joint stock commercia banl k agrobank · expressing an opinion on the effectivenes os f the...

JOINT STOCK COMMERCIAL BANK "AGROBANK"

Consolidated Financial Statements for the year ended December 31, 2018 and Independent Auditors' Report

Contents

Independent Auditors' Report 1

Consolidated Statement of Financial Position 7

Consolidated Statement of Profit or Loss and Other Comprehensive Income 9

Consolidated Statement of Changes in Equity 11

Consolidated Statement of Cash Flows 13

Notes to the Consolidated Financial Statements

1 Background 15 2 Use of accounting estimates and professional judgments 16 3 Basis of preparation 17 4 Significant accounting policies 21 5 Standards issued but not yet effective 46 6 Cash and cash equivalents 47 7 Due from Other Banks 50 8 Loans and Advances to Customers, including finance lease receivables 51 9 Investment Securities 57 10 Investment in Associates 59 11 Property, Equipment and Intangible Assets 61 12 Other assets 62 13 Due to other banks 63 14 Customer accounts 64 15 Debt securities issued 64 16 Other borrowed funds 66 17 Other liabilities 69 18 Share capital 69 19 Interest income and expense 70 20 Commission Income and Expense 70 21 Other operating income and expenses 71 22 Administrative and other operating expenses 71 23 Income Taxes 71 24 Earnings per share 72 25 Segment Analysis 73 26 Financial Risk Management 80 27 Management of Capital 90 28 Contingencies and Commitments 90 29 Fair Value of Financial Instruments 91 30 Related Party Transactions 93 31 Subsequent events 95

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То the Shareholders and Board of Joint Stock Bank "Agrobank"

We have audited the consolidated financial statements of Joint Stock Bank "Agrobank" (the "Bank") and its subsidiaries (the "Group"), which comprise the consolidated statement of financial position as at 31 December 2018, the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2018, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS).

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of ttie Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (lESBA Code) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in the Republic of Uzbekistan, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the lESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Measurement of expected credit losses ("ECL") on loans and advances to customers

See Notes 4, 8 to the consolidated financial statements.

The key audit matter How the matter was addressed in our audit

Audited entity Joint StocK Bank "Agrobank'.

Tashkent, the Republic of Uzbekistan

JSC LLC "KPMG Audit', a company incorporated under the Laws of the Republic of Uzbekistan, a member flrni of the KPMG netwoK of ind«¥iendent member firms affiliated with KPMG Intematonal Cooperative ( "KPMG Int^-national"). a Swiss entity

JSB "Agrobank" Independent Auditors' Report Page 2

Loans and advances to customers make up 83% of assets and are recognized less the allowance for expected credit losses, regularly reviewed and responsive to assumptions used.

From 1 January 2018, the Group applied the new model for ECL measurement that requires management to apply professional judgement and make assumptions regarding the following key areas:

Timely identification of significant increase in credit risk and default events on loans to customers (Stages 1, 2 and 3 under IFRS 9);

Estimate of probability of default (PD) and loss given default (LGD);

We analyzed main aspects of methodology and policies of the Group regarding ECL measurement for compliance vwth IFRS 9 requirements, including by involving specialists of financial risk management.

To analyze professional judgement applied by management and assumptions made in calculating the ECL allowance for adequacy, we also performed the following audit procedures:

We tested the organization and operating effectiveness of intemal controls for timely classification of loans to Stages of credit risk; For the sample of loans, the potential change in ECL measurement on which may have a significant impact on the consolidated financial statements, we tested the accuracy of Stage assigned by the Group by analyzing linancial and non-financial information on borrowers selected, as well as assumptions and professional judgements used by tiie Group.

For loans issued to large coфorate borrowers, on which the Group measures ECL using own rating model, we assessed total ECL for adequacy by analyzing credit ratings, assigned by independent rating agencies and own ECL model, formed using available information about the financial position and defaults of companies.

For loans to customers classified to Stages 1 and 2, on which tile Group measures ECL on a collective basis, we tested the principles of appropriate models and reconciled 1tie inputs of models to primary documents on a selective basis.

Forecast of expected flows on loans issued to customers classified to Stage 3.

For selected loans classified to Stage 3, ECL allowances on which are assessed on an individual basis, we critically assessed assumptions used by the Group in calculating future cash flows, including value assessment of collaterals and their terms, based on our understanding and available market information. We focused on loans to customers which may potentially have the most significant impact on the consolidated financial statements.


Due to significant scope of loans issued to customers, transition to the new model of ECL and uncertainty inherent to the assessment of ECL allowance, this matter is considered to be a key audit one.

We also ensured that disclosures in the financial statements adequately reflect the Group's exposure to credit risk.

Determination of fair value of other borrowings

See Notes 2,16 to the consolidated financial statements.

The key audit matter How the matter was addressed in our audit

The Group receives a significant portion of targeted financing of its activities from governmental financial institutions within governmental programs. A lot of loans are attracted by the Group under conditions which significantly differ from other borrowings. Due to significant scope of loans provided by governmental financial institutions and significant judgement inherent to estimate of fair value of the specified financial liabilities, this matter is considered to be a key audit one.

We analyzed the resolutions of executive bodies of the Republic of Uzbekistan regarding programs on financing and development of economic sectore, within which the Group attracts financing from governmental financial institutions. To analyze professional judgement applied by management and assumptions made in determining whether the attracted financing is a separate market for adequacy, we considered all criteria of governmental financing programs and interrelation with loans issued by the Group under favourable conditions. We also ensured that disclosures in the consolidated financial statements adequately describe key aspects within significant assumptions made by the Group regarding determination of fair value of financial liabilities.

The consolidated financial statements of the Group as at and for the year ended 31 December 2017 were audited by other auditors who expressed an unmodified opinion on those statements on 4 May 2018.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free ft'om material misstatement, whether due to fraud or error.


In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's financial reporting process.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about w/hether the consolidated financial statements as a v^hole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

— Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

— Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control;

— Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;

— Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern;

— Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation;

— Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated


financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefite of such communication.

The engagement partner on the audit resulting in this independent auditors' report is:

Saidov S.K. Engagement Director Director General of JSC LLC "KPMG Audit"

Kuznetsov A. A. Engagement Partner

Qualification certificate of bank auditor # 16/3 dated 1 February 2019, issued by the Central Bank of the Republic of Uzbekistan.

JSC LLC "KPMG Audit" Tashkent, Uzbekistan

28 June 2019

Joint Stock Commercial Bank "Agrobank" Consolidated Statement of Financial Position

31 December 31 December 1 January

Note 2018 2017 2017 In thousands of Uzbekistan Soums (Restated) (Restated)

ASSETS Cash and cash equivalents 6 1,119,834,357 1,095,912,580 190,000,157 Due from other banks 7 137,789,469 110,551,808 142,546,532 Loans and advances to customers, including finance lease receivables 8 8,619,533,978 3,281,327,366 3,083,417,107 Investment securities g 16,837,819 39,457,283 18,205,865 Investment in associates 10 42,223,208 34,795,129 63,268,295 Deferred income tax assets 23 17,864,492 17,313,478 9,964,557 Property, equipment and intangible assets 11 288,767,406 170,489,447 102,518,713 Other assets 12 50,751,105 66,335,581 29,564,694 Current income tax prepayment 9,924,140 6,123,411 1,052,982 Assets of subsidiary (associate) acquired for

1,052,982

sale 10 75,199,986 128,907,494 -

Non-current assets held for sale - - 985,627

TOTAL ASSETS 10,378,725,960 4,951,213,577 3,641,524,529

LIABILITIES Due to other banks 13 535,294,398 62,575,736 731,128,978 Customer accounts 14 3,002,045,403 1,915,459,201 2,033,525,925 Debt securities issued 15 97,603,731 134,100,529 144,263,906 Other borrowed funds 16 4,483,191,737 1,113,001,268 484,551,885 Other liabilities 17 35,921,603 355,225,720 26,663,341 Current income tax liability 9,718,498 9,694,151 2,066,192 Liabilities of subsidiary acquired for sale - 389,609 -

TOTAL LIABILITIES 8,163,775,370 3,590,446,214 3,422,200,227

Joint Stock Commercial Bank "Agrobank" Consolidated Statement of Profit or Loss and Other Comprehensive Income

In thousands of Uzbekistan Soums Note

31 December 2018

31 December 2017

(Restated)

1 December 2017

(Restated)

EQUITY

Share capital 18 2,188,008,559 1,360,610,347 392,695,931

Share premium Treasury shares Revaluation reserve for investment securities Retained earnings / (Accumulated loss)

18 18

1,412,124 (115,000)

5,430,515 21,061,030

1,412,124 (115,000)

6,725,537 (61,955,326)

1,412,124 (115,000)

8,337,059 (183,752,986)

Equity attributable to the owners of the Bank 2,215,797,228 1,306,677,682 218,577,128

Non-controlling interest (846,638) 54,089,681 747,174

TOTAL EQUITY 2,214,950,590 1,360,767,363 219,324,302

TOTAL LIABILITIES AND EQUITY 10,378,725,960 4,951,213,577 3,641,524,529

*The Group has initially applied IFRS 9 a t 1 January 2018. Under the transition methods chosen, comparative information is not restated (see Note 4). As a result of adoption of IFRS 9 the Group changed presentation of certain captions, comparative information is re-presented accordingly (see Note 4).

Approved for issue and sianed on 28

R.U. Mamat^ulov Chairman of the В

/1,К. Eshmatov hief Accountant

The attached notes form an integral pail of these consolidated financial statements.

Joint Stock Commercial Sank "Agrobani(" Consolidated Statement of Profit or Loss and Other Comprehensive Income

Note 2018 2017 (Restated)'

In thousands of Uzbekistan Soums (Restated)'

Continuing operations:

Interest income calculated using the effective interest nnethod 19 856,558,024 511,433,888 Other interest income 19 3,400,269 6,851,106 Interest expense 19 (268,653,567) (249,750,641)

Net interest income 591,304,726 268,534,353 Provision charge for expected credit losses on debt financial assets 6.7,8 (82,852,143) (14,020,458) Net interest income after provision charge for expected credit losses 508,452,583 254,513,897 Revenue from sales of agricultural machinery 107.913,609 48,239.400 Cost of goods sold (86,108,046) (39,126.716) Net sales revenue 21,805,563 9,112,684 Fee and commission income 20 212,447,282 278,283,709 Fee and commission expense 20 (92,552,487) (72,713,883) Net loss from transactions with foreign currencies (20,675,830) (18,801,813) Dividend income 2,118.471 3,727,475 Other operating income 21 24,189,437 33,502,700 Gains less losses on initial recognition of assets at rates below market 76.407 54,232 Allowance for impairment on other financial assets and и о credit related commitments 13

(506,708) (9,379,297) Loss from investment securities (9,380,333) -

Administrative and other operating expenses 22 (542,865,109) (410,104.732) Share of associates' financial result 10 (361,591) 12,927,818

Profit before tax 102,747,685 81,122,790 Income tax expense 23 (29,758,602) (14,931,295)

PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS 72,989,083 66,191,495

Discontinued operations: Gain on disposal of discontinued operations - 55,772,121

NET PROFIT FOR THE YEAR 72,989,083 121,963,616

Other comprehensive income: Items that maybe reclassified subsequently to profit or loss Investment securities - Net losses arising during the year (1,590,018) (2,067,615) - Income tax recorded directly in other comprehensive income 294,996 456,093

Other comprehensive loss for the year (1,295,022) (1,611,522)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 71,694,061 120,352,094


In thousands of Uzbekistan Soums

Note 2018 2017 (Restated)

Profit rs attributable to: -Owners of the Bank -Non-controlling interest

73,835,721 (846,638)

121,797,660 165,956

Profit for the year 72,989,083 121,963,616

Total comprehensive income is attributable to: - Owners of the Bank - Non-controlling interest

72,540,699 (846,638)

120,186.138 165,956

Total comprehensive income for the year 71,694,061 120,352,094

Earnings per ordinary share for profit from continuing operations attributable to the owners of the Bank, basic and diluted in UZS 24 41 58

Earnings per ordinary share for profit from discontinued operations attributable to the owners of the Bank, basic and diluted in UZS 24 - 49

*The Group has initially applied IFRS 9 at 1 January 2018. Under the transition methods chosen, comparative information is not restated (see Note 4). As a result of adoption of IFRS 9 the Group changed presentation of certain captions, comparative infonnation is re-presented accordingly (see Note 4),

Approved for issue and sianed on 28

Mamatkulo^ ^ Chairman of tFte Bo

shmatov M.K. hief Accountant


Joint Stock Commercial Bank "Agrobank" Consolidated Statement of Financial P o s i t i o n

Attributable to owners of the Bank

In thousands of Uzbekistan Scums

Note Share capital Share premium

Treasury shares

Revaluation reserve for investment

securities

Retained earnings /

(Accumulated loss)

Total Non-controlling

interest

Total equity

Balance as at 31 December 2016 392,695,931 1,412,124 (115,000) 8,337,059 (200,703,499) 201,626,615 747,174 202,373,789 Correction of previous periods" errors 16,950,513 16,950,513 16,950,513 Restated balance as at 1 January 2017 392,695,931 1,412,124 (115,000) 8,337,059 (183,752,986) 218,577,128 747,174 219,324,302 Income for the year Other comprehensive loss - - - (1,611,522)

121,797,660 121,797,660 (1,611,522)

165,956 121,963,616 (1,611.522)

Total comprehensive loss for 2017 - - - (1,611,522) 121,797,660 120,186,138 165,956 120,352,094

Shares issued 18 967,914,416 - - - - 967,914,416 - 967,914,416

Change in non-controlling interest in other subsidiaries 1 - - - - - - 53,176,551 53,176,551

Restated balance as at 31 December 2017 1,360,610,347 1,412,124 (115,000) 6,725,537 (61,955,326) 1,306,677,682 54,089,681 1,360,767,363

''The Group has initially applied IFRS 9 at 1 January 2018. Under the transition methods chosen, comparative infonmation is not restated (see Note 4). As a result of adoption of IFRS 9 the Group changed presentation of certain captions, comparative information is re-presented accordingly (see Note 4).

Joint Stock Commercial Bank "Agrobank" Consolidated Statement of Financial P o s i t i o n

Restated balance as at 1 January 2018

Effect of transition to IFRS 9as at 1 January 2018 (Note 4)

1,360,610,347 1,412,124 (115,000) 6,725,537 (61,955,326)

9,180,635

1,306,677,682

9,180,635

54,089,681 1,360,767,363

9,180,635 Restated balance as at 1 Januafv 2018 1,360,610,347 1,412,124 (115,000) 6,725,537 (52,774,691) 1,315,858,317 54,089,681 1,369,947,998 Income for the year Other comprehensive loss

-

• •

(1,295,022) 73,835,721 73,835,721

(1,295,022) (846,638) 72,989,083

(1,295,022)

Total comprehensive income for 2018 - - - (1,295,022) 73,835,721 72,540,699 (846,638) 71,694,061

Shares issued Disposal of subsidiaries

19 827,398,212 1

- - - - 827,398,212 (54,089,681)

827,398,212 (54,089,681)

Balance as at 31 December 2018 2,188,008,559 1,412,124 (115,000) 5,430,515 21,061,030 2,215,797,228 (846,638) 2,214,950,590

Approved for issue and signed on 28 June 2019.

Maniatkul(J\^.U. / Chairman oHhe Bo

The attached notes form an integral part of these о statements.

