses

(in thousands of US dollars) 2011 2010 (in thousands of US dollars) 2011 2010

Interest on bank loans 36 236 33 368 Impairment of advances paid and receivables written off 7 498 4 217

Interest on other borrowings 4 633 9 401 Other provisions (Note 19) 1 439 - Less interest capitalised within inventories (Note 8) and fixed assets (Note 5) (20 262) (3 757) Loss on disposal of property, plant and equipment 891 -

Total financial costs 20 607 39 012 Write off of non-recoverable VAT 393 13 857

Penalties paid 253 1 852

Charitable contributions 217 -

Provision for litigation (Note 19) - 7 272

Loss on disposal of other assets - 657

Other expenses 525 5 361

Total other expenses 11 216 33 216

190 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 191 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.29 Earnings per Share 6 CONSOLIDATED 6.30 Disposal of Subsidiaries FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Earnings Disposal In September 2011 the Group sold its sub- During 2011, the following subsidiaries sidiary Maryina Rosha Plaza LLC for USD were disposed of by the Group: per Share of Subsidiaries 50 000 thousand. The Company owned A.I Raikin Retail and Entertainment In November 2010, the Group sold 100% Centre (under construction) classified share in JSC Hotel Novoslobodskaya to as investment real estate under devel- related parties for a cash consideration of The calculation of the basic and diluted earnings per share is based on the following data: opment, in substance this transaction USD 24 119 thousand. was a sale of investment property under development by the Group (Note 7). In November 2010, the Group sold a 100% share in LLC OPIN Plaza to related parties Basic and diluted earnings Weighted average Net profit/ (loss) Earnings/(loss) for a cash consideration of USD 8 128 per share number of shares for the year per share thousand. outstanding during (USD’000) (USD’000) the period In November 2010, the Group sold a 100% share in Estate Management LLC and OI Management Company LLC along with For the year ended 31 December 2011 15 274 284 32 436 2.12 shares in their subsidiaries Pavlovo LLC, Lukino LLC, Lukino-Invest LLC, Regional development LLC, OPIN Yug LLC, Pavlovo For the year ended 31 December 2010 15 280 221 (524 643) (34.33) Podvorye LLC, Stroy Invest Group LLC to a third party for a cash consideration of USD 193 thousand.

Net cash inflow on disposal is as follows:

(in thousands of US dollars)

Consideration received in cash 32 440

Less: cash and cash equivalent balances disposed off (1 666)

Net cash inflow on disposals 30 774

In October 2010, the Group sold its subsidiary, Lukus LLC, for a cash consideration of USD 871 thousand. This subsidiary held land plots classified as investment property and in substance this transaction represented a disposal of investment property by the Group (Note 6).

192 оао «опин» и дочерние предприятия JSC OPIN and subsidiaries ANNUAL REPORT 2011 193 6 CONSOLIDATED 6.30 Disposal of Subsidiaries 1 OVERVIEW FINANCIAL STATEMENTS 2 BUSINESS REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 6 CONSOLIDATED 6.31 related Party Transactions FINANCIAL STATEMENTS The analysis of assets and liabilities of the disposed subsidiaries in 2010 and calculation of gain on disposal is as follows:

(in thousands of US dollars) Related Party Parties are generally considered to be The related parties of the Group with related if the parties are under common which the Group had transactions Transactions control, or one party has the ability to during the reporting period are classified Assets control the other party or can exercise into the following quality categories: significant influence over the other Goodwill 504 party in making business decisions or (a) enterprises that directly or indirectly exercise joint control. In considering through one or more intermediaries Property, plant and equipment (Note 5) 107 each possible related party relation- control, or are controlled by, or are ship, attention is directed to the sub- under common control with, the Intangible assets 3 stance of the relationship, not merely Group; the legal form. Deferred tax assets (Note 16) 23 (b) key management personnel, that is persons having authority and Inventories 34 942 responsibility for planning, direct- ing and controlling the activities of Value added tax recoverable 991 the Group, including directors and officers of the Group; Trade receivables 407

Other receivables 4 783

Loans issued to third parties 1 830

Cash and cash equivalents 1 666 The Group’s balances with related parties as at 31 December 2011 and 2010 are as follows: Total assets 45 256

Liabilities (in thousands of US dollars) 31 December 2011 31 December 2010

Deferred tax liabilities (Note 16) 8 138

Balances Balances Short-term loans and borrowings 7 620 with related parties with related parties under common con- under common con- Trade and other payables 2 654 trol trol

Other taxes payable 15

Short-term loans and borrowings 25 130 21 656 Current income tax liabilities 10

Advances from customers 970 Cash and cash equivalents 6 008 -

Total liabilities 19 407

Net assets disposed off (25 849) During 2011–2010 the Group received a loan from a related party at 15% p. a. in USD with capitalisation of interest. In 2011, the Group placed a deposit with a related bank Cash consideration received 32 440 in USD at 4,5% p. a. maturing on 1 February 2012.

