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A Content 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 con- struction with attention to detail, dedication to customers, market knowledge ▶ р. 8 and a strong vision. Its impressive land bank gives OPIN the flexibility to imple- ment 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 commu- nication 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.