Eshmatov M.K. Chief Accountant

Joint Stock Commercial Bank "Agrobank" Consolidated Statement of Financial Position

Note 2018 In thousands of Uzbekistan Soums

2017 (Restated)

Cash flows from operating activities Interest received 821,488,000 435,296,305 Interest paid (241,346,633) (229,423,971) Fees and commissions received 210,972,868 330,307,602 Fees and commissions paid (92,552,487) (74,594,380) Other operating income received 131,741,456 77,683,268 Cost of goods sold (86,108,046) (39,126,716) Personnel expenses paid (351,206,718) (255,142,470) Administrative and other operating expenses paid (147,873,471) (133,641,188) Income tax paid (34,085,998) (16,424,085)

Cash flows from operating activities before changes in operating assets and liabilities 211,028,971 94,934,365

Net (increase) / decrease in: - due from other banks (26,939,467) (335,849,913) - loans to customers, including finance lease receivables (5,355,198,949) (81,654,598) - other assets 7,446,748 (61,048,394)

Net increase / [decrease) in: - debt secuhties issued (35,846,107) (10,279,474) - due to other banks 464,810,038 (661,136,802) - customer accounts 1,088,068,948 (734,826,213) - other liabilities (1,383,652) (67,956,610)

Net cash flows used in operating activities (3,648,013,470) (1,857,817,639)

Cash flows from investing activities Acquisition of property, equipment and intangible assets (149,308,065) (84,335,721) Proceeds from disposal of property, equipment and intangible assets 603,295 Acquisition of investment securities (948,070) (3,856,775) Proceeds from disposal of investments in joint venture 113,348,620 Proceeds from disposal of assets held for sale 985,627 Dividend income received 2,118,471 3,727,475

Net cash flows (used in)/ from investing activities (147,534,369) 29,869,226


In thousands of Uzbe(<istan Soums Note 2018 2017

(Restated) Cash flows from financing activities Issue of share capital Proceeds from other borrowed funds Repayment of other borrowed funds

18 16 16

499,999,999 9,878,968,502

(6,561,637,854)

1,292,717,216 3,434,291,587

(3,071,463,610)

Net cash flows from financing activities 3,817,330,647 1,655,545,193

Effect of exchange rate changes on cash and cash equivalents 2,775,626 1,078,315,643

Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Effect of changes in expected credit losses on cash and cash equivalents

6 24,558,434

1,095,912,580

(636,658)

905,912,423 190,000,157

Cash and cash equivalents at the end of the year 6 1,119,834,357 1,095,912,580

'The Group has initially applied IFRS 9 at 1 January 2018. Under the transition methods chosen, comparative information is not restated (see Note 4). As a result of adoption of IFRS 9 the Group changed presentation of certain captions, comparative information is re-presented accordingly (see Note 4).

Approved for issue and signed on

Mamatkulo\^.U. Chairman or the

Eshmatov M.K. Chief Accountant


Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018

1 Background

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards for the year ended 31 December 2018 for Joint Stock Commercial Bank "Agrobank" (the "Bank") and its subsidiaries (the "Group"). The Bank is a joint stock company limited by shares. The Bank was established in accordance with the regulations of the Republic of Uzbekistan ("Uzbekistan").

The Bank was established in 1995 under the laws of the Republic of Uzbekistan and has operated under the banking license #78 re-issued by the Central Bank of Uzbekistan ("CBU") on 21 October 2017.

Principal activity. The Bank's principal activities are commercial banking, retail banking, operations with securities, foreign currencies and originating loans and guarantees. The Bank accepts deposits from legal entities and individuals and grants loans, transfers payments within Uzbekistan and abroad. The Bank conducts its banking operations from its head office in Tashkent and 178 branches within Uzbekistan as of 31 December 2018 (31 December 2017: 177 branches).

The Bank participates in the state deposit insurance scheme introduced by the Uzbek Law #360-II "Insurance of Individual Bank Deposit" dated 5 April 2002. On 28 November 2008, the President of the Republic of Uzbekistan issued Decree No. UP-4057, according to which in case of the withdrawal of a license of a bank, the State Deposit Insurance Fund guarantees repayment of 100% of individual deposits regardless of the deposit amount.

The Government of Uzbekistan is the ultimate controlling party of the Bank. A substantial volume of the Bank's operations are with entities controlled directly or indirectly by the Government of Uzbekistan. As such, the Bank's strategy reflects the Government's strategy in developing the country's economy. Namely, the Bank plays a significant role in the distribution of funds of the country's budget, which flow through the Bank to different governmental agencies and state owned and controlled entities. In addition, being an agent of the Government in financing cotton and grain related sectors of the economy, the Bank channels funds of the Fund for Agricultural Procurement and Settlements for the state needs under the Ministry of Finance of the Republic of Uzbekistan among state entities related to these sectors

Registered address and place of business. The Bank's registered address is: 43, Mukimiy Street, Tashkent, 100096, Uzbekistan.

Presentation currency. These consolidated financial statements are presented in Uzbek Soums ("UZS"), unless otherwise stated.

Shareholders. At 31 December 2018 and 31 December 2017, the interest of the shareholders in the Bank's capital was as follows:

in % 2018 2017 The Fund of Reconstruction and Development of the Republic of Uzbekistan 56.29 66.65 Ministry of Finance of the Republic of Uzbekistan 37.95 24.03

State Cotton Association "Uzpakhtasanoat" and its member companies 2.11 1.58 Other legal entities (individually hold less than 1%) 3.32 7.22 Other shareholders (individually hold less than 1%) 0.33 0.52 Total 100 100

15


Subsidiary. These consolidated financial statements include the following subsidiaries at 31 December 2018 and 31 December 2017:

Subsidiary Ownership Ownership Country 2018 2017

Industry Year of acquisition

JSC "Pakhta Leasing" "Leader Finance" LLC

51% 100%

51% Uzbekistan 100% Uzbekistan

Leasing Depositary

2006 2004

JSC "Pakhta Leasing" was registered in Tashkent city on 17 March 2006. The main activity is the finance leases of agricultural technical equipment and spare parts.

"Leader Finance" LLC was registered in Tashkent city on 13 September 2004. The activities of the company include depository services, as well as acting as investment agent and an investment consultant.

Uzbekistan business environment

The Group's operations are primarily located in the Republic of Uzbekistan. Consequently, the Group is exposed to the economic and financial markets of the Republic of Uzbekistan which display characteristics of an emerging market. The legal, tax, and regulatory frameworks continue to be developed and are subject to varying interpretations and frequent changes which, together with other legal and fiscal impediments, add to the challenges faced by entities operating in the Republic of Uzbekistan.

During 2017 Uzbekistan experienced significant reforms initiated by the President under the program Action on five priority directions of development of the Republic of Uzbekistan in 2018-2021. For instance, major currency conversion restrictions have been repealed, mandatory sale of foreign currency generated by export sales was abolished, settlement period for export transactions was increased, one-stop-shop of government services was introduced and other positive changes have been implemented.

The consolidated financial statements reflect management's assessment of the impact of the Uzbek business environment on the operations and the financial position of the Group. The actual impact of future business environment may differ from management's assessment.

The Bank's financial position and operating results will continue to be affected by future political and economic developments in Uzbekistan including the application and interpretation of existing and future legislation and tax regulations which greatly impact Uzbek financial markets and the economy overall. Management is unable to predict all developments which could have an impact on the banking sector generally and on the financial position of the Bank in particular.

The key economic indicators for the period of 12 months of 2018 in Uzbekistan were as follows:

• Inflation: 14.3%1 (2017: 14.4%) • Official exchange rates: 31 December 2018: US Dollars ("USD") 1 = UZS 8,336.25 2 (31

December 2017: USD 1 = UZS 8,120.07). • GDP growth 5.1%1 (2017: 5.3%). • Central Bank refinancing rate - 16%2 (2017: 14%).

2 Use of accounting estimates and professional judgments

In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of the Group's accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Judgments

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is included in the following notes:

• Applicable to 2018 only:

1 Source: The State Committee of the Republic of Uzbekistan on Statistics (www.stat.uz) 2 Source: Central Bank of Uzbekistan (www.cbu.uz)

16

http://www.stat.uz

http://www.cbu.uz

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 - classification of financial assets: assessment of the business model within which the assets are held and assessment of whether the contractual terms of the financial asset are solely payments of principal and interest on the principal amount outstanding - Note 4.

- establishing the criteria for determining whether credit risk on the financial asset has increased significantly since initial recognition, determining methodology for incorporating forward-looking information into measurement of ECL and selection and approval of models used to measure ECL - Note 4.

Determination of fair value of the assets with non-market terms

Loans issued by the Group in accordance with the instructions of the authorities do not have similar financial instruments in the market, have been granted under government programs and due to their uniqueness and the specifics of the government lending program and category of borrowers, form a separate market segment. Therefore, the management believes that contractual interest rates are market rates for such loans and therefore the Group initially recognizes loans at fair value, which equals their nominal value.

Loans issued by the Group to other banks under small and medium sized enterprises financing programs, as well as under financing programs of other banks in the agricultural sector, do not have similar financial instruments in the market, have been granted under government programs and orders of the authorities and due to its uniqueness, as well as the specifics of the government program of lending and the category of ultimate counterparties, form a separate market segment. Therefore, the management believes that contractual interest rates are market rates for such loans and the Group initially recognizes such financial instruments at fair value which equals their nominal value.

Determination of fair value of financial liabilities raised on terms other than market terms

The Group's financial liabilities are initially recognized at fair value. Where financial liabilities bear interest at different rates than market rates in order to form related assets, the interest rates of which also do not correspond to market rates taking into account the Group's margin, the nominal value of financial liabilities is recognized as the fair value.

Where liabilities that do not have related assets are raised under terms that are different from market terms, the fair value of the liability is determined using valuation techniques that discount the liability at the interest rate determined as the market average for similar liabilities at the date of initial recognition.

Assumptions and estimations uncertainty

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ended 31 December 2018 is included in the following notes:

• Applicable to 2018 only:

- impairment of financial instruments: determining inputs into the ECL measurement model, including incorporation of forward-looking information - Note 4.

• Applicable to 2018 and 2017:

- impairment of financial instruments - Note 4.

- estimates of fair values of financial assets and liabilities - Note 29.

3 Basis of preparation

Statement of compliance

Theses consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS).

This is the first set of the Group's annual consolidated financial statements to which IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers have been applied.

These consolidated financial statements are based on the journal entries prepared according to the accounting legislation of the Republic of Uzbekistan, adjusted and reclassified in order to comply with IFRS.

The consolidated financial statements are prepared on the historical cost basis except that investment securities are stated at fair value. The accounting policies applied in the preparation of these consolidated financial statements are set out in Note 4. These policies have been consistently applied to all periods presented, unless otherwise stated.

Functional and presentation currency of the consolidated financial statements

17

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 The national currency of the Republic of Uzbekistan is the Uzbek Soum ("UZS"), which is also the Group's functional currency and the currency in which these consolidated financial statements are presented. All financial information presented in UZS is rounded to the nearest thousand unless otherwise stated. Restatement of comparative information

In 2018, the Group decided to restate comparative figures for 2017 and 2016 due to the identification of errors in these periods.

In particular, in preparing the consolidated financial statements for 2018, the Group found that it incorrectly assigned certain loans to customers as impaired as at 31 December 2017 and 2016. As a result, the allowance for impairment losses on loans and advances to customers was overstated at these dates.

The Group also adjusted the error in recognition of interest income in respect of impaired loans for 2017.

The Group incorrectly classified certain investments in associates as Investment securities (Available-for-sale investment securities) as at 31 December 2017. In preparing the consolidated financial statements for 2018, the Group corrected this error. The Group also restated its estimate of the fair value of certain securities and, as a result, adjusted the statement of other comprehensive income.

The effect of the above corrections on the consolidated financial statements as at 31 December 2017 and 1 January 2017 and for 2017 is presented below.

Consolidated Statement of Financial Position at 31 December 2017

Note Before restatement Reclassification Corrections of

errors Restated

ASSETS

Loans and advances to customers, including finance lease receivables

Investment securities

Investment in associates

Deferred income tax assets

EQUITY

Accumulated loss Revaluation reserve for investment securities

10

3,250,167,081

58,390,765

18,538,052

24,058,559

(85,781,368)

8,813,133

(16,257,077)

16,257,077

31,160,285

(2,676,405)

(6,745,081)

23,826,042

(2,087,596)

3,281,327,366

39,457,283

34,795,129

17,313,478

(61,955,326)

6,725,537

Statement of Profit or Loss and other Comprehensive Income for 2017

Note Before restatement

Reclassific ation Corrections of errors Restated

Interest income calculated using the effective interest method

Other interest income

(Recovery of) / provision for loan impairment

Fee and commission income

Profit before tax

Income tax expense

19

20

438,777,072 45,451,917

- 6,851,106

1,071,774 -

330,586,732 (52,303,023)

69,010,476

(9,694,510)

27,204,899

(15,092,230)

12,112,669

(5,236,785)

511,433,888

6,851,106

(14,020,456)

278,283,709

83,756,712

(14,931,295)

18

8

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 NET PROFIT FOR THE YEAR 115,088,087 6,875,529 121,963,616

Other comprehensive income:

Items that are or may be reclassified subsequently to profit or loss Investment securities - Net gains / (net losses) arising during the year

- Income tax recorded directly in other comprehensive income

608,790

(132,716) -

Consolidated Statement of Financial Position at 1 January 2017

(2,676,405)

588,809

(2,067,615)

456,093

Note Before restatement

ASSETS Loans and advances to customers, including

finance lease re ceivables Deferred income tax assets

EQUITY Accumulated loss

8 23

3,061,741,259 14,689,892

(200,703,499)

Corrections of errors

21,675,848 (4,725,335)

16,950,513

Restated

3,083,417,107 9,964,557

(183,752,986)

Changes in accounting policies

The Group has adopted IFRS 9 Financial Instruments from 1 January 2018.

A number of other new standards are also effective from 1 January 2018 but they do not have a material effect on the Group's financial statements.

Due to the transition methods chosen by the Group in applying IFRS 9, comparative information throughout these financial statements has not generally been restated to reflect its requirements.

The adoption of IFRS 15 Revenue from Contracts with Customers did not impact the timing or amount of fee and commission income from contracts with customers and the related assets and liabilities recognized by the Group.

The effect of initially applying these standards is mainly attributed to the following:

- additional disclosures related to IFRS 9 (see Note 4)

IFRS 9 Financial instruments

IFRS 9 sets out requirements for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement. The requirements of IFRS 9 represent a significant change from IAS 39. The new standard brings fundamental changes to the accounting for financial assets and to certain aspects of the accounting for financial liabilities.

As a result of the adoption of IFRS 9, the Group has applied consequential amendments to IAS 1 „Presentation of Financial Statements', which require separate presentation in the statement of profit or loss and other comprehensive income of interest revenue calculated using the effective interest method. Previously, the Group disclosed this amount in notes to the financial statements.

Additionally, the Group has adopted consequential amendments to IFRS 7 „Financial Instruments: Disclosures' that are applied to disclosures about 2018 but have not been applied to the comparative information.

The key changes to the Group's accounting policies resulting from its adoption of IFRS 9 are summarized below.

Classification of financial assets and financial liabilities

IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). IFRS 9 classification is generally based on the business model in which a financial asset is managed and

19

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 its contractual cash flows. The standard eliminates the existing IAS 39 categories of held-to-maturity, loans and receivables and available-for-sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated. Instead, the whole hybrid instrument is assessed for classification. For an explanation of how the Group classifies financial assets under IFRS 9, see Note 4.

IFRS 9 largely retains the existing requirements in IAS 39 for the classification of financial liabilities. However, although under IAS 39 all fair value changes of liabilities designated under the fair value option were recognized in profit or loss, under IFRS 9 fair value changes are generally presented as follows:

• the amount of change in the fair value that is attributable to changes in the credit risk of the liability is presented in other comprehensive income; and

• the remaining amount of change in the fair value is presented in profit or loss.

The Group classifies all financial liabilities at amortized cost.