Gain on disposal 6 591

194 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 195 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.31 related Party Transactions 6 CONSOLIDATED 6.32 Segment Information FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Related party transactions in 2011 and 2010 are set out below: Segment Products and services from which reportable segments derive their revenues

Information The Group has identified the General Director as its chief operating decision maker and management reports used by him to oversee operations and make decisions on (in thousands US dollars) Year ended Year ended resource allocation serve as a basis for information presented. 31 December 2011 31 December 2010

Related party Key management Related party Key manage- The Group has determined operating segments based on the information that is transactions personnel trans- transactions ment personnel reported to the Group’s chief operating decision maker for the purposes of resource actions transactions allocation and assessment of segment performance. For management purposes the Group is organised into business units based on their products and services, and has four reportable operating segments: Revenue under construction contracts - - - 523

⦁⦁ land holdings (except for land plots classified as inventories); Revenue from sales of residential property - - 1 954 53 and land plots ⦁⦁ residential property (including land plots classified within inventories);

⦁⦁ commercial property development; Revenue from rendering other services - - 1 435 -

⦁⦁ frame-panel houses; Interest income 69 - - - ⦁⦁ Other operations mainly include consulting services rendered by the Group and contracts for construction of other properties. Financial expenses (3 478) - (1 673) -

Information regarding the Group’s reportable segments is presented below. Loss on disposal of investment properties - - (27 348) - (Note 6)

Profit/ (loss) on disposal of investment - - 10 682 - properties (Note 30)

Key management personnel compensation

Payroll and related taxes - 2 220 - 985

Payments on termination of labour - 63 - 38 contracts

Insurance - 10 - 26

Total key management personnel 2 293 1 049 compensation

196 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 197 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.32 Segment Information 6 CONSOLIDATED 6.32 Segment Information FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Segment revenue and results

The following is an analysis of the Group’s revenue and results from continuing operations by reportable segment: 2010 Land plots Residential Commercial Frame-panel Other Total (in thousands of US dollars) property property de- houses for the velop-ment Group

2011 (in thousands Land plots Residential Commercial Frame-panel Other Total of US dollars) property property de- houses on the Group velopment Revenue

Revenue External sales 323 109 398 - 39 107 2 433 151 261

External sales 533 224 410 - 44 104 1 120 270 167 Total revenue 323 109 398 - 39 107 2 433 151 261

Total revenue 533 224 410 - 44 104 1 120 270 167 Operating expenses (1 834) (102 683) - (46 608) (262) (151 387)

Operating expenses (737) (181 336) - (46 729) (278) (229 080) Inventory write-down - (43 326) - - - (43 326)

Inventory write-down - (39 851) - - - (39 851) Impairment of assets - - (2 224) (6 151) 14 (8 361)

Profit on change in fair value of investment Loss from change in fair value of investment property 110 444 - - - - 110 444 property (443 539) - (13 535) - - (457 074)

Loss on investment property disposal (838) - (1 617) - - (2 455) Loss on investment property disposal (27 037) - - - - (27 037)

Claims provision - 1 608 - - - 1 608 Claims provision - (7 272) - - - (7 272)

Provision on advances paid - (6 995) - - - (6 995) (Loss) /gain on disposal of subsidiaries - - (11 674) - - (11 674)

Profit/ (loss) before tax and financing Profit/ (loss) before tax and financing activities by segments 109 402 (2 164) (1 617) (2 625) 842 103 838 activities by segments (472 087) (43 883) (27 433) (13 652) 2 185 (554 870)

Finance costs (20 607) Interest expense (39 012)

Loss on foreign currency operations (2 950) Loss on foreign currency operations (3 782)

Unallocated expenses, net (15 109) Unallocated expenses, net (14 537)