Impairment of financial assets IFRS 9 replaces the 'incurred loss' model in IAS 39 with an 'expected credit loss' model. The new impairment model also applies to certain loan commitments and financial guarantee contracts but not to equity investments. Under IFRS 9, credit losses are recognized earlier than under IAS 39. For an explanation of how the Group applies the impairment requirements of IFRS 9, see Note 12. Transition Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively, except as described below. Comparative periods have not been restated. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognized in retained earnings and reserves as at 1 January 2018. Accordingly, the information presented as at and for the year ended 31 December 2017 does not reflect the requirements of IFRS 9 and therefore is not comparable to the information presented as at and for the year ended 31 December 2018 under IFRS 9. The Group used the exemption not to restate comparative periods but considering that the amendments made by IFRS 9 to IAS 1 introduced the requirement to present 'interest income calculated using the effective interest rate' as a separate line item in the consolidate statement of profit or loss and other comprehensive income, the Group has reclassified comparative interest income on non-derivative debt financial assets measured at FVTPL and net investments in finance leases to 'other interest income' and changed the description of the line item from 'interest income' reported in 2017 to 'interest income calculated using the effective interest method'. The following estimates have been made on the basis of the facts and circumstances that existed at the date of initial application: - The determination of the business model within which a financial asset is held, - The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL, - The designation of certain investments in equity instruments not held for trading as at FVOCI. - If a debt security had low credit risk at the date of initial application of IFRS 9, then the Group has assumed that credit risk on the asset had not increased significantly since its initial recognition. For more information and details on the changes and implications resulting from the adoption of IFRS 9, see Note 4.

IFRS 15 Revenue from Contracts with Customers IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaced IAS 18 'Revenue', IAS 11 'Construction Contracts and related interpretations'. The Group initially applied IFRS 15 on 1 January 2018 retrospectively in accordance with IAS 8 without any practical expedients. The timing or amount of the Group's fee and commission income from contracts with customers was not impacted by the adoption of IFRS 15. A contract with a customer that results in the recognition of a financial instrument in the Group's consolidated financial statements may be partially in the scope of IFRS 9 and partially in the scope of IFRS 15. In this case, the Group first applies the requirements of IFRS 9 to identify and account for part of the contract. Revenue from the sale of agricultural machinery is recognized when the goods are no longer under the direct physical control of the Group and when the risks of ownership of the goods have been transferred to

20

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 the buyer. The Group recognizes other fee and commission income when or as soon as it satisfies its performance obligation under the contract by providing a service to the customer.

4 Significant accounting policies

Consolidated financial statements Subsidiaries, which are those entities over which the Group has control, are consolidated. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee only if the following conditions are met:

• power over the investee (i.e., the rights that give it the current ability to govern the relevant activities of the investee);

• the Group has exposure associated with variable income from participation in the investee, or rights to receive such income;

• the Group is able to affect its returns by exercising its power over the investee. Generally, it is assumed that the majority of voting rights give rise to control. In order to support this assumption and when the Group has less than a majority of the votes or similar rights over an investee, the Group considers all significant facts and circumstances in assessing whether it has power over that investee:

• agreements with other vote holders in the investee; • rights arising from other agreements; • voting rights and potential voting rights held by the Group.

Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. All intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated in full; unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, accounting policies for subsidiaries are changed to ensure consistency with the policies adopted by the Group. A change in the ownership interest of a subsidiary without loss of control is accounted for as an equity transaction. Losses of a subsidiary are attributed to the non-controlling interest even if this results in a deficit balance. If the Group loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary (including goodwill) and the carrying amount of any non-controlling interest in the cumulative translation differences recorded in equity; recognizes the fair value of the consideration received, the fair value of any surplus or deficit in profit or loss on the remaining investment; reclassifies the parent's share of the components previously recognized in other comprehensive income.

Investments in associates Associates are entities in which the Group generally holds between 20% and 50% of the voting rights, or is otherwise able to exercise significant influence, but which are not controlled by the Group or jointly controlled by the Group and other parties. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost, including goodwill. Subsequent changes in the carrying amount reflect the post-acquisition changes in the Group's share of net assets of the associate. The Group's share of its associates' profits or losses is recognized in profit or loss, and its share of movements in reserves is recognized in other comprehensive income. However, when the Group's share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognize further losses, unless the Group is obliged to make further payments to, or on behalf of, the associate. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates; unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Non-controlling interest is that part of the net results and equity of a subsidiary attributable to equity interests that are not owned, directly or indirectly, by the Bank. Non-controlling interest represents a separate component of the Group's equity.

Goodwill Goodwill arising from the acquisition of subsidiaries is stated at cost less impairment losses.

21

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 Policy applicable from 1 January 2018 Effective interest rate Interest income and expense are recognized in profit or loss using the effective interest method. The 'effective interest rate' is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

• the gross carrying amount of the financial asset; or • the amortized cost of the financial liability.

When calculating the effective interest rate for financial instruments other than purchased or originated credit-impaired assets, the Group estimates future cash flows considering all contractual terms of the financial instrument, but not expected credit losses. For purchased or originated credit-impaired financial assets, a credit-adjusted effective interest rate is calculated using estimated future cash flows including expected credit losses. The calculation of the effective interest rate includes transaction costs and fees and points paid or received that are an integral part of the effective interest rate. Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset or financial liability.

Amortized cost and gross carrying amount The 'amortized cost' of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured on initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any expected credit loss allowance (or impairment allowance before 1 January 2018). The 'gross carrying amount of a financial asset' measured at amortized cost is the amortized cost of a financial asset before adjusting for any expected credit loss allowance.

Calculation of interest income and expense The effective interest rate of a financial asset or financial liability is calculated on initial recognition of a financial asset or a financial liability. In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortized cost of the liability. The effective interest rate is revised as a result of periodic re-estimation of cash flows of floating rate instruments to reflect movements in market rates of interest. The effective interest rate is also revised for fair value hedge adjustments at the date amortization of the hedge adjustment begins. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis. For financial assets that were credit-impaired on initial recognition, interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of the asset. The calculation of interest income does not revert to a gross basis, even if the credit risk of the asset improves. Presentation Interest income calculated using the effective interest method presented in the statement of profit or loss and other comprehensive income includes:

• interest on financial assets measured at amortized cost; • interest on debt instruments measured at FVOCI.

Other interest income presented in the consolidated statement of profit or loss and other comprehensive income includes interest income on non-derivative debt financial instruments measured at FVTPL and net investments in finance leases. Interest expense presented in the statement of profit or loss and other comprehensive income includes:

• financial liabilities measured at amortized cost.

Policy applicable before 1 January 2018 Effective interest rate Interest income and expense were recognized in profit or loss using the effective interest method. The effective interest rate was the rate that exactly discounted the estimated future cash payments and receipts through the expected life of the financial asset or financial liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group estimated future cash flows considering all contractual terms of the financial instrument, but not future credit losses.

22

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 The calculation of the effective interest rate included transaction costs and fees and points paid or received that were an integral part of the effective interest rate. Transaction costs included incremental costs that were directly attributable to the acquisition or issue of a financial asset or financial liability.

Presentation Interest income calculated using the effective interest method presented in the consolidated statement of profit or loss and other comprehensive income includes:

• interest on financial assets measured at amortized cost; • interest on debt instruments measured at FVOCI; • interest on non-derivative debt financial instruments measured at FVTPL and net investments in

finance leases; • the effective portion of fair value changes in qualifying hedging derivatives designated in cash flow

hedges of variability in interest cash flows, in the same period as the hedged cash flows affect interest income/expense; and

• the effective portion of fair value changes in qualifying hedging derivatives designated in fair value hedges of interest rate risk.

Interest expense presented in the statement of profit or loss and other comprehensive income includes: • financial liabilities measured at amortized cost.

Fees and commission Fee and commission income and expense that are integral to the effective interest rate on a financial asset or financial liability are included in the effective interest rate. Other fee and commission income - including account servicing fees, investment management fees, sales commission, placement fees and syndication fees - is recognized as the related services are performed. If a loan commitment is not expected to result in the draw-down of a loan, then the related loan commitment fee is recognized on a straight-line basis over the commitment period. A contract with a customer that results in a recognized financial instrument in the Group's financial statements may be partially in the scope of IFRS 9 and partially in the scope of IFRS 15. If this is the case, then the Group first applies IFRS 9 to separate and measure the part of the contract that is in the scope of IFRS 9 and then applies IFRS 15 to the residual. Other fee and commission expenses relate mainly to transaction and service fees, which are expensed as the services are received.

Financial assets and financial liabilities Classification Financial assets - Policy applicable from 1 January 2018 On initial recognition, a financial asset is classified as measured at: amortized cost, FVOCI or FVTPL. A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

• the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and

• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt instrument is measured at FVOCI only if it meets both of the following conditions and is not designated as at FVTPL:

• the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

For debt financial assets measured at FVOCI, gains and losses are recognized in other comprehensive income, except for the following, which are recognized in profit or loss in the same manner as for financial assets measured at amortized cost:

• interest income using the effective interest method; • ECL and reversals; and • foreign exchange gains and losses.

When a debt financial asset measured at FVOCI is derecognized, the cumulative gain or loss previously

23

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 recognized in other comprehensive income is reclassified from equity to profit or loss. On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in fair value in other comprehensive income. This election is made on an investment-by-investment basis. Gains and losses on such equity instruments are never reclassified to profit or loss and no impairment is recognized in profit or loss. Dividends are recognized in profit or loss unless they clearly represent a recovery of part of the cost of the investment, in which case they are recognized in other comprehensive income. Cumulative gains and losses recognized in other comprehensive income are transferred to retained earnings on disposal of an investment. All other financial assets are classified as measured at FVTPL. In addition, on initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. Financial assets - Business model assessment: Policy applicable from 1 January 2018 The Group makes an assessment of the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes: - the stated policies and objectives for the portfolio and the operation of those policies in practice. This includes the management's strategy on earning contractual interest revenue, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of the liabilities that are funding those assets or expected cash outflows or realizing cash flows through the sale of the assets. - how the performance of the portfolio is evaluated and reported to the Group's management. - the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed. - how managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected. - the frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about future sales activity. Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose and the Group continues to recognize these assets. Financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest: Policy applicable from 1 January 2018 For the purposes of this assessment, 'principal' is defined as the fair value of the financial asset on initial recognition. 'Interest' is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin. In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment, the Group analyses: - contingent events that would change the amount and timing of cash flows; - terms and conditions that may adjust the coupon rate stipulated in the contract, including variable rate terms; - prepayment and extension terms; and - terms that limit the Group's claim to cash flows from specified assets (e.g. non-recourse financial asset arrangements). A prepayment condition meets the SPPI criterion if the amount paid at prepayment represents essentially the outstanding portion of the principal and interest on the outstanding portion and may include reasonable additional compensation for early termination of the contract. In addition, a prepayment condition shall be deemed to meet this criterion if the financial asset is acquired or created with a premium or discount to the nominal amount specified in the contract, the amount payable on prepayment is in effect the nominal amount specified in the contract plus contractual accrued (but not paid) interest (and may also include reasonable additional compensation for early termination of the contract); and at initial recognition of a financial asset, the fair value of its early redemption condition is insignificant.

24


Financial assets - subsequent assessment and profit and loss: Policy applicable from 1 January 2018

Financial assets measured These assets are subsequently measured at fair value. Net gains and at FVTPL losses, including any interest or dividend income, are recognized in profit

or loss for the period.

Financial assets measured These assets are subsequently measured at amortized cost using the at amortized cost effective interest method. Amortized cost is reduced by the amount of

impairment losses. Interest income, foreign currency gains, losses and impairment losses are recognized in profit or loss. Any gain or loss arising on derecognition is recognized in profit or loss for the period.

Investment in debt These assets are subsequently measured at fair value. Interest income instruments measured at calculated using the effective interest method, foreign currency gains, FVOCI losses and impairment losses are recognized in profit or loss. Other net

gains and losses are recognized in other comprehensive income. When derecognized, the gains or losses accumulated in other comprehensive income are reclassified to profit or loss for the period.

Investments in equity These assets are subsequently measured at fair value. Dividends are instruments measured at recognized as income in profit or loss, unless it is clear that the dividend FVOCI represents a return on part of the investment's cost. Other net gains and

losses are recognized in other comprehensive income and are never reclassified to profit or loss for the period.

Non-recourse loans In some cases, loans made by the Group that are secured by collateral of the borrower limit the Group's claim to cash flows of the underlying collateral (non-recourse loans). The Group applies judgment in assessing whether the non-recourse loans meet the SPPI criterion. The Group typically considers the following information when making this judgement:

whether the contractual arrangement specifically defines the amounts and dates of the cash payments of the loan; the fair value of the collateral relative to the amount of the secured financial asset; the ability and willingness of the borrower to make contractual payments, notwithstanding a decline in the value of collateral; whether the borrower is an individual or a substantive operating entity or is a special-purpose entity; the Group's risk of loss on the asset relative to a full-recourse loan; the extent to which the collateral represents all or a substantial portion of the borrower's assets; and whether the Group will benefit from any upside from the underlying assets.

Financial assets - Policy applicable before 1 January 2018 The Group classified its financial assets into one of the following categories: - loans and receivables; - held-to-maturity; - available-for-sale; and - at FVTPL, and within this category as: - held for trading; - derivative hedging instruments; or - designated as at FVTPL.

Financial assets - subsequent assessment and profit and loss: Policy applicable from 1 January 2018

25


Financial assets measured Measured at fair value with changes in fair value including any interest or at FVTPL dividend income, recognized in profit or loss.

Held-to-maturity financial Measured at amortized cost using the effective interest method. assets

Loans and receivables Measured at amortized cost using the effective interest method.

Available-for-sale financial Measured at fair value with changes in fair value except for impairment assets losses, interest income and foreign exchange differences on debt

instruments, recognized in other comprehensive income and accumulated in the fair value reserve. When these assets were derecognized, the cumulative gain or loss in equity was reclassified to profit or loss.

Financial liabilities - classification, subsequent assessment and profit and loss Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at fair value through profit or loss, if it is classified as held for trading, it is a derivative, or it is designated as such by the entity on initial recognition. Financial liabilities at FVTPL are measured at fair value, and net gain or loss, including any interest expense, is recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign currency gains and losses are recognized in profit or loss. Any gain or loss arising on derecognition is also recognized in profit or loss. The Group has fixed rate bank loans that give banks the right to change interest rates due to changes in the CBU key rate. The Group has a right to early repayment at par value without significant penalties. Such instruments are treated by the Group as instruments with floating interest rates.

Modification of financial assets and financial liabilities Policy applicable from 1 January 2018 Financial assets If the terms of a financial asset are modified, the Group evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different (referred to as 'substantial modification'), then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognized and a new financial asset is recognized at fair value plus any eligible transaction costs. Any fees received as part of the modification are accounted for as follows:

• fees that are considered in determining the fair value of the new asset and fees that represent reimbursement of eligible transaction costs are included in the initial measurement of the asset; and

• other fees are included in profit or loss as part of the gain or loss on derecognition. Changes in cash flows on existing financial assets or financial liabilities are not considered as modification, if they result from existing contractual terms, e.g. changes in interest rates initiated by the Group due to changes in the CBU key rate, if the loan agreement entitles the Group to do so. The Group performs a quantitative and qualitative evaluation of whether the modification is substantial, i.e. whether the cash flows of the original financial asset and the modified or replaced financial asset are substantially different. The Group assesses whether the modification is substantial based on quantitative and qualitative factors in the following order: qualitative factors, quantitative factors, combined effect of qualitative and quantitative factors. If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset deemed to have expired. In making this evaluation the Group analogizes to the guidance on the derecognition of financial liabilities. The Group concludes that the modification is substantial as a result of the following qualitative factors:

• change the currency of the financial asset; • change in collateral or other credit enhancement; • change of terms of financial asset that lead to non-compliance with the SPPI criterion (e.g.

inclusion of conversion feature) applicable from 1 January 2018. If cash flows are modified when the borrower is in financial difficulties, then the objective of the

26

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 modification is usually to maximize recovery of the original contractual terms rather than to originate a new asset with substantially different terms. If the Group plans to modify a financial asset in a way that would result in forgiveness of cash flows, then it first considers whether a portion of the asset should be written off before the modification takes place (see below for write off policy). This approach impacts the result of the quantitative evaluation and means that the derecognition criteria are not usually met in such cases. The Group further performs qualitative evaluation of whether the modification is substantial. If the modification of a financial asset measured at amortized cost or FVOCI does not result in derecognition of the financial asset, then the Group first recalculates the gross carrying amount of the financial asset using the original effective interest rate of the asset and recognizes the resulting adjustment as a modification gain or loss in profit or loss. For floating-rate financial assets, the original effective interest rate used to calculate the modification gain or loss is adjusted to reflect current market terms at the time of the modification. Any costs or fees incurred and fees received as part of the modification adjust the gross carrying amount of the modified financial asset and are amortized over the remaining term of the modified financial asset. If such a modification is carried out because of financial difficulties of the borrower, then the gain or loss is presented together with impairment losses. In other cases, it is presented as interest income calculated using the effective interest method. For fixed-rate loans, where the borrower has an option to prepay the loan at par without significant penalty, the Group treats the modification of an interest rate to a current market rate using the guidance on floating-rate financial instruments. This means that the effective interest rate is adjusted prospectively.

Financial liabilities The Group derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different. In this case, a new financial liability based on the modified terms is recognized at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognized in profit or loss. Consideration paid includes non-financial assets transferred, if any, and the assumption of liabilities, including the new modified financial liability. Group performs a quantitative and qualitative evaluation of whether the modification is substantial considering qualitative factors, quantitative factors and combined effect of qualitative and quantitative factors. The Group concludes that the modification is substantial as a result of the following qualitative factors:

• change the currency of the financial liability; • change in collateral or other credit enhancement; • inclusion of conversion option; • change in the subordination of the financial liability.

For the quantitative assessment the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability. If the modification of a financial liability is not accounted for as derecognition, then the amortized cost of the liability is recalculated by discounting the modified cash flows at the original effective interest rate and the resulting gain or loss is recognized in profit or loss. For floating-rate financial liabilities, the original effective interest rate used to calculate the modification gain or loss is adjusted to reflect current market terms at the time of the modification . Any costs and fees incurred are recognized as an adjustment to the carrying amount of the liability and amortized over the remaining term of the modified financial liability by re-computing the effective interest rate on the instrument.

Policy applicable before 1 January 2018 Financial assets If the terms of a financial asset were modified, then the Group evaluated whether the cash flows of the modified asset were substantially different. If the cash flows were substantially different, then the contractual rights to cash flows from the original financial asset were deemed to have expired. In this case, the original financial asset was derecognized and a new financial asset was recognized at fair value. If the terms of a financial asset were modified because of financial difficulties of the borrower and the asset was not derecognized, then impairment of the asset was measured using the pre- modification interest rate.

Financial liabilities The Group derecognized a financial liability when its terms were modified and the cash flows of the modified liability were substantially different. In this case, a new financial liability based on the modified

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Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 terms was recognized at fair value. The difference between the carrying amount of the financial liability extinguished and consideration paid was recognized in profit or loss. Consideration paid included non-financial assets transferred, if any, and the assumption of liabilities, including the new modified financial liability. If the modification of a financial liability was not accounted for as derecognition, then any costs and fees incurred were recognized as an adjustment to the carrying amount of the liability and amortized over the remaining term of the modified financial liability by re-computing the effective interest rate on the instrument.

Reclassification Financial liabilities are not reclassified subsequent to their initial recognition.

Derecognition Financial assets The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognized) and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss. The Group enters into transactions whereby it transfers assets recognized on its consolidated statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets or a portion of them. In such cases, the transferred assets are not derecognized. Examples of such transactions are securities lending transactions. In transactions in which the Group neither retains nor transfers substantially all of the risks and rewards of ownership of a financial asset and it retains control over the asset, the Group continues to recognize the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset. In certain transactions, the Group retains the obligation to service the transferred financial asset for a fee. The transferred asset is derecognized if it meets the derecognition criteria. For a service contract, the Group is required to recognize either a service asset (if the consideration to be received is more than sufficient compensation for the performance of the service) or a service liability (if the consideration to be received is not sufficient compensation for the performance of the service). Financial liabilities The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. From 1 January 2018 any cumulative gain/loss recognized in other comprehensive income in respect of financial liabilities designated as at FVTPL is not recognized in profit or loss on derecognition of such financial liabilities.

Policy applicable before 1 January 2018 Financial guarantee contracts In the ordinary course of business, the Group gives financial guarantees, consisting of letters of credit, guarantees and acceptances. Financial guarantee contracts are initially recognized in the consolidated financial statements at fair value through "Other liabilities" line item in the amount of commission received. Upon initial recognition, the Group's liability under each guarantee is measured at the higher of the amortized premium and the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee. Any increase in the liability relating to financial guarantee contracts is taken into account in the consolidated income statement. The premium received is recognized in profit or loss on a straight-line basis over the life of the guarantee.

Taxation The current income tax charge is calculated in accordance with the regulations of the Republic of Uzbekistan and the cities in which the Bank has offices, branches and subsidiaries. Deferred tax assets and liabilities are calculated in respect of all temporary differences using the liability

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Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 method. Deferred income taxes are provided for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for consolidated financial reporting purposes, except where the deferred income tax arises from the initial recognition of goodwill in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. Deferred tax assets are recorded only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted by the reporting date. Deferred income tax is recognized on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Property and equipment Property and equipment are stated at cost, excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment losses. Such cost includes the cost of replacing part of equipment when that cost is incurred if the recognition criteria are met. The carrying amount of property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Upon initial recognition at cost, buildings are carried at a revalued amount, being the fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Valuations are performed frequently enough to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. Accumulated depreciation at the revaluation date is eliminated with the gross carrying amount of the asset reduced and the resulting amount is restated to the revalued amount of the asset. Any revaluation surplus is recognized in other comprehensive income, except to the extent that it reverses a previous revaluation decrease recognized in profit or loss, in which case the increase is recognized in profit or loss. In this case, the amount of the increase in the value of the asset is recognized in the financial result. A revaluation decrease is recognized in profit or loss, except that a decrease directly offsetting a previous surplus on the same asset is directly offset against the surplus in the property and equipment revaluation reserve. The annual transfer from the revaluation reserve for property and equipment to retained earnings is made in the form of the difference between depreciation based on the revalued carrying amount of assets and depreciation based on the historical cost of assets. On disposal of an asset, the relevant amount included in the revaluation reserve is transferred to retained earnings. Depreciation of an asset begins when it becomes available for use. Depreciation is calculated on a straight-line basis over the following estimated useful lives of the assets:

Years Buildings 20 Furniture and equipement 6-7 Computers and office equipment 5-7 Vehicles 5

The asset's residual values, useful lives and methods are reviewed, and adjusted as appropriate, at each financial year-end. Costs related to repairs and renewals are charged when incurred and included in other operating expenses, unless they qualify for capitalization.

Intangible assets Intangible assets include software and licences. Intangible assets acquired separately are initially measured at cost. The cost of intangible assets acquired in a business combination is its fair value at the date of acquisition. Upon initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Intangible assets have limited or indefinite useful lives. Intangible assets with limited useful lives are amortized over their useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. Amortization periods and procedures for intangible assets with indefinite useful lives are reviewed at least annually at the end of each reporting year.

Years Licence 5-6

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Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 Software 5-6

Available-for-sale financial assets Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified in any of the three preceding categories. Upon initial recognition, available-for-sale financial assets are measured at fair value with gains or losses being recognized in other comprehensive income until the investment is derecognized or until the investment is determined to be impaired at which time the cumulative gain or loss previously reported in equity is included in other comprehensive income. In this case, the accumulated gain or loss previously recognized in other comprehensive income is reclassified to the consolidated income statement. However, interest calculated using the effective interest method is recognized in profit or loss.

Impairment Policy applicable from 1 January 2018 Non-derivative financial instruments and contract assets The Group recognizes a provision for impairment losses in respect of ECL for: - financial assets measured at amortized cost; - investments in debt instruments measured at FVOCI; and - contract assets. The Group estimates provisions for losses equal to ECL for the entire period, except for the following instruments, for which the amount of the provision to be recognized would be equal to 12 month ECL: - debt securities if it has been determined that they have low credit risk at the reporting date; and - other debt securities and bank account balances for which credit risk (i.e. the risk of default during the expected life of the financial instrument) has not increased significantly since initial recognition. In assessing whether there has been a significant increase in the credit risk of a financial asset since its initial recognition and in assessing ECL, the Group considers reasonable and supportable information that is appropriate and available without undue cost or effort. This includes both quantitative and qualitative information, and analysis that based on the Group's past experience and a reasonable assessment of credit quality and includes forward-looking information. The Group assumes that the credit risk of a financial asset has increased significantly if it is more than 30 days overdue. A financial asset is classified as a financial asset by the Group when a default event has occurred, as follows: - It is unlikely that the borrower will be able to repay its loan obligations to the Group in full without the Group taking such steps as selling the collateral, if any; or - financial asset is more than 90 days overdue.

The Group believes that a debt security has a low credit risk if its credit rating meets the internationally accepted definition of "investment grade" rating. ECL for the entire term are ECL that arise as a result of all possible events of default during the expected life of a financial instrument. 12-month ECL represent that part of the ECL that arises from default events that are possible within 12 months after the reporting date (or a shorter period if the expected life of the financial instrument is less than 12 months). The maximum period is considered when the ECL are measured over the maximum contractual period during which the Group is exposed to credit risk.

Measurement of ECL ECL are a probability-weighted estimate of credit losses. They are measured as follows:

• financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive);

• financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the present value of estimated future cash flows;

• undrawn loan commitments: as the present value of the difference between the contractual cash flows that are due to the Group if the commitment is drawn down and the cash flows that the

30


Group expects to receive; and • financial guarantee contracts: the present value of expected payments to reimburse the holder

less any amounts that the Group expects to recover.

Restructured financial assets If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one due to financial difficulties of the borrower, then an assessment is made of whether the financial asset should be derecognized and ECL are measured as follows: - If the expected restructuring will not result in derecognition of the existing asset, then the expected cash flows arising from the modified financial asset are included in calculating the cash shortfalls from the existing asset (see Note 4). - If the expected restructuring will result in derecognition of the existing asset, then the expected fair value of the new asset is treated as the final cash flow from the existing financial asset at the time of its derecognition. This amount is included in calculating the cash shortfalls from the existing financial asset that are discounted from the expected date of derecognition to the reporting date using the original effective interest rate of the existing financial asset.

Credit-impaired financial assets At each reporting date, the Group assesses whether financial assets carried at amortized cost and debt securities carried at FVOCI are credit-impaired. A financial asset is „credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:

significant financial difficulty of the borrower or issuer; a breach of contract such as a default or past due event; the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise; it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or the disappearance of an active market for a security because of financial difficulties of the issuer.

A loan that has been renegotiated due to a deterioration in the borrower's condition is usually considered to be credit-impaired unless there is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other indicators of impairment. In addition, a retail loan that is overdue for 90 days or more is considered credit-im paired.

In making an assessment of whether an investment in sovereign debt is credit-impaired, the Group considers the following factors:

The market's assessment of creditworthiness as reflected in the bond yields. The rating agencies' assessments of creditworthiness. The country's ability to access the capital markets for new debt issuance. The probability of debt being restructured, resulting in holders suffering losses through voluntary or mandatory debt forgiveness. The international support mechanisms in place to provide the necessary support as „lender of last resort' to that country, as well as the intention, reflected in public statements, of governments and agencies to use those mechanisms. This includes an assessment of the depth of those mechanisms and, irrespective of the political intent, whether there is the capacity to fulfil the required criteria.

Presentation of provision for ECL in the consolidated statement of financial position Loss provisions for ECL are presented in the consolidated statement of financial position as follows:

• financial assets measured at amortized cost: as a deduction from the gross carrying amount of the assets;

• loan commitments and financial guarantee contracts: generally, as a provision; • where a financial instrument includes both a drawn and an undrawn component, and the Group

cannot identify the ECL on the loan commitment component separately from those on the drawn component: the Group presents a combined loss provision for both components. The combined

31


amount is presented as a deduction from the gross carrying amount of the drawn component. Any excess of the loss provision over the gross amount of the drawn component is presented as a provision; and

• debt instruments measured at FVOCI: no loss allowance is recognized in the consolidated statement of financial position because the carrying amount of these assets is their fair value. However, the loss provision is disclosed and is recognized in the fair value reserve.

Write-offs Loans and debt securities are written off (either partially or in full) when there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. This is generally the case when the Group determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. This assessment is carried out at the individual asset level. Recoveries of amounts previously written off are included in 'impairment losses on financial instruments' in the statement of profit or loss and other comprehensive income. Financial assets that are written off could still be subject to enforcement activities in order to comply with the Group's procedures for recovery of amounts due.

Policy applicable before 1 January 2018 Objective evidence of impairment At each reporting date, the Group assessed whether there was objective evidence that financial assets not carried at FVTPL were impaired. A financial asset or a group of financial assets was 'impaired' when objective evidence demonstrated that a loss event had occurred after the initial recognition of the asset(s) and that the loss event had an impact on the future cash flows of the asset(s) that could be estimated reliably. Objective evidence that financial assets were impaired included:

• significant financial difficulty of a borrower or issuer; • default or delinquency by a borrower; • the restructuring of a loan or advance by the Group on terms that the Group would not consider

otherwise; • indications that a borrower or issuer would enter bankruptcy; • the disappearance of an active market for a security; or • observable data relating to a group of assets such as adverse changes in the payment status of

borrowers or issuers in the group, or economic conditions that correlated with defaults in the group.

A loan that was renegotiated due to a deterioration in the borrower's condition was usually considered to be impaired unless there was evidence that the risk of not receiving contractual cash flows had reduced significantly and there were no other indicators of impairment. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost was objective evidence of impairment. In general, the Group considered a decline of 20% to be 'significant' and a period of nine months to be 'prolonged'. However, in specific circumstances a smaller decline or a shorter period may have been appropriate.

Financial assets The Group has analysed evidence of impairment for these financial assets at both measured at an individual asset and group level. All individually significant assets were assessed amortized cost for impairment on an individual basis. Those that were not impaired were then

assessed collectively for any impairment that had already occurred but not yet been identified at the individual asset level. Assets that are not individually significant were assessed for impairment on a group basis. The assessment was performed on a group basis for groups of assets with similar risk characteristics.

In performing its impairment assessment on a group basis, the Group has used historical trends in the timing and amount of losses incurred and has made adjustments if current economic and credit conditions are such that actual losses are likely to be greater or less than suggested by historical trends.

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The impairment loss was calculated as the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate of the asset. Losses were recognized in profit or loss and reflected in an allowance account. When the Group considered that there was no realistic prospect of recovering the asset, the amounts were written off. If the amount of the impairment loss subsequently decreased and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss was reversed through profit or loss.