Income tax (32 736) Income tax 87 558

Profit for the year 32 436 Loss for the year (524 643)

198 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 199 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.32 Segment Information 6 CONSOLIDATED 6.32 Segment Information FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Unallocated (expenses) /income, net The accounting policies of reportable Segment assets and liabilities Segment assets are those operating assets segments are the same as the Group’s that are employed by a segment in its accounting policies described in Note operating activities and that are either 2. Profit/ (loss) before tax in segment directly attributable to the segment or (in thousands of US dollars) 2011 2010 (in thousands of US dollars) 31 December 31 December table represents the profit earned or the can be allocated to the segment on a 2011 2010 loss incurred by each segment with- reasonable basis. out allocation of certain general and Selling, general and administrative expenses (12 178) (10 464) administrative costs, other unallocated Segment liabilities are those operating income/ (expenses), interest expense, Segment assets liabilities that result from the operating gain/loss on foreign currency operations activities of a segment and that are ei- Interest income 468 1 402 and income tax. This measure is reported Land plots 1 084 007 1 040 336 ther directly attributable to the segment to the chief operating decision maker for or can be allocated to the segment on a the purposes of resource allocation and Residential property 410 261 566 350 reasonable basis. Gain on disposal of subsidiaries - 18 265 assessment of segment performance.

Commercial property development - 55 315

Gain/ (loss) on disposal of property, plant and equipment (891) 1 520 Frame-panel houses 19 094 25 935

Other 11 1 240 Other income 823 684

Total segment assets 1 513 373 1 689 176

Impairment of advances paid Unallocated assets 62 775 40 607 and receivables written off (503) (4 217)

Total assets 1 576 148 1 729 783 Other provisions (1 440) - Segment liabilities

Penalties paid (253) (1 852) Land plots 225 242 265 523

Residential property 143 815 278 526 Write off of non-reimbursable VAT (393) (13 857)

Commercial property development - 6 212 Loss on disposal of other assets - (657) Frame-panel houses 7 098 10 294

Other expenses (742) (5 361) Other - 41

Total segment liabilities 376 155 560 596 Total unallocated expenses, net (15 109) (14 537)

Unallocated liabilities 181 560 119 575

Total liabilities 557 715 680 171

200 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 201 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.32 Segment Information 6 CONSOLIDATED 6.32 Segment Information FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Other segment information Information on geographical location of the Group’s revenue from external Geographical information customers and non-current assets except for investments held to maturity and The Group operates in four principal deferred tax assets is as follows: geographical areas: Russian Federation, Canada, USA and Japan. (in thousands of US dollars) 2011 2010

(in thousands of US dollars) 2011 2010 Additions to non-current assets

Revenue by geographical location Land holdings 41 32 042

Russian Federation 226 221 112 153

Residential property 2 759 1 329 Canada 26 584 25 134

Commercial property development - 5 012 Japan 15 021 12 119

USA 2 254 1 750 Frame-panel houses 337 111

Other 87 105

Other 12 -

Total revenue by geographical location 270 167 151 261

Unallocated capital expenditures 363 13

Total additions to non-current assets 3 512 38 507

31 December 31 December (in thousands of US dollars) 2011 2010 Segment depreciation

Residential property 157 160 Non-current assets by geographical location

Russian Federation 939 081 933 554 Frame-panel houses 1 164 3 333

Canada 12 269 17 452 Other 3 56

USA 360 942 Unallocated depreciation 231 319

Total non-current assets by geographical location 951 710 951 948 Total depreciation 1 555 3 868

202 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 203 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.33 Capital Commitments 6 CONSOLIDATED 6.33 Capital Commitments FINANCIAL STATEMENTS and Contingencies FINANCIAL STATEMENTS and Contingencies