Available-for-sale Impairment losses on available-for-sale financial assets have been recognized by financial assets reclassifying losses accumulated in the fair value reserve to profit or loss. The

reclassified amount was the difference between the acquisition cost, net of any principal repayment and amortization, and the current fair value, less any impairment loss previously recognized in profit or loss. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed, with the amount of the reversal recognized in profit or loss. Impairment losses recognized in profit.

or loss on an investment in an equity instrument classified as available-for-sale were not reversed through profit or loss

Individual or collective assessment An individual measurement of impairment was based on management's best estimate of the present value of the cash flows that were expected to be received. In estimating these cash flows, management made judgements about a debtor's financial position and the net realizable value of any underlying collateral. Each impaired asset was assessed on its merits, and the workout strategy and estimate of cash flows considered recoverable were independently approved by the Credit Risk function. The collective provision for groups of homogeneous loans was established using statistical methods such as roll rate methodology or, for small portfolios with insufficient information, a formula approach based on historical loss rate experience. The roll rate methodology used statistical analysis of historical data on delinquency to estimate the amount of loss. Management applied judgement to ensure that the estimate of loss arrived at on the basis of historical information was appropriately adjusted to reflect the economic conditions and product mix at the reporting date. Roll rates and loss rates were regularly benchmarked against actual loss experience. The IBNR provision covered credit losses inherent in portfolios of loans and receivables, and held-to-maturity investment securities with similar credit risk characteristics when there was objective evidence to suggest that they contained impaired items but the individual impaired items could not yet be identified. In assessing the need for collective loss provision, management considered factors such as credit quality, portfolio size, concentrations and economic factors. To estimate the required provision, assumptions were made to define how inherent losses were modelled and to determine the required input parameters, based on historical experience and current economic conditions. The accuracy of the provision depended on the model assumptions and parameters used in determining the collective provision.

Loans that were subject to a collective IBNR provision were not considered impaired.

Measurement of impairment Impairment losses on assets measured at amortized cost were calculated as the difference between the carrying amount and the present value of estimated future cash flows discounted at the asset's original effective interest rate. Impairment losses on available-for-sale assets were calculated as the difference between the carrying amount and the fair value.

Reversal of impairment - For assets measured at amortized cost: if an event occurring after the impairment was recognized caused the amount of impairment loss to decrease, then the decrease in impairment loss was reversed through profit or loss. - For available-for-sale debt security: if, in a subsequent period, the fair value of an impaired debt security increased and the increase could be related objectively to an event occurring after the impairment loss was recognized, then the impairment loss was reversed through profit or loss; otherwise, any increase in fair value was recognized through other comprehensive income.

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Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 Any subsequent recovery in the fair value of an impaired available-for-sale equity security was always recognized in other comprehensive income.

Presentation Impairment losses were recognized in profit or loss and reflected in an allowance account against loans and receivables or held-to-maturity investment securities. Interest on the impaired assets continued to be recognized through the unwinding of the discount. Impairment losses on available-for-sale investment securities were recognized by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss. The cumulative loss that was reclassified from equity to profit or loss was the difference between the acquisition cost, net of any principal repayment and amortization, and the current fair value, less any impairment loss previously recognized in profit or loss. Changes in impairment attributable to the application of the effective interest method were reflected as a component of interest income.

Write-off The Group wrote off a loan or an investment debt security, either partially or in full, and any related provision for impairment losses, when the Group determined that there was no realistic prospect of recovery. Designation at fair value through profit or loss.

Loans to customers Policy applicable from 1 January 2018 'Loans to customers' caption in the consolidated statement of financial position include: loans to customers measured at amortized cost (see Note 8); they are initially measured at fair value plus incremental direct transaction costs, and subsequently at their amortized cost using the effective interest method.

Policy applicable before 1 January 2018 Loans to customers were non-derivative financial assets with fixed or determinable payments that were not quoted in an active market and that the Group did not intend to sell immediately or in the near term. Loans to customers included:

• those classified as loans and receivables; and • those designated as at FVTPL.

Loans to customers were initially measured at fair value plus incremental direct transaction costs, and subsequently measured at their amortized cost using the effective interest method. When the Group chose to designate the loans to customers as measured at FVTPL, they were measured at fair value with face value changes recognized immediately in profit or loss. Loans to customers also included finance lease receivables in which the Group was the lessor (see Note 8).

Investment securities Policy applicable from 1 January 2018 The 'investment financial assets caption in the consolidated statement of financial position includes debt investment securities measured at amortized cost; these are initially measured at fair value plus incremental direct transaction costs, and subsequently at their amortized cost using the effective interest method.

Policy applicable before 1 January 2018 Held-to-maturity Held-to-maturity investments were non-derivative assets with fixed or determinable payments and fixed maturity that the Group had the positive intent and ability to hold to maturity, and which were not designated as at FVTPL or as available-for-sale. Held-to-maturity investments were carried at amortized cost using the effective interest method, less any impairment losses. A sale or reclassification of a more than insignificant amount of held-to-maturity investments would result in the reclassification of all held-to-maturity investments as available-for-sale, and would prevent the Group from classifying investment securities as held-to-maturity for the current and the following two financial years. However, sales and reclassifications in any of the following circumstances would not trigger a reclassification:

34


• sales or reclassifications that were so close to maturity that changes in the market rate of interest would not have a significant effect on the financial asset's fair value;

• sales or reclassifications after the Group had collected substantially all of the asset's original principal; and

• sales or reclassifications that were attributable to non-recurring isolated events beyond the Group's control that could not have been reasonably anticipated.

Fair value through profit or loss - Trading assets were those assets that the Group acquired or incurred principally for the purpose of selling or repurchasing in the near term, or held as part of a portfolio that is managed together for short-term profit or position taking. Trading assets were initially recognized and subsequently measured at fair value in the consolidated statement of financial position, with transaction costs recognized in profit or loss. All changes in fair value were recognized as part of net trading income in profit or loss. - Designated assets. The Group designated some investment securities as at fair value, with fair value changes recognized immediately in profit or loss. Available-for-sale Available-for-sale investments were non-derivative investments that were designated as available-for-sale or were not classified as another category of financial assets. Available-for-sale investments comprise equity securities and debt securities. Unquoted equity securities which fair value could not be measured reliably were carried at cost. All other available-for-sale investments were measured at fair value after initial recognition. Interest income was recognized in profit or loss using the effective interest method. Dividend income was recognized in profit or loss when the Group became entitled to the dividend. Foreign exchange gains or losses on available-for-sale debt security investments were recognized in profit or loss. Impairment losses were recognized in profit or loss. Other fair value changes, other than impairment losses, were recognized in other comprehensive income and presented in the fair value reserve within equity. When the financial asset was derecognized, the gain or loss accumulated in other comprehensive income was reclassified to profit or loss. A non-derivative financial asset might be reclassified from the available-for-sale category to the loans and receivables category if it would otherwise have met the definition of loans and receivables and if the Group had the intention and ability to hold that financial asset for the foreseeable future or until maturity.

Deposits, debt securities issued and subordinated liabilities Deposits, debt securities issued and subordinated liabilities are initially measured at fair value minus incremental direct transaction costs, and subsequently measured at their amortized cost using the effective interest method, except where the Group designates liabilities at FVTPL. From 1 January 2018, when the Group designates a financial liability as at FVTPL, the amount of change in the fair value of the liability that is attributable to changes in its credit risk is presented in other comprehensive income as a liability credit reserve. On initial recognition of the financial liability, the Group assesses whether presenting the amount of change in the fair value of the liability that is attributable to credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. This assessment is made by using a regression analysis to compare: - the expected changes in the fair value of the liability related to changes in the credit risk; with - the impact on profit or loss of expected changes in fair value of the related instruments. Amounts presented in the liability credit reserve are not subsequently transferred to profit or loss. When these instruments are derecognized, the related cumulative amount in the liability credit reserve is transferred to retained earnings.

Financial guarantees and loan commitments Financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss that it incurs because a specified debtor fails to make payment when it is due in accordance with the terms of a debt instrument. Loan commitments are firm commitments to provide credit under pre-specified terms and conditions. Financial guarantees issued or commitments to provide a loan at a below-market interest rate are initially measured at fair value. Subsequently, they are measured as follows: - from 1 January 2018: at the higher of the loss allowance determined in accordance with IFRS 9 (see Note 3(d)(iv)) and the amount initially recognized less, when appropriate, the cumulative amount of income recognized in accordance with the principles of IFRS 15; and - before 1 January 2018: at the higher of the two amounts: the amount determined in accordance with IAS

35

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 37 and the amount initially recognized less, where appropriate, cumulative amortization recognized in accordance with IAS 18.

The Group has issued no loan commitments that are measured at FVTPL.

For other loan commitments: - from 1 January 2018: the Group recognizes a loss provision; - before 1 January 2018: the Group recognized a provision in accordance with IAS 37 if the contract was considered to be onerous.

Liabilities arising from financial guarantees and loan commitments are included within provisions.

Cash and cash equivalents Cash and cash equivalents consist of cash on hand, amounts due from the CBU (excluding obligatory reserves) and amounts due from credit institutions that mature within 90 days of the date of origination and are free from contractual encumbrances.

Amounts due from credit institutions In the normal course of business, the Group advances amounts due from credit institutions for various periods of time. Amounts due from other banks are not available for immediate or short-term sale and are carried at amortized cost using the effective interest rate if they have fixed maturities. Amounts that do not have fixed maturities are carried at amortized cost based on the expected maturities of those assets. Amounts due from credit institutions are carried net of any provision for impairment losses. Mandatory reserve deposits with CBU represent mandatory reserve deposits which are not available to finance the Bank's day to day operations. Obligatory reserves with CBU are included in amounts due from credit institutions for the purposes of the statement of cash flows. Amounts due to credit institutions are recorded when cash or other assets are advanced to the Group by counterparty banks. These non-derivative financial liabilities are carried at amortized cost.

Lease Finance lease - Group as a lessee The Group recognizes finance leases as assets and liabilities in the consolidated statement of financial position at the commencement of the lease term at an amount equal to the fair value of the leased property or, if lower, at the present value of the minimum lease payments. In calculating the present value of the minimum lease payments, the discount factor used is the internal rate of interest under the lease agreement, if it is practicable to determine such a rate. Otherwise, the incremental rate on the Group's borrowings is used. Initial direct costs are included in the asset. Lease payments are apportioned between the finance charges and the redemption of the liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Costs directly attributable to the lessee's activities under a finance lease are recorded as part of the leased assets.

Finance lease - Group as a lessor The Group records lease payments receivable at an amount equal to the net investment in the lease from the date of commencement of the lease term. Finance income is based on a pattern reflecting a constant periodic rate of return on the carrying amount of the net investment. Initial direct costs are included in the initial amount of the lease receivables. Operating lease - Group as a lessee Leases of property where the lessor retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Lease payments under an operating lease are recognized as expenses on a straight-line basis over the lease term and included in other operating expenses. Operating lease - Group as a lessor The Group records assets subject to operating leases in the consolidated statement of financial position according to the nature of the asset. Lease income from operating leases is recognized in profit or loss on a straight-line basis over the lease term. The aggregate cost of incentives provided to lessees is recognized as a reduction of lease income on a straight-line basis over the lease term. Initial direct costs incurred under an operating lease are added to the carrying amount of the leased asset.

Customer accounts

36

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 Customer accounts are non-derivative financial liabilities to individuals, state or corporate customers and are carried at amortized cost.

Borrowings Borrowings are non-derivative liabilities from state and financial institutions and are carried at amortized cost.

Offsetting of financial instruments Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position only when there is a legally enforceable right to offset the recognized amounts, and there is an intention to either settle on a net basis, or to realize the asset and settle the liability simultaneously.

Pledged property recovered from outstanding loans Pledged property recovered from outstanding loans represents financial and non-financial assets received by the Group in settlement of overdue loans. These assets are initially recognized at fair value upon receipt and included in property and equipment or other non-financial assets depending on their nature and the Group's intention in respect of recovery of these assets and are subsequently remeasured and accounted for in accordance with the accounting policies for these categories of assets.

Prepayments Prepayments are non-financial assets that are initially measured at cost less accumulated impairment losses.

Provisions Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.

Share capital Ordinary shares and non-redeemable preference shares with discretionary dividend rights are classified as equity. External costs directly attributable to the issue of new shares, other than on a business combination, are recorded as a deduction from the proceeds in equity. Any excess of the fair value of consideration received over the par value of shares issued is recognized as additional paid-in capital.

Dividends Dividends are recognized as a liability and deducted from equity at the reporting date only if they are declared before or on the reporting date. Dividends are disclosed when they are proposed before the reporting date or proposed or declared after the reporting date but before the consolidated financial statements are authorized for issue.

Earnings per share Earnings per share are determined by dividing the profit or loss attributable to equity holders of the Bank by the weighted average number of shares outstanding during the reporting year.

Contingent assets and liabilities Contingent liabilities are not recognized in the consolidated statement of financial position but are disclosed unless the possibility of any outflow in settlement is remote. A contingent asset is not recognized in the consolidated statement of financial position but disclosed when an inflow of economic benefits is probable.

Employee benefits and social security contributions In the Republic of Uzbekistan, the Group contributes to the unified social tax system. These contributions are also recorded on an accrual basis. Unified social tax includes contributions to the Pension Fund. The Group does not have its own pension scheme. Wages, salaries, contributions to the state pension and social insurance funds, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the year in which the associated services are rendered by the employees of the Group.

37


Segment information Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segment and assess its performance. The Group assesses reportable segment information in accordance with IFRS. A reportable operating segment is identified when one of the following quantitative requirements is met:

• its revenue from sales to external customers and from transactions with other segments is at least 10% of total revenue - external and internal - of all operating segments; or

• the absolute measure of profit or loss is not less than 10 percent of the greater of (i) the aggregate profit of all operating segments that did not report a loss and (ii) the aggregate loss of all operating segments that reported a loss; or

• its assets represent at least 10 percent of the total assets of all operating segments; • its assets and liabilities are not less than 10 percent of the total equity.

If the total external sales revenue reported by operating segments is less than 75 percent of the Group's revenue, additional operating segments are reported as reportable segments (even if they do not meet the quantitative criteria described above) until at least 75 percent of the Group's revenue is included in the consolidated financial statements.

Foreign currency translation The consolidated financial statements are presented in Uzbek Soums, which is the Group's functional and presentation currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that entity's chosen functional currency. Transactions in foreign currencies are initially recorded in the functional currency at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated into the functional currency at the rate of exchange at the reporting date. Gains and losses resulting from the translation of foreign currency transactions are recognized in the consolidated income statement in "Net gains from foreign currencies - Foreign currency translation". Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rate at the date when the fair value was determined. Differences between the contractual exchange rate of a transaction in a foreign currency and the official CBU exchange rate at the date of the transaction are included in gains less losses from foreign currencies.

Comparative information As a result of adoption of IFRS 9 the Group changed presentation of certain captions in the primary forms of consolidated financial statements. Comparative information is reclassified to conform to changes in presentation in the current period. The effect of main changes in presentation of the consolidated statement of financial position is disclosed in Note 4. The effect of main changes in presentation of the consolidated statement of financial position as at 31 December 2017 is as follows: - "Available-for-sale financial assets" was presented within "Investment financial assets" line item; The effect of main changes in presentation of the consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2017 is as follows: - The presentation of interest income was amended to present interest on net investments in finance leases separately under 'other interest income' line item;

- The presentation of impairment losses was amended to present impairment losses on debt financial assets (including net investments in finance leases), loan commitments and financial guarantees, and other assets separately.

Financial risk review

This note presents information about the Group's exposure to financial risks.

Credit risk - Amounts arising from ECL

Significant increase in credit risk

38

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 When determining whether the risk of default on a financial instrument has increased significantly since initial recognition, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group's historical experience and expert credit assessment and including forward -looking information.

The objective of the assessment is to identify whether a significant increase in credit risk has occurred for an exposure by comparing:

• the remaining lifetime probability of default (PD) as at the reporting date; with

• the remaining lifetime PD for this point in time that was estimated at the time of initial recognition of the exposure (adjusted where relevant for changes in prepayment expectations).

The Group uses three criteria for determining whether there has been a significant increase in credit risk:

• quantitative test based on movement in probability of default (PD);

• qualitative indicators; and

• backstop of 30 days past due, except for which a backstop of 15 days past due is applied.