Capital Commitments Capital commitments administration is gradually strength- Tax liabilities arising from intercompany As Russian tax legislation does not Compliance with loan As at 31 December 2011, the Group did ening, including the fact that there is a transactions are determined using actual provide definitive guidance in certain covenants or conditions and Contingencies not have any significant commitments higher risk of review of tax transactions transaction prices. It is possible, with areas, the Group adopts, from time to The Group has certain restrictive cove- on future capital expenditures. As of without a clear business purpose or with the evolution of the interpretation of the time, interpretations of such uncertain nants with regard to loans and borrow- 31 December 2010, the Group’s capital tax incompliant counterparties. Fiscal transfer pricing rules, that such transfer areas that reduce the overall tax rate of ings. Non-compliance with these cove- commitments under concluded contracts periods remain open to review by the prices could be challenged. The impact the Group. While management cur- nants may lead to negative consequences approximated USD 38 000 thousand. authorities in respect of taxes for three of such developments cannot be reliably rently estimates that the tax positions for the Group, including default. At 31 calendar years preceding the year of estimated, however it may be significant and interpretations that it has taken December 2011 and 31 December 2010, Operating leases review. In certain cases a tax review may in terms of the entity’s financial position can probably be sustained, there is a the Group observed partial non-compli- The Group did not have any significant cover earlier periods. and/or business activities in general. possible risk that outflow of resources ance with certain financial covenants as future rental payments under non-can- will be required should such tax posi- regards the loans from ING Bank N. V. in cellable operation leases in effect as at 31 Russian transfer pricing legislation The Group includes several companies tions and interpretations be challenged the amount of USD 103 121 thousand (31 December 2011 and 2010. enacted during the current period is incorporated outside of Russia. Tax by the relevant authorities. The impact December 2010: USD 99 765 thousand) effective prospectively to new transac- liabilities of the Group are determined on of such developments cannot be reliably and from VTB BANK (DEUTSCHLAND) AG Commitments on tions from 1 January 2012. It introduces the assumption that these companies are estimated, however it may be significant in the amount of USD 34 042 thousand (31 cultivation of significant reporting and documentation not subject to Russian profits tax because in terms of the entity’s financial position December 2010: USD 66 186 thousand), agricultural land requirements. Russian transfer pricing they do not have a permanent establish- and/or business activities in general. namely a decrease in the net value of There are certain risks of forced termi- legislation applicable to transactions ment in Russia. This interpretation of the Group’s net assets under IFRS below nation of the right to agricultural land performed before 31 December 2011 or relevant legislation may be challenged Pension the prescribed minimal level (USD 1 261 in case of its significant degradation, or earlier provides the possibility for tax but the impact of any such challenge and retirement plans 721 thousand). In connection with this in case the land has not been used for authorities to make transfer pricing cannot be reliably estimated currently In accordance with Russian law all of the non-compliance the above loans were agricultural purposes during three years. adjustments and impose additional tax by the Group’s management; however, Group’s employees are eligible to receive reclassified into short-term loans and liabilities in respect of all controllable it may be significant to the financial state pension benefits. At 31 December borrowings. In both cases there is a significant transactions, provided that the trans- position and/or the overall operations of 2011 and 31 December 2010, the Group interval between establishing the fact of action price differs from the market the Group. was not liable for any supplementary In 2012, the Group successfully refi- degradation (non-use) of land and termi- price by more than 20%. Controllable pensions, post-retirement health-care, nanced the ING Bank N. V. loan and, nation of rights, during which violations transactions include transactions At 31 December 2011 in addition to the insurance benefits or retirement indem- thereby, could settle the non-compliance can be eliminated. In addition, termina- with interdependent parties, as deter- above transfer pricing matters and nities to its current or former employees. with the financial covenants set by the tion of rights requires compliance with mined under the Russian Tax Code, all potential additional tax charges from loan agreement with this bank. certain procedures. The Group has set cross-border transactions (irrespective non-resident Group companies the control procedures to decrease the risk whether performed between related or Group has other possible tax obligations Also, in March 2012, the Group signed a of forced termination of rights to its ag- unrelated parties), transactions where from exposure to tax risks other than supplement agreement with VTB Bank ricultural land. Part of the land is leased the price applied by a taxpayer differs by significant, primarily related to income (Deutschland) AG in accordance with to third party agricultural producers, the more than 20% from the price applied tax, which the management cannot which the equity ratio under the loan rest is cultivated. in similar transactions by the same reliably estimate due to inaccuracies agreements with this bank has been taxpayer within a short period of time, in interpretation of tax legislation decreased. As a result, the Group became Taxation contingencies and barter transactions. Significant diffi- and insufficient court practice. Man- in compliance with all covenants under Russian tax legislation which was culties exist in interpreting and applying agement intends to vigorously defend the loan agreements with this Bank. enacted or substantively enacted at the transfer pricing legislation in practice. their position and interpretations that end of the reporting period is subject to Any prior existing court decisions may were used for determining recognised varying interpretations when being ap- provide guidance, but are not legally taxes in these consolidated financial plied to the transactions and activities of binding for decisions by other, or higher statements if they are challenged by the the Group. Consequently, tax positions level, courts in the future. authorities. taken by management and the formal documentation supporting the tax positions may be successfully challenged by relevant authorities. Russian tax

204 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 205 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.34 Risk Management Policy 6 CONSOLIDATED 6.34 Risk Management Policy FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Risk Management Risk management is essential for the Contractors: The Group seeks additional The Group’s maximum exposure to credit risk is generally reflected in the Ma rket risk Group. The main risks inherent to the credit risk mitigation instruments, The group is exposed to market risks aris- Policy carrying amounts of financial assets. The maximum level of credit risk as of the Group’s operations include credit risk, including safety deposits, work comple- reporting date was as follows: ing from open positions on a) currency liquidity risk, interest rate risk, foreign tion guarantees issued by reliable banks, and b) interest-bearing assets and lia- exchange risk and other price risks. A and attracts professional advisors for bilities. Management sets limits on the description of the Group’s risk manage- providing quality control and technical value of risk that may be accepted, which (in thousands of US dollars) 31 December 31 December ment policies in relation to these risks is supervision. is monitored on a daily basis. However, 2011 2010 provided below. the use of this approach does not prevent Property buyers: As a rule prepayment is losses outside of these limits in the event Credit risk required from each potential buyer. of more significant market movements. The Group is exposed to credit risk which Non-current assets is the risk that one party to a financial Banks and financial institutions: the Group The impact of market risk presented instrument will fail to discharge an undertakes due diligence procedure with below is based on a change in one factor obligation and cause the other party to regard to banks and financial institu- Investments held to maturity (Note 9) 9 523 - with all other variables held constant. incur a financial loss. The Group does not tions, which are service providers for the This can hardly occur in practice, and hedge its credit risks. Group, to ensure their creditworthiness. changes in several factors can correlate, Current assets The Investment Committee establishes e. g., a change in interest rates and The Group structures the levels of credit limits for aggregate credit exposure to currency rates. risk it undertakes by placing limits on banks and financial institutions. Such Cash and cash equivalents (Note 13) 21 471 12 106 the amount of risk accepted in relation limits are subject to quarterly review. The Currency risk to one counterparty/customer, or groups Group maintains accounts with several Currency risk is the risk that the value of of counterparties/customers. Prior to en- banks to ensure the flexibility of its risk financial instruments will fluctuate due Financial assets within receivables (Note 11) 18 535 30 740 tering into material contracts, the Group management policy implementation to changes in foreign exchange rates. undertakes due diligence procedures, which includes checking the financial The Group is exposed to currency risk Loans issued to third parties (Note 12) 8 867 - condition and creditworthiness of the with regard to revenue, purchases and counterparty, its experience, expertise borrowings denominated in currencies and reputation in the subject area of other than functional currencies of the Total maximum exposure to credit risk 58 396 42 846 co-operation. The Group also obtains Group’s subsidiaries. The majority of a legal opinion from its in-house or these transactions are denominated in independent legal counsel regarding the US dollars and Canadian dollars (CAD). validity and enforceability of contracts At 31 December 2011, the Group had three counterparties (2010: three counterparties), and other material documentation in with aggregate receivables of USD 13 908 thousand (2010: USD 24 260 thousand) or The Group’s management monitors connection with the subject transaction. 75% of the total trade receivables, receivables under construction contracts and other currency rate fluctuations on a perma- receivables (2010: 79%). nent basis and takes necessary measures The Group’s counterparties/customers to mitigate this risk. In the context of mainly include buyers or property and The Group has deposits with two banks (2010: also two banks) which creates a certain the weakening of RR/USD and CAD/USD banks. The Group has developed addi- level of credit risk concentration. The Group monitors credit risk concentration by exchange rates, the Group maintains tional procedures to mitigate credit risk placing deposits with reliable credit institutions internationally rated not below B+. part of its cash in foreign currencies, on each category. namely US dollars. In addition, initially, prices for the Group’s products are set in notional units linked to the US dollar exchange rate — stated by Central Bank of Russian Federation. In such a way the Group implicitly has opportunity to decrease currency risks.