Credit risk grades

The Group allocates each exposure to a credit risk grade based on a variety of data that is determined to be predictive of the risk of default and applying experienced credit judgement. Credit risk grades are defined using qualitative and quantitative factors that are indicative of risk of default. These factors vary depending on the nature of the exposure and the type of borrower.

Credit risk grades are defined and calibrated such that the risk of default occurring increases exponentially as the credit risk deteriorates so, for example, the difference in risk of default between credit risk grades 1 and 2 is smaller than the difference between credit risk grades 2 and 3.

Each exposure is allocated to a credit risk grade at initial recognition based on available information about the borrower. Exposures are subject to ongoing monitoring, which may result in an exposure being moved to a different credit risk grade. The monitoring typically involves use of the following data.

Corporate exposure All exposures (corporate and retail exposures)

• Information obtained during periodic review • Payment record - this includes overdue of customer files - e.g. audited financial status as well as a range of variables about statements, management accounts, payment ratios budgets and projections. Examples of areas of particular focus are: gross profit margins, financial leverage ratios, debt service coverage, compliance with covenants, quality of management, senior management changes

• Data from credit reference agencies, press • Utilisation of the granted limit articles, changes in external credit ratings • Requests for and granting of forbearance

Quoted bond and credit default swap (CDS) • Existing and forecast changes in business, prices for the borrower where available financial and economic conditions

Actual and expected significant changes in the political, regulatory and technological environment of the borrower or in its business activities

Generating the term structure of PD

Credit risk grades are a primary input into the determination of the term structure of PD for exposures. The Group collects performance and default information about its credit risk exposures analysed by jurisdiction

39

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 or region and by type of product and borrower as well as by credit risk grading. For some portfolios, information purchased from external credit reference agencies is also used.

The Group employs statistical models to analyse the data collected and generate estimates of the remaining lifetime PD of exposures and how these are expected to change as a result of the passage of time.

Determining whether credit risk has increased significantly

The Group assesses whether credit risk has increased significantly since initial recognition at each reporting period. Determining whether an increase in credit risk is significant depends on the characteristics of the financial instrument and the borrower, and the geographical region. What is considered significant will differ for different types of lending, in particular between corporate and retail.

As a backstop, the Group considers that a significant increase in credit risk occurs no later than when an asset is more than 30 days past due. Days past due are determined by counting the number of days since the earliest elapsed due date in respect of which full payment has not been received. Due dates are determined without considering any grace period that might be available to the borrower.

The Group monitors the effectiveness of the criteria used to identify significant increases in credit risk by regular reviews to confirm that:

• the criteria are capable of identifying significant increases in credit risk before an exposure is in default;

• the criteria do not align with the point in time when an asset becomes 30 days past due;

• the average time between the identification of a significant increase in credit risk and default appears reasonable;

• exposures are not generally transferred directly from 12-month ECL measurement (stage 1) to credit-impaired (stage 3); and

• there is no unwarranted volatility in loss provision from transfers between 12-month ECL (stage 1) and lifetime ECL measurements (stage 2);

• decrease in the credit quality class of the Debtor in comparison with its class at the date of comparison by 2 and more points and/or to the level of "unsatisfactory";

• a change in the principal repayment schedule, where the total payments over the next 12 months are reduced by no more than 50% compared to the original repayment schedule and/or;

• extension of the term of the loan agreement by no more than 12 months compared to the original maturity.

Definition of default

The Group considers a financial asset to be in default when:

• the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realizing security (if any is held);

• the borrower is past due more than 90 days on any material credit obligation to the Group. Overdrafts are considered as being past due once the customer has breached an advised limit or been advised of a limit smaller than the current amount outstanding; or

• it is becoming probable that the borrower will restructure the asset as a result of bankruptcy due to the borrower's inability to pay its credit obligations.

In assessing whether a borrower is in default, the Group considers indicators that are:

• qualitative - e.g. breaches of covenant; • quantitative - e.g. overdue status and non-payment on another obligation of the same issuer to the

Group; and • based on data developed internally and obtained from external sources.

Inputs into the assessment of whether a financial instrument is in default and their significance may vary over time to reflect changes in circumstances.

40

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 Incorporation of forward-looking information

The Group incorporates forward-looking information into both the assessment of whether the credit risk of an instrument has increased significantly since its initial recognition and the measurement of ECL. The Group uses expert judgement to evaluate forward-looking information. This assessment is also based on information obtained from external sources.

In order to calculate ECL, the Group analyses the relationship between information on macroeconomic factors and the integral indicator of credit quality of the loan portfolio. As an integral indicator of the loan portfolio quality, the actual default rate for the year is assumed to be the ratio of the number of loans that became defaults during the year under review to the number of loans that were not in default at the beginning of the year under review. Information on actual and forecasted values of macroeconomic indicators from the following sources is accepted as forecast information:

- State Statistics Committee of the Republic of Uzbekistan

- Forecasts of the World Bank on the main macroeconomic indicators of the Republic of Uzbekistan

- International Monetary Fund, World Economic Outlook Database

The following factors are taken as macroeconomic factors, the influence of which is studied: growth of consumer price index, growth of real GDP, growth of export, growth of import, growth of unemployment.

2018 2019 2020

Consumer price index 17.8%/17.47%/16/5% 15.5%/13.13%/13.0% 11.0%/11.61%/9.1% growth GDP growth 5.1%/5.0%/4.6% 4.8%/5.0%/4.4% 5.1%/5.5%/4.8% Export growth 18.5%/18.53%/11.4% 17.4%/6.48%/13.0% 16.0%/4.8%/15.0%

Based on the results of the analysis of the forecast values of macro parameters available for 2018-2020, 3 scenarios with the corresponding weights were determined:

Scenario Scenario weight 1 25% 2 - Basic 50% 3 25%

To calculate the adjusting factors, the forecast values of macroindicators on the horizon of 3 years are used, since the forecasts of most of the macroindicators under consideration are not available in the recognized open sources (IMF, World Bank) on the farther horizons.

Adjusting factors are subject to periodic (but not less than once a year) recalculation using updated data on the actual frequency of portfolio defaults and updated data on the facts and forecasts of macroindicators from official sources. However, taking into account the frequency of updates of macro data, as well as the time required to calculate the actual portfolio default rate, some lag in the calculation of correction factors is acceptable.

Modified financial assets

The contractual terms of a loan may be modified for a number of reasons, including changing market conditions, customer retention and other factors not related to a current or potential credit deterioration of the customer. An existing loan which terms have been modified may be derecognized and the renegotiated loan recognized as a new loan at fair value in accordance with the accounting policy.

When the terms of a financial asset are modified and the modification does not result in derecognition, the determination of whether the asset's credit risk has increased significantly reflects comparison of:

• its remaining lifetime PD at the reporting date based on the modified terms; with

41

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 • the remaining lifetime PD estimated based on data at initial recognition and the original contractual terms.

When modification results in derecognition, a new loan is recognized and allocated to Stage 1 (assuming it is not credit-impaired at that time).

The Group renegotiates loans to customers in financial difficulties (referred to as 'forbearance activities') to maximize collection opportunities and minimize the risk of default. Under the Group's forbearance policy, loan forbearance is granted on a selective basis if the debtor is currently in default on its debt or if there is a high risk of default, there is evidence that the debtor made all reasonable efforts to pay under the original contractual terms and the debtor is expected to be able to meet the revised terms.

The revised terms usually include extending the maturity, changing the timing of interest payments and amending the terms of loan covenants. Both retail and corporate loans are subject to the forbearance policy.

For financial assets modified as part of the Group's forbearance policy, the estimate of PD reflects whether the modification has improved or restored the Group's ability to collect interest and principal and the Group's previous experience of similar forbearance action. As part of this process, the Group evaluates the borrower's payment performance against the modified contractual terms and considers various behavioural indicators.

Generally, forbearance is a qualitative indicator of a significant increase in credit risk and an expectation of forbearance may constitute evidence that an exposure is credit-impaired. A customer needs to demonstrate consistently good payment behavior over a period of time before the exposure is no longer considered to be credit-impaired/ in default or the PD is considered to have decreased such that the loss provision reverts to being measured at an amount equal to 12-month ECL.

Measurement of ECL

The key inputs into the measurement of ECL are the term structure of the following variables:

• probability of default (PD);

• loss given default (LGD);

• exposure at default (EAD).

ECL for exposures in Stage 1 is calculated by multiplying the 12-month PD by LGD and EAD.

The methodology of estimating PDs is discussed above under the heading "Generating the term structure of PD".

The Group estimates LGD parameters based on the history of recovery rates of claims against defaulted counterparties. The LGD models consider the structure, collateral, seniority of the claim, counterparty industry and recovery costs of any collateral that is integral to the financial asset. For loans secured by retail property, LTV ratios are a key parameter in determining LGD. LGD estimates are recalibrated for different economic scenarios and, for real estate lending, to reflect possible changes in property prices. They are calculated on a discounted cash flow basis using the effective interest rate as the discounting factor.

EAD represents the expected exposure in the event of a default. The Group derives the EAD from the current exposure to the counterparty and potential changes to the current amount allowed under the contract and arising from amortization. The EAD of a financial asset is its gross carrying amount at the time of default. For lending commitments, the EAD is potential future amounts that may be drawn under the contract, which are estimated based on historical observations and forward-looking forecasts. For financial guarantees, the EAD represents the guarantee exposure when the financial guarantee becomes payable.

As described above, and subject to using a maximum of a 12-month PD for Stage 1 financial assets, the Group measures ECL considering the risk of default over the maximum contractual period (including any borrower's extension options) over which it is exposed to credit risk, even if, for credit risk management purposes, the Group considers a longer period. The maximum contractual period extends to the date at

42

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 which the Group has the right to require repayment of an advance or terminate a loan commitment or guarantee.

Where modelling of a parameter is carried out on a collective basis, the financial instruments are grouped on the basis of shared risk characteristics that include:

instrument type;

credit risk ratings;

collateral type;

LTV ratio for retail mortgages;

date of initial recognition;

remaining term to maturity;

industry; and

geographic location of the borrower.

The groupings are subject to regular review to ensure that exposures within a particular group remain appropriately homogeneous.

For portfolios in respect of which the Group has limited historical data, external benchmark information is used to supplement the internally available data. The portfolios for which external benchmark information represents a significant input into measurement of ECL are as follows.

Exposure at default December 31, 2018 pD

Cash and cash equivalents 282,787,593 Moody's Default Due from other banks 137,789,469 statistics

Loss provision

The following tables show reconciliations from the opening to the closing balances of the loss provision by class of financial instruments. Comparative amounts for 2017 represent provision account for credit losses and reflect measurement basis under IAS 39.

43


Transition to IFRS 9

Classification of financial assets and financial liabilities on the date of initial application of IFRS 9. The following table shows the original measurement categories in

Financial assets

In thousands of Uzbek Soums

Original classification under IAS 39

New classification under IFRS 9

Original carrying amount

under IAS 39

Change in the measurement

basis

New carrying amount under

IFRS 9

Tax effect from transition to

IFRS 9

Cash and cash equivalents Loans and receivables Amort ized cost 1,095,912,580 (1,573,097) 1,094,339,483 (342,935)

Due from credit institutions Loans and receivables Amort ized cost 110,551,808 (385) 110,551,423 (84)

Loans to customers Loans and receivables Amort ized cost 3,250,167,081 9,289,817 3,259,456,898 2,025,180

Other financial assets Loans and receivables Amort ized cost 22,973,633 4,102,249 27,075,882 894,290

Total financial assets 4,479,605,102 11,818,584 4,491,423,686 2,576,451

44


There are no changes in the classification or measurement of financial liabilities as a result of the transition to IFRS 9.

The Group's accounting policies on the classification of financial instruments under IFRS 9 are set out in Note 4. The application of these policies resulted in the reclassifications set out in the table above and explained below.

Investments in equity instruments that have been classified as available-for-sale in accordance with IAS 39 have been reclassified to category measured at FVOCI.

The following table summarizes the impact, net of tax, of transition to IFRS 9

In thousands of Uzbek Soums Impact of adopting

IFRS 9

Accumulated loss

Closing balance under IAS 39 (31 December 2017) (61,955,326)

Recognit ion of ECL under IFRS 9 for assets measured at amortized cost, loan commitments and financial guarantee contracts Deferred tax regarding above

11,739,942 (2,559,307)

Opening balance restated under IFRS 9 (1 January 2018)

The following table reconciles:

(52,774,691)

• the closing impairment provision for financial assets in accordance with IAS 39 and provisions for loan commitments and financial guarantee contracts in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets as at 31 December 2017; to

• the opening ECL provision determined in accordance with IFRS 9 as at 1 January 2018

For financial assets, this table is presented by the related financial assets' measurement categories in accordance with IAS 39 and IFRS 9, and shows separately the effect of the changes in the measurement category on the loss provision at the date of initial application of IFRS 9, i.e. as at 1 January 2018.

(in thousands UZS)

Impairment al lowance in accordance with IAS 39

as at December 31, 2017 Change in

measurement basis

ECL in accordance with IFRS 9 as at

Cash and cash equivalents - (1,573,097) (1,573,097)

Amounts due from credit institutions - (385) (385)

Loans to customers and letters of credit (60,235,013) 9,289,817 (50,945,196)

Other financial assets (10,862,506) 4,102,249 (6,760,257)

Unused credit lines - (78,642) (78,642) Total ECL provision (71,097,519) 11,739,942 (59,357,577)

45


5 Standards issued but not yet effective

A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2019 with earlier application permitted; however, the Group has not early adopted them in preparing these consolidated financial statements, with the exception of the amendment to IFRS 9 affecting prepayment features with negative compensation issued in October 2017.

Of those standards that are not yet effective, IFRS 16 is expected to have a significant impact on the Group's consolidated financial statements in the period of initial application.

IFRS 16

The Group is required to adopt IFRS 16 Leases from 1 January 2019. The Group has assessed the estimated impact that initial application of IFRS 16 will have on its consolidated financial statements, as described below. The actual impacts of adopting the standard on 1 January 2019 may change because:

- the Group has not yet finalized the testing and assessment of controls over its new IT systems; and

- the new accounting policies are subject to change until the Group presents its first financial statements that include the date of initial application.

IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low value items. Lessor accounting remains similar to the current standard - i.e. lessors continue to classify leases as finance or operating leases.

IFRS 16 replaces existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

Leases in which the Group is a lessee The Group has completed an initial assessment of the potential impact on its consolidated financial statements but has not yet completed its detailed assessment. The actual impact of applying IFRS 16 on the financial statements in the period of initial application will depend on future economic conditions, the development of the Group's lease portfolio, the Group's assessment of whether it will exercise any lease renewal options and the extent to which the Group chooses to use practical expedients and recognition exemptions. The Group will recognize new assets and liabilities for its operating leases of office buildings. The nature of expenses related to those leases will now change because IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. Previously, the Group recognized operating lease expense on a straight-line basis over the term of the lease, and recognized assets and liabilities only to the extent that there was a timing difference between actual lease payments and the expense recognized. As at 31 December 2018, the Group entered into operating lease agreements for a period of one year with a preemptive right of further extension of these agreements.

No significant impact is expected for the Group's finance leases.

Leases in which the Group is a lessor

No significant impact is expected for leases in which the Group is a lessor.

Transition

The Group plans to apply IFRS 16 initially on 1 January 2019, using a modified retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognized as an adjustment to the opening balance of retained earnings at 1 January 2019, with no restatement of comparative information.

When transitioning to a new standard, the Group plans to apply a practical expedient, which allows it to maintain its previous assessment as to which of the existing agreements are leases or contain lease relations. This means that it will apply IFRS 16 to all contracts entered into before 1 January 2019 and identified as leases in accordance with IAS 17 and IFRIC 4.