206 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 207 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.34 Risk Management Policy 6 CONSOLIDATED 6.34 Risk Management Policy FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Financial instruments by currency

(in thousands of US dollars) USD RUB CAD Total at (in thousands of US dollars) USD RUB CAD Total at 31 December 31 December 2011 2010

Financial assets Financial assets

Investments held to maturity (Note 9) - 9 523 - 9 523 Cash and cash equivalents (Note 13) 5 635 4 692 1 789 12 116

Cash and cash equivalents Financial assets within receivables (Note 11) 1 733 27 826 1 181 30 740 (Note 13) 607 19 675 1 193 21 475

Total financial assets 7 368 32 518 2 970 42 856 Financial assets within receivables (Note 11) - 16 374 2 161 18 535

Financial liabilities Loans issued (Note 12) 6 522 2 345 - 8 867

Financial liabilities within payables (Note 18) 1 766 35 424 3 396 40 586 Total financial assets 7 129 47 917 3 354 58 400

Loans and borrowings Financial liabilities (Notes 17) 339 611 5 821 - 345 432

Financial liabilities within payables (Note 18) 1 155 25 679 3 842 30 676 Total financial liabilities 341 377 41 245 3 396 386 018

Loans and borrowings Net financial position (Notes 17) 260 825 56 530 - 317 355 31 December 2010 (334 009) (8 727) (426) (343 162)

Total financial liabilities 261 980 82 209 3 842 348 031 US dollar strengthening/weakening against Russian Rouble by 10% at 31 December 2011 would have increased/decreased the profit for 2011 by USD 25 531 thousand (2010: USD 33 444 thousand). This analysis assumes that all other variables, in particular interest rates, remain constant and does not take into account the differences on translation to the Group’s presentation currency. Net financial position at 31 December 2011 (254 851) (34 292) (488) (289 631)

208 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 209 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.34 Risk Management Policy 6 CONSOLIDATED 6.34 Risk Management Policy FINANCIAL STATEMENTS FINANCIAL STATEMENTS

Interest rate risk Other price risk The Group recognises the capital in- Interest rate risk arises from the possi- Other price risk arises from possible tensive nature and low liquidity of real bility that changes in interest rates for changes in fair values or future cash estate. Therefore, the Group uses its best (in thousands Weighted On Less From From 3 From Contractual financial instruments will affect the flows as a result of changes in market efforts to fund a significant portion of of US dollars) average in- demand than 1 1 to 3 months 1 to 5 amount value of financial instruments with fixed prices (apart from the impact of interest future cash needs through long-term bor- terest rate month months to 1 year years at 31 December 2011 interest rates or future cash flows related rate and currency risks) for financial rowings and to maintain a high propor- to financial instruments with floating instruments. The Group is exposed to tion of equity financing. The Group also interest rates. this risk with regard to payables to con- tries to partially finance the development Financial liabilities tractors. The policy in relation to this risk of its residential projects by receiving The Group’s financial liabilities at 31 De- stipulates signing construction contracts advance payments under construction cember 2011 have both fixed and floating with contractors on a fixed price basis. contracts. Financial liabilities interest rates. Therefore, a sensitivity analysis is not within payables - 16 356 6 002 2 760 4 986 3 362 33 466 presented as the risk of fluctuation of The maturity analysis of the Group’s The Group’s Treasury function performs future cash flows with regard to payables financial liabilities as of 31 December analysis of current interest rates on an is insignificant as of the reporting date. 2011 and 2010 is detailed as follows. The Loans and borrowings 11,9 176 578 27 803 8 801 116 491 32 131 361 804 annual basis and prepares forecasts for tables have been drawn up based on the the next year. Depending on the fore- Liquidity risk undiscounted cash flows of financial cast, the management makes decisions Liquidity risk is the risk that the Group liabilities based on the earliest date on Total financial liabilities 192 934 33 805 11 561 121 477 35 493 395 270 whether it would be more beneficial will not be able to settle all liabilities which the Group can be required to pay. to obtain financing on a fixed-rate or as they fall due. The Group’s liquidity The table includes both interest and variable-rate basis. In case of changes position is carefully monitored and principal cash flows. in the current market fixed or variable managed. The Group has established rates the management may consider budgeting and cash flow planning refinancing of a particular debt on more procedures to ensure it has adequate cash (in thousands Weighted On Less From From 3 From Contractual favourable terms. available to meet its payment obligations of US dollars) average in- demand than 1 1 to 3 months 1 to 5 amount in due course. terest rate month months to 1 year years at31 December The Group does not have any financial 2010 assets with variable interest rates. The Group’s management monitors these risks by means of maturity analysis, Sensitivity analysis for floating interest determining the Group’s strategy for the Financial liabilities rates is not presented as most of the next financial period. Current liquidity Group’s loans and borrowings are on a is managed by the Treasury Department, fixed rate basis and consequently the risk which deals in financial markets for Financial liabilities of fluctuations in floating interest rates is current liquidity support and cash flow within payables - 17 050 10 615 2 259 10 662 - 40 586 deemed to be insignificant by the Group’s management. management. Loans and borrowings 10,1 174 469 - 23 698 150 407 19 599 368 173