46


Other standards

The following amended standards and interpretations are not expected to have a significant impact on the Group's consolidated financial statements:

- IFRIC 23 Uncertainty over Tax Treatments^ - Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28); - Plan Amendment, Curtailment or Settlement (Amendments to IAS 19); - Annual Improvements to IFRS Standards 2015-2017 Cycle - various standards; - Amendments to References to Conceptual Framework in IFRS Standards; - IFRS 17 Insurance Contracts.

6 Cash and cash equivalents

In thousands of Uzbek Soums 2018 2017

Cash on hand 489,161,894 535,648,182 Correspondent accounts and overnight placements with other banks Cash balances with CBU (other than mandatory reserve deposits)

233,385,741

347,884,870

297,837,460

234,406,925 Placements with other banks with original maturity of less than three months

50,038,510 28,020,013

ECL provision (636,658) -

Total cash and cash equivalents 1,119,834,357 1,095,912,580

As at 31 December 2018 and 31 December 2017 the Group has no counterparties, other than the CBU, whose balances of cash and cash equivalents exceed 10% of the Group's capital.

47


2018 2017

(In thousands of Uzbek Soums)

Stage 1 12-month ECL

Stage 2 Lifetime ECL for

assets that are not credit-impaired

Stage 3 Lifetime ECL for assets that are credit-impaired

Total Total

ECL provision as at the beginning of the year (Note 4)

Net charge ECL provision as at the end of the year

1,573,097

(936,439)

636,658

1,573,097

(936,439)

636,658

The credit quality of cash and cash equivalents balances is summarized as follows as at 31 December 2018:


Correspondent accounts and

overnight deposits with

other banks

Cash balances with

CBU

Placements with other banks with

original maturities of

less than three months

Total

Neither past due or impaired -CBU -AA1 (Moody's rated) -AA2 (Moody's rated) -A1 (Moody's rated) -A2 (Moody's rated) -A3 (Moody's rated) -BAA1 (Moody's rated) -BBB (Fitch rated) -Ba1 (Moody's rated) -BA2 (Moody's rated) -B2 (Moody's rated) -B3 (Moody's rated) -Not rated ECL provision

765 19,106

1,605,451

146,426,39^ 2,043,552 2,003,456

21,486

77,780,07^ 2,591,139

894,318 (636,658)

347,884,870

30,000,000

20,000,00

38,510

347,884,870 765

19,106 1,605,451

30,000,000 146,426,396

2,043,552 2,003,456

21,486 20,000,00

77,780,072 2,591,139

932,828 (636,658)

Total cash and cash equivalent, excluding cash on hand

232,749,083 347,884,870 50,038,510 630,672,463

48

Joint S^ock Commercial Bank "Agrobank"

The credit quality of cash and cash equivalents balances is summarized as follows as at 31 December 2017:

Correspondent Cash Placements with Total accounts and balances with other banks with

overnight CBU original maturit ies In thousands of Uzbek deposits with of less than three Soums other banks months

Neither past due or impaired

- CBU 64,279 234,406,925 - 234,471,205 - AA1 (Moody's rated) 118,402 - - 118,402 - AA2 (Moody's rated) 2,220 - - 2,220 - A1 (Moody's rated) 197,760 - - 197,760 - A2 (Moody's rated) 39,299,249 - - 39,299,249 - A3 (Moody's rated) 7,177 - - 7,177 - BAA1 (Moody's rated) 10,038 - - 10,038 - BBB (Fitch rated) 70,578, - - 70,578 - Ba1 (Moody's rated) 1,828 - - 1,828 - BA2 (Moody's rated) 46,784,405 - - 46,784,405 - B2 (Moody's rated) 210,390,522 - 18,020,013 228,410,535 - B3 (Moody's rated) - - 10,000,000 10,000,000 - Not rated 891,003 - - 891,003

Total cash and cash equivalent, excluding cash on hand 297,837,460 234,406,925 28,020,013 560,264,398

49

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 7 Due from Other Banks


Long term loans to other banks Mandatory cash balances with CBU Short term placements with other banks with original maturities of more than three months, but less than a year Restr icted cash in respect of letters of credit and VISA transactions ECL provision

73,760,992 61,446,943

2,581,561

J2IL

71,792,463

353,570

38,405,775

Total due from other banks 137,789,469 110,551,808


Stage 1 12-month ECL

2018 Stage 2

Lifetime ECL for assets that are not

credit-impaired

Stage 3 Lifetime ECL for assets that are credit-impaired

Total

2017

Total

ECL provision as at the beginning of the year (Note 4)

Net charge ECL provision as at the end of the year

385

(358)

27

385

(358)

27

As at 31 December 2018 and 31 December 2017, due from other banks were from seven and five banks, respectively.

Restricted cash represents balances with foreign banks placed by the Group on behalf of its clients. The Group does not have the right to use these funds to finance its activities. The bank has no such balances in 2018.

The credit quality of amounts due from other banks as at 31 December 2018 and 31 December 2017 is summarized as follows:


Mandatory reserve deposits

with the CBU

Short term placements with

other banks with original maturity of

more than three months, but less

than a year

Long term placements

with other banks

Total

Neither past due nor impaired -CBU -В2 (Moody's rated) -B (S&P rated) -B3 (Moody's rated) -Not rated ECL provision

61,446,943 2,581,561

J2IL

22,766,972 34,525,737 14,300,000 2,168,283

61,446,943 25,348,533 34,525,737 14,300,000

2,168,283

( 2 7 1

Total due from other banks 61,446,943 2,581,534 73,760,992 137,789,469

50



Mandatory reserve deposits

with the CBU

Restricted cash

Short term placements with other banks with

original maturity of more than three

months, but less than a year

Total

Neither past due nor impaired -CBU -A1 (Moody's rated) -A2 (Moody's rated) -B+ (Fitch rated) -В2 (Moody's rated)

71,792,463 2,439,259

35,966,441 75

353,570

71,792,463 2,439,259

35,966,441 75

353,570

Total due from other banks 71,792,463 38,405,775 353,570 110,551,808

Ratings of the counterparties are based on Fitch, Moody's and Standard&Poor's rating systems

All funds in credit institutions are in Stage 1 of credit risk.

Amounts due from other banks are not collateralised. Refer to Note 34 for the estimated fair value of each class of amounts due from other banks. Interest rate analysis of due from other banks is disclosed in Note 29. Information on related party balances is disclosed in Note 30.

8 Loans and Advances to Customers, including finance lease receivables


Corporate loans State and municipal organisations Small and medium enterprises Individuals

904,879,664 1 ,163,011,145 5 , 263,049,371 1 , 405,325,753

303,390,225 700,496,727

1,798,706,052 372,943,527

Total loans and advances to customers, including f inance lease receivables, gross 8 ,736,265,933 3,341,562,378

Less: ECL provision ( 1 16,731,955) (60,235,012)

Total loans and advances to customers, including f inance lease receivables 8,619,533,978 3,281,327,366

51


The table below shows an analysis of the movement in ECL provision. Comparative data for 2017 reflect the measurement basis under IAS 39.

2018 2017

Loans to customers at amortized cost, UZS thousand Stage 1 Stage 2 Stage 3 Total

Balance as at 1 January 5,832,841 5,631,117 39,481,238 50,945,196 46,214,397

Transfer from Stage 1



Net change of loss provision

New financial assets originated or purchased

Financial assets that have been repaid in full (Write-offs)/reversals

Unwinding of discount on present value of ECLs

631,116

(17,156)

(74,419)

(2,059,272)

15,198,319

(1,858,475)

(397,474)

21,685

(2,396,816)

824,414

56,459,436

(2,812,127)

(233,642)

(4,529)

2,471,235

12,436,765

9,665,325

(874,270)

11,201,907 14,020,456

81,323,080 -

(4,065,443) (8,736,045)

(17,127,913) (17,127,913)

(874,270)

160

Balance as at 31 December 17,652,954 57,330,235 41,748,766 116,731,955 60,235,013

Economic sector risk concentrations within the customer loan portfolio are as follows:

2018 2017 In thousands of Uzbek Soums amount % amount %

Agriculture 4,095,344,956 46.9% 1,591,275,284 47.6% Manufacturing 1,363,743,958 15.6% 798,784,314 23.9% Individuals 1,405,325,753 16.1% 538,969,374 16.1% Trade 907,879,589 10.4% 347,095,404 10.4% Construction 134,092,348 1.5% 38,659,380 1.2% Other 829,879,329 9.5% 26,778,622 0.8%

Total loans and advances to customers before impairment provision 8,736,265,933 100 3,341,562,378 100

At 31 December 2018 the Group had a concentration of loans represented by UZS 950,424,460 thousand due from ten largest borrowers or 11% of gross loan portfolio net of ECL provision (2017: UZS 536,647,633 thousand or 16%).

Information about collateral as at 31 December 2018 and 31 December 2017 is as follows:

In thousands of Uzbek Soums 2018 2017 Not past due and past due for less than 90 days

- government guarantee - guarantees and sureties - transport

57,322,919 3,433,812,999

1,279,196,399

57,188,416 1,589,687,587

344,283,397 52


- real estate 1,262,579,835 564,994,695 - insurance policy 2,139,731,843 513,126,606 - deposits 6,150,077 6,149,142 - equipment 298,513,808 170,638,939 - fixtures 76,996,774 7,095,986 - other 3,287,210 29,230 - unsecured 91,461,982 26,443,732

Total not past due and past due for less than 90 days 8,649,053,846 3,279,637,730

Past due for more than 90 days - government guarantee - -

- guarantees and sureties 16,212,707 8,388,320 - transport 14,449,252 10,730,900 - real estate 20,247,211 11,283,461 - insurance policy 14,057,409 3,695,224 - deposits 13,922 2,638 - equipment 1,560,934 179,891 - fixtures - 371 - other - -

- unsecured 20,670,652 27,643,843

Total past due for more than 90 days 87,212,087 61,924,648

Quality of loan portfolio The loan credit quality analysis presented in the tables below is based on the scale of credit quality of borrowers developed by the Bank:

• "Standard" - assets, counterparties for which have a low probability of default, demonstrate a high ability to meet financial liabilities in a timely manner;

• "Sub-standard"- assets, counterparties for which have a medium probability of default, demonstrate an average ability to meet financial liabilities in a timely manner and require more attention at the monitoring stage;

• "Doubtful"- assets, counterparties for which have a higher probability of default, require special attention at the monitoring stage;

• "Unsatisfactory" - assets that, taking into account the existing indicators of impairment, meet the definition of default;

• "Uncollectable" - assets that are in default for a long time (more than 1 year).

53


The following table contains information about the quality of the loan portfolio before deducting the ECL provision as at 31 December 2018 and 31 December 2018:

31 December 2018 Stage 1 Stage 2 Stage 3

Loans to corporate customers 812,976,364 70,680,268 -

1-Standard - 21,223,030 -

2-Sub-s tandard - - -

3-Doubt fu l - - -

4-Unsat is factory - - -5-Uncol lectab le - - -

812,976,364 91,903,298 -ECL provision 2,318,722 46,174,552 -Total loans to corporate customers 810,657,642 45,728,746 -

Loans to small and medium-sized businesses

- not past due 5,089,314,147 - -

- past due for less than 30 days 24,669,168 361,969 -

- past due f rom 31 to 90 days - 71,536,616 -

- past due f rom 91 to 180 days - - 31,675,191 - past due f rom 180 to 360 days - - 24,761,972 - past due for more than 360 days - - 20,730,312

5,113,983,315 71,898,585 77,167,474 ECL provision 12,833,246 11,100,118 38,340,950 Total loans to small and medium-sized businesses 5,101,150,069 60,798,467 38,826,524

Loans to state entities - not past due 1,158,630,503 - -

- past due for less than 30 days - - -

- past due f rom 31 to 90 days - 14,710 -

- past due f rom 91 to 180 days - - 1,886,758 - past due f rom 180 to 360 days - - 2,006,598 - past due for more than 360 days - - 472,574

1,158,630,503 14,710 4,365,930 ECL provision 2,147,469 5,010 2,209,560 Total loans to state entities 1,156,483,034 9,700 2,156,370

Loans to individuals Consumer loans 436,652,149 798,809 251,164 Mortgage loans 64,262,354 3,344,093 2,009,114 Microloans 893,556,883 1,032,784 3,418,404 Total loans to retail customers 1,394,471,385 5,175,686 5,678,682 ECL provision 353,518 50,555 1,198,257 Total loans to retail customers 1,394,117,867 5,125,131 4,480,425 Total loans to customers at amortized

cost 8,462,408,613 111,662,044 45,463,321

54


31 December 2018 Stage 1 Stage 2 Stage 3

Loans to retail customers Consumer loans

- not past due - past due for less than 30 days - past due f rom 31 to 90 days - past due f rom 91 to 180 days - past due f rom 180 to 360 days - past due for more than 360 days

1,394,471,385

436,627,575 24,574

5,175,686

798,809

5,678,682

196,56;3 34,669 19,932

Total consumer loans 436,652,149 798,809 251,164

Mortgage loans - not past due - past due for less than 30 days - past due f rom 31 to 90 days - past due f rom 91 to 180 days - past due f rom 180 to 360 days - past due for more than 360 days

64,213,910 48,444

3,344,09 3-

1,005,572 471,519 532,023

Total mortgage loans 64,262,354 3,344,093 2,009,114

Microloans - not past due - past due for less than 30 days - past due f rom 31 to 90 days - past due f rom 91 to 180 days - past due f rom 180 to 360 days - past due for more than 360 days

893,350,092 206,790

1,032,784-1,541,977

399,842 1,476,585

Total microloans

ECL provision Total loans to retail customers

893,556,883 353,518

1,394,117,867

1,032,784 50,555

5,125,131

3,418,404 1,198,257 4,480,425

55



Corporate loans Loans to small Loans to and medium- individuals

sized businesses

Loans to state and municipal organisations

Total

Neither past due nor impaired 303,390,225 1,715,060,246 531,372,594 697,175,456 3 ,246,998,522

Past due but not impaired up to 30 days 31 to 90 days 91 to 180 days over 180 days

- 5,279,116 25,557,630

1 ,648,158 2,925,836

119,652 1,146,783

7 ,046,927 2 9,630,249

Total past due but not impaired - 3 0,836,746 4 ,573,994 1 ,266,436 36,677,176

Individually impaired up to 30 days 31 to 90 days 91 to 180 days over 180 days

- 761,682 129,844

14,918,300 36,999,235

648,831 59,103

1 ,079,951 1 ,234,901

1 ,963,293 91,542

1 ,410,513 1 88,947

1 7,961,544 3 8,325,677

Total individually impaired loans - 5 2,809,061 3 ,022,786 2 ,054,835 5 7,886,682

Impairment provision for loans individually determined to be impaired

Impairment for portfolio basis provisions ( 1 , 5 1 6 , 9 5 1 ) (40,742,650) (8,742,529)

(1,857,239) (2,679,733)

(1,203,703) (3,492,209)

(43,803,591) (16,431,422)

ECL provision (1,516,951) (49,485,178) ( 4,536,972) (4,695,912) (60,235,013)

Total loans to customers, including finance lease receivables less ECL provision 301,873,274 1 ,749,220,875 5 34,432,403 695,800,814 3,281,327,366

Changes in an assumption for calculation of ECL provision

Changes in these estimates may affect the provision for impairment of loans to corporate customers, loans to SME and loans to individuals. For example, an increase/decrease in the net present value of the projected cash flows by one percent will lead to a decrease/increase in the amount of ECL provision for loans to corporate clients as at 31 December 2018 by UZS 9 048 796 thousand (2017: UZS 3 033 902 thousand), a decrease/increase in the amount of ECL provision for loans to SME by UZS 52 630 493 thousand (2017: UZS 17 987 060 thousand) and a decrease/increase in the amount of ECL provision for loans to individuals by UZS 14 053 257 thousand (2017: UZS 5 389 693 thousand).

As at 31 December 2018, corporate loans included finance lease receivables in the amount of UZS 26,588,948 thousand (31 December 2017: UZS 38,040,542 thousand) before ECL provision.

The table below provides an analysis of the gross amount of finance lease receivables and its present value as at 31 December:

56



Net investment in lease receivable within 1 year Net investment in lease receivable from 1 year to 5 years Net investment in lease receivable during a period of more than 5 years

6,028,014 22,618,628

8,469,904 27,749,362

3,522,235 Net investment in f inance lease

Unearned income receivable within 1 year Unearned income receivable from 1 year to 5 years

Unearned income receivable during a period of more than 5 years

28,646,642

(710,224) (1,347,470)

39,741,501

(362,517)

(1,187,689)

(150,753)

Net investment in f inance lease (2,057,694) (1,700,959)

Net investment in finance lease receivable within 1 year Net investment in finance lease receivable from 1 year to 5 years Net investment in finance lease receivable during a period of more than 5 years

5,317,790 21,271,158

8,107,387 26,561,673

3,371,482

Net investment in f inance lease

Less al lowance for f inance lease

26,588,948

(460,485)

38,040,542

(771,801)

Total net investment in f inance lease 26,128,463 37,268,741

Current part Long-term part

5,225,693 20,902,770

7,942,897 29,325,844

Total net investment in f inance lease 26,128,463 37,268,741

The normal contractual lease arrangements of the Group include the following main terms and conditions:

• Lease term (1 -5 years); • Stated annual lease interest is in the range of 12% - 16%, payable monthly from

commencement/delivery of lease equipment to the lessee; • Finance income calculated using effective interest rate; • The lessee insures risks related to the leased assets such as damage, theft and other risks and

keeps them insured throughout the term of the lease. Insurance fees are paid by the Lessee; • The Group is entitled to possession of the equipment if certain terms of the agreement are not

fulfilled; • Initial direct costs are initially borne by the Group and are reimbursed by lessees prior to the

inception of the lease; and • Legal title passes to the lessee upon repayment of final lease payment.

Refer to Note 29 for the estimated fair value of each class of loans and advances to customers. Interest rate analysis of loans and advances to customers is disclosed in Note 29. Information on related party balances is disclosed in Note 30.

9 Investment Securities

Investments in equity securities are presented below:

In thousands of Uzbek Soums Name Nature of business 2018 2017

Measured at fair value Uzagroservis group companies Trade and services 6,364,469 18,679,940 JSCB "Microcreditbank" Financial services 2,136,000 4,029,447 SJSIC "Uzagrosug'urta" Trade and services 2,085,197 5,356,346 Cotton industry companies Trade and services 1,676,079 4,901,130 JSC "Uzagrolizing" Financial services 1,592,488 1,956,094 JSC "Nishon Paxta Tozalash" Trade and services 865,617 208,340 JSC "Uzmed-leasing" Financial services 568,281 698,034 JSC "Zirabuloq Paxta Tozalash" Trade and services 379,503 182,045

57


SC "Urgenchkormash" Trade and services 271,007 332,885 JSC "Republican Currency Exchange" Financial services 198,460 243,774 LLC "Kreditno-informatsionnyy analit icheskiy

tsentr" Financial services 83,387 40,000 LLC "Bozor, pul va kredit" Trade and services 62,998 30,220 JSC "Sirdaryo Agrokimyokhimoya" Trade and services 31,988 15,344 LLC «Khonka» regional machine workshop Trade and services 1,012 486 Guarantee Fund Development of Small

Business Financial services - 2,000,000 JSC "Chilonzor buyum bozori" Trade and services - 290,624 JSC "Kurilish leasing" Financial services - 278,538

Other 521,333 214,036

Total investment securities 16,837,81 ̂ 39,457,2833

Investment securities available for sale are equity securities and equity investments, registered in Uzbekistan and not publicly traded. Due to the nature of the local financial markets, it is not possible to obtain current market value for these investments. For these investments, fair value is estimated by reference to the discounted operating cash flows or dividends from the investee. Changes in investment securities fair value and measurement approaches are stipulated in Note 29.

58


10 Investment in Associates

The table below summarizes the movements in the carrying amount of investment in associate and joint venture.


Carrying amount at 1 January 34,795,129 37,677,166 Share of profit of associates 361,591 6,189,397 Dividends from associates - ( 260,001) Disposal of joint venture - ( 5 7 , 3 9 8 , 0 6 0 ) Acquisit ion of associate companies 7 , 0 6 6 , 4 8 8 16,257,077

Carrying amount at 31 December 42,223,208 34,795,129

The Group's interest in its principle associates and joint venture were as follows:

2018 2017 % %

ownership ownership interest interest

held Place of business held Place of business

"Davr-Mashlizing" LLC JV "Central Asia Seed Company"

49.5%

25.0%

Uzbekistan

Uzbekistan

49.5%

25.0%

Uzbekistan

Uzbekistan

"Davr-Mashlizing" is a limited liability company with the main activity of providing finance leases to agricultural companies in Uzbekistan.

JV "Central Asia Seed Company" is a joint venture of the Bank, Pakhta Kapital Invest LLC (Uzbekistan) and Elsut International Inc. (United Stated of America) with 25 percent, 23 percent and 52 percent ownership interest held by each party respectively. JV Central Asia Seed Company operates in agricultural sector with the intent of producing high quality cotton seeds.

During 2017 the management of the Bank sold 50 percent ownership in JSC "Uzbek-Turkish Bank" to Ziraat Bankasi (Turkey) for UZS 113,348,620 thousand. Profit from the sale of the share in JSC "Uzbek-Turkish Bank" was recorded in "Profit for the year from discontinued operations" line in the Consolidated Statement of Profit or Loss and Other Comprehensive Income.

Summarized financial information for each significant associate is as follows at 31 December 2018 and 31 December 2017:

2018

In thousands of Uzbek Soums JV "Central Asia Seed Company"

Davr-Mashlizing

Uzagroservis companies

Total associates

Current assets 94,706,061 2,216,783 11,148,227 108,071,071 Non-current assets 55,866,595 1,772,776 118,437,918 176,077,289 Current liabilities 66,278,482 16,985 16,825,758 83,121,225 Non-current liabilities 22,300,421 - 48,697,531 70,997,952 Revenue 55,076,190 89,557 6,888,913 62,054,660 Profit from operations 998,897 (229,690) 389,124 1,158,331

59


2017

JV "Central Asia Seed Total In thousands of Uzbek Soums Company" Davr-Mashlizing associates

Current assets 78,712,773 2,256,932 80,969,705 Non-current assets 54,798,436 2,061,823 56,860,259 Current liabilities 25,187,742 37,277 25,225,019 Non-current liabilities 44,326,757 - 44,326,757 Revenue 41,995,160 176,883 42,172,043 Profit from operations 3,994,658 14 3,994,672

The only reconciling difference between the above amounts and the carrying amount of the investments in associates and joint venture is elimination of the ownership interest held by the other investors in the associates.

The Group had no material share of contingent liabilities of the associates and joint venture as at 31 December 2018 and 31 December 2017.

Assets of a subsidiary (associate) acquired for resale

Assets of a subsidiary (associate) acquired for resale in the amount of UZS 75,199,986 thousand are investments in JSC "Uzagroservis", a company that provides agricultural machinery for lease.

During 2017, the Group obtained the shares of JSC "Uzagroservis" by means of converting the debt. The Group recognized the assets of the subsidiary in the amount of UZS 128,907,494 thousand and the corresponding non-controlling interest in the amount of UZS 53,176,551 thousand.

On 19 February 2018, the share capital of JSC "Uzagroservis" was increased as a result of contributions from the state-controlled company JSC "Uzagrotexsanoatholding", as result of which the share of the Group was diluted from 58.6% to 31.96%.

The Group is committed to sell its interest in JSC "Uzagroservis" and is currently conducting active marketing activities aimed at the sale of the asset.

60


1 1 Property, Equipment and Intangible Assets


Building and premises

Furniture and equipment

Construction in progress

Intangible assets

Total

Carrying amount as at 31 December 2016 43,291,438 59,227,082 - 193 102,518,713

Addit ions 3,340,693 65,075,949 25,696,493 94,113,135

Transfers 25,696,493 (25,696,493) -

Disposals (2,893,351) (791,289) (3,684,640)

Depreciation / amortization charge (4,799,481) (17,658,087) (193) (22,457,761)

Carrying amount as at 31 December 2017 64,635,792 105,853,655 - - 170,489,447

Addit ions Transfers Disposals Depreciation / amortization charge

2,506,455 12,253,007

(209,407)

(5,704,629)

58,238,699 (19,166)

(2,702,317)

(22,985,348)

89,135,685 (12,253,007) 19,167

(240)

(940)

149,880,839 1

(2,911,964)

(28,690,917)

Carrying amount as at 31 December 2018 73,481,218 138,385,523 76,882,678 17,987 288,767,406

Gross book value as at 31 December 2018 120,547,462 305,068,008 - 1,640,000 427,255,470

Accumulated depreciation as at 31 December 2018 (47,007,877) (89,858,174) - (1,622,013) (138,488,064)

61


1 2 Other assets


December 31, 2018

December 31, 2017

Other financial assets Receivable f rom money transfer organizations Trade receivables Commission receivable Accounts receivable f rom Paynet service organization Other financial assets ECL provision

7,706,319 8,070,862

977,800 2,303,995 1,059,254

(6,214,405)

12,102,773 5,097,253 3,174,987 1,062,871

155,806 (10,862,506)

Total other financial assets 13,903,825 10,731,184

Other non-financial assets Inventory Prepayment for equipment Prepayment to fund and credit insurance Recoverable assets f rom court decision Other

15,304,438 7,387,858 4,455,344 8,696,625 1,003,015

37,930,312 7,551,799 1,535,748 8,366,243

220,295

Total other non-financial assets 36,847,280 55,604,397

Total other assets 50,751,105 66,335,581

Recoverable assets from court decision include cases related to operating activities of the Bank. The Bank made 100 percent allowance for these receivables.

At 31 December 2018 and 31 December 2017 all other financial assets are neither past due nor impaired. Refer to Note 29 for disclosure of the fair value of other financial assets.

The following is an analysis of changes in the ECL provision for 2018:

2018


Stage 1 12-month

ECL

Stage 2 Lifetime ECL for

assets that are not credit-impaired

Stage 3 Lifetime ECL for assets that are credit-impaired Total

ECL provision as at the beginning of the year (Note 4) 1,507,484

Net charge 1,206,345 ECL provision as at the end of the year 2,713,829

532,205

(319,307)

4,720,569

(1,432,890)

212,898

6,760,257

(545,852)

3,287,679 6,214,405

Movements in the provision for impairment of other financial assets for 2017 are as follows:

Provision for impairment at 1 January 3,343,616

Provision for / (recovery of) impairment during the year Amounts written off during the year

9,379,297 (1,860,407)

Provision for impairment at 31 December 10,862,506

62


13 Due to other banks

In thousands of Uzbek Soums December 31,

2018 December 31,

2017

Long-term placements of other banks Short-term placements of other banks Correspondent accounts and overnight placements of other banks

244,840,215 290,454,183

55,687,500 5,387,100 1,501,136

Total due to other banks 535,294,398 62,575,736

Increase in the amounts due to other banks was partially caused by a loan issued by Xalq Bank in the amount of UZS 152,000,000 thousand. The funds were received for the participation of the Group in the program of support for young entrepreneurs on the basis of the decrees of the Government of the Republic of Uzbekistan. The Group also raised a loan from National Bank of Republic of Uzbekistan in the amount of UZS 161,095,500 thousand on the basis of the decrees of the Government of the Republic of Uzbekistan.

Refer to Note 29 for the disclosure of the fair value of each class of amounts due to other banks.

63


1 4 Customer accounts

In thousands of Uzbek Soums December 31, 2018 December 31, 2017

State and public organizations

- current/sett lement accounts

- term deposits

1,291,926,124

454,518,978

837,407,146

430,620,066

384,139,663

46,480,403

Other legal entities


- term deposits

472,232,702

411,569,470

60,663,232

454,307,792

444,789,492

9,518,300

Individuals


- term deposits

1,237,886,577

427,306,620

810,579,957

1,030,531,343

369,810,004

660,721,339

Total customer accounts 3,002,045,403 1,915,459,201

Economic sector concentration within customer accounts are as follows:


State and public organizations - current/sett lement accounts 454,518,978 384,139,663 - term deposits 837,407,146 46,480,403

Other legal entities - current/sett lement accounts 411,569,470 444,789,492 - term deposits 60,663,232 9,518,300

Individuals - current/sett lement accounts 427,306,620 369,810,004 - term deposits 810,579,957 660,721,339

Total customer accounts 3,002,045,403 1,915,459,201

At 31 December 2018 and 31 December 2017 customer accounts amounting to UZS 30,952,103 thousand and UZS 144,193,646 thousand, respectively, were used as collateral for letters of credit and other similar products issued by the Group.

At 31 December 2018 and 31 December 2017, customer accounts totalling UZS 690,184,000 thousand (23%) and UZS 242,027,568 thousand (13%), respectively, were due to 10 customers

Refer to Note 29 for the disclosure of the fair value of each class of customer accounts. Interest rate analyses of customer accounts are disclosed in Note 26. Information on related party transactions is disclosed in Note 30.

1 5 Debt securities issued

In thousands of Uzbek Soums December 31, 2018 December 31, 2017

Deposit certificates 97,587,678 134,084,476

Non-documentary bonds 16,053 16,053

Total debt securities issued 97,603,731 134,100,529

At 31 December 2018 and 31 December 2017, deposit certificates of UZS 97,550,000 thousand (100%) and UZS 126,080,000 thousand (94%), respectively, were due to 10 counterparties.

64

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 Refer to Note 29 for the disclosure of the fair value of each class of debt securities issued. Interest rate analyses of debt securities issued are disclosed in Note 26.

65

Joint Stock Commercial Bank "Agrobank"

Notes to the Consolidated Financial Statements - December 31, 2018

1 6 Other borrowed funds In thousands of Uzbek Soums December 31, 2018 December 31, 2017 International Financial Institutions "Ziraat" Bank (Turkey) International Development Associat ion Asian Development Bank

420,144,667 62,935,586 37,716,345

335,926,230 67,048,745 40,578,781

Uzbekistan Financial Institutions Ministry of Finance of the Republic of Uzbekistan The Fund for Reconstruction and Development of the Republic of Uzbekistan CBU Farmers Support Fund State Fund for Government Program Development Khokimiyat

2,866,240,551 729,366,872

236,564,427 56,095,306 31,124,164 20,723,993

552,457,463 34,941,421

81,100,601

Others 22,279,826 948,027 Total other borrowed funds 4,483,191,737 1,113,001,268

Other borrowed funds

In thousands of Uzbek Soums % Principal amount Total

At 1 January 2018 (revised) 4,027,316 1,108,973,952 1,113,001,268

Cash flow / interest accrual

Repayment

Adjustment considering exchange rate

90,791,041 9,878,967,535

(75,200,574) (6,561,637,854)

591,859 36,678,462

9,969,758,576 (6,636,838,428)

37,270,321

At 31 December 2018 20,209,642 4,462,982,095 4,483,191,737

As at 31 December 2018 the outstanding principle and accrued interests in the total amount of UZS 420,144,667 thousand (2017: 335,926,230 thousand) represents borrowings from Ziraat Bank (Turkey) in the total amount USD 160 million and shall be used for advancing loans to small and medium enterprises and financing investment projects in Uzbekistan, at interest rates varying from 6M Libor+6.5% (2017: Libor+6.5%) to 6M Libor 6.75% (2017: Libor 6.75%) with maturities ranging from February 2019 to July 2023 with semi-annual repayment of the principal and interest. Under the agreement with Ziraat Bank (Turkey), the Bank shall be in compliance with certain financial covenants. At the reporting date the Bank complied with