Sensitivity analysis of fixed interest rates is not presented as the Group does not have any fair valued assets or liabilities Total financial liabilities 191 519 10 615 25 957 161 069 19 599 408 759 with fixed interest rates. Therefore, changes in interest rates do not affect the Group’s profit or loss. The Group’s management takes actions to settle short-term debt liabilities. The settlement plan is provided in Note 1.

210 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 211 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.34 Risk Management Policy 6 CONSOLIDATED 6.35 Financial Instruments: Presentation FINANCIAL STATEMENTS FINANCIAL STATEMENTS by Category and Fair Values

Management of Capital Financial Carrying amounts of financial assets and liabilities The Group manages its capital mainly to as of 31 December 2011 and 2010 are as follows: 31 December 31 December ensure that it will be able to continue as Instruments: (in thousands of US dollars) 2011 2010 a going concern while maximising the Presentation return to its equity holders and other by Category Financial Assets Held-to-maturity Loans issued stakeholders and to maintain an optimal (in thousands of US investments and receivables capital structure to reduce the cost of Long-term and short-term loans and borrowings and Fair Values dollars) capital. (Note 17) 317 355 345 432 31 31 31 31 December December December December To maintain and regulate the capi- 2011 2010 2011 2010 tal structure, the Group may return Cash and cash equivalents (Note 13) (21 475) (12 116) capital to its equity holders, issue new shares or sell assets to reduce the debt. Non-Current Assets

The amount of capital that the Group Net borrowed funds 295 880 333 316 managed as at 31 December 2011 was USD 1 018 433 thousand (2010: USD 1 049 612 Investments held to maturity thousand). (Note 9) 9 523 - - - Equity 1 018 433 1 049 612

Main sources of finance of the Group are issuing additional shares for sharehold- Current assets ers, offering shares in capital markets Net debt to equity ratio 29,05% 31,76% and attracting borrowed funds from Financial assets within lending and non-banking institutions. receivables (Note 11) - - 18 535 30 740

The Group’s management reviews the The Group did not comply with exter- debt to equity ratio and failed to comply capital structure on a semi-annual basis. nally imposed capital requirements with equity requirements under certain Loans issued (Note 12) - - 8 867 - As part of this policy, the Group’s man- throughout 2011 and 2010. These loan agreements (Note 33). Subsequent to agement evaluates the cost of capital and requirements were set in the Group’s the reporting date, the Group reached an risks associated with each capital item. loan agreements under which the Group agreement on decreasing the minimum Cash and cash equivalents should maintain the debt to equity ratio equity level and took actions to repay (Note 13) - - 21 475 12 116 below 67% and its equity should not be a loan under another loan agreement, below a certain fixed level. The Group which currently enables it to comply complied with the requirements to the with all requirements (Note 36). Total financial assets 9 523 - 48 877 42 856

212 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 213 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6.35 Financial Instruments: Presentation 6 CONSOLIDATED 6.36 Events after the Reporting Date FINANCIAL STATEMENTS by Category and Fair Values FINANCIAL STATEMENTS

Events after In January 2012, 59 428 treasury shares In March 2012, the Group signed a bought by the Company from its share- supplement agreement with VTB Bank Financial Liabilities Financial liabilities the Reporting holders in the reporting period were (Deutschland) AG in accordance with (in thousands of US dollars) carried at amortised cost Date redeemed. which the equity ratio under the loan agreements with this bank was de- In January 2012, the Group signed a loan creased. As a result, the Group was in 31 December 31 December agreement with JSC ACB Rosbank for compliance with all covenants under the 2011 2010 obtaining a loan in the amount equiva- loan agreements with this bank. lent to USD 99 900 thousand. Under this loan agreement, this amount should be In March 2012, the Company received Non-Current Liabilities used for repayment of the loan to ING a notification on increase of the con- Bank N. V. Thereby, the Group could trolling interest of Onexim Holdings remedy non-compliance with covenants Limited up to 63,75% and that Onexim Long-term loans and borrowings (Note 17) 31 070 17 460 with regard to the loan agreement with Group Limited has the right to dispose ING Bank N. V. The repayment schedule of 83,17% of the Company’s share due to for this new loan is from 2-d quarter 2013 indirect ownership. Current Liabilities up to 2-d quarter 2014.

In January-April 2012 the Group achieved Short-term loans and borrowings agreements to obtain debt financing in and accrued interest (Note 17) 286 285 327 972 amount USD 158 258 thousand, under pledge of investment real estate and inventory, Also in January 2012, Group Financial liabilities within payables (Note 18) 30 676 40 586 prolonged settlement period of one from non bank loans in the amount USD 18 323 thousand to one year. Total financial liabilities 348 031 386 018

Management believes that the fair value of financial assets at 31 December 2011 and 31 December 2010 does not differ significantly from their carrying amounts. In management’s assessment the fair value of financial liabilities at 31 December 2011 amounts to USD 343 117 thousand (31 December 2010: USD 386 018 thousand).

214 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 215 1 OVERVIEW 1 OVERVIEW 2 BUSINESS REVIEW 2 BUSINESS REVIEW 3 OPERATING REVIEW 3 OPERATING REVIEW 4 FINANCIAL REVIEW 4 FINANCIAL REVIEW www.opin.ru 5 GOVERNANCE 5 GOVERNANCE 6 CONSOLIDATED 6 CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

INFORMATION Annual Shareholders’ Meeting Computershare Registrator LLC (prior Depositary Information Regarding stockholding, reregistering 2010.— Natianalnaya Registratsionnaya Com- (issue of global depository receipts): of shares, stockholders are to contact FOR STOCKHOLDERS The Annual General Meeting of Share- pany LLC) — one of the largest registrars to OPIN Registrar — Computershare holders is determined by the Board and in Russian Federation, a branch of the Full and short titles: Registrator LLC. scheduled for June 2012. international group of companies Com- putershare. The Bank of New York Mellon, BNY Registered address: Registrar information: Mellon Computershare Registrator LLC serves 121108, Moscow, 8 Ivana Franko St. The registrar of OPIN is Limited Liability more than 800 customers (more than Registered address: Company Computershare Registrator. 1.3 client accounts) including large phone.: (495) 926–81–60 corporations as well as small joint stock One Wall street, New York, New York Full and short titles of the Registrar: companies. Among its customers are 10286, USA fax: (495) 926–81–78 Aeroflot — Russian Airlines JSC, Polyus Limited Liability Company Comput- Zoloto JSC, OJSC MMC Norilsk Nickel, Phone.:212 815 5948 e-mail: [email protected] ershare Registrator (Computershare ROSBANK (OJSC JSCB), NOVATEK JSC, Registrator LLC. Megafon JSC, DOMSTROY LLC. Fax: 212 571 3050 Stockholders can also contact OPIN:

Registered address: Currently Computershare Registrator Contacts Antonina Litvinova LLC has the highest equity capital ratio 121108, Moscow, 8 Ivana Franko St. among other registrars and is a leader by Head of Corporate Governance/Corporate shareholder investment and insurance Secretary phone.: (495) 926–81–60 coverage (in accordance with the registrars rating of INFI PARTAD, 2009). Phone.: (495) 363–22–11 (ext. 24–12) fax: (495) 926–81–78 For more than ten years Computershare e-mail: [email protected] e-mail: [email protected] Registrator LLC has been a member of PARTAD (Professional Association of Reg- Mailing address: 123104, Moscow, Tver- Number, issue date, validity of the Reg- istrars, Transfer-Agents and Depositar- skoy Boulevard, 13–1, JSC OPIN istrar’s license carrying on registering of ies) and participates in the committees of owners of securities, entity that issued PARTAD as a member of the Board. the license:

Issue date: 6 September 2002

Number: 10–000–1–00252

Blank: series 03–000397

Validity: unlimited

Issued by: Federal Commission for the Securities Market, Russia

216 JSC OPIN and subsidiaries JSC OPIN and subsidiaries ANNUAL REPORT 2011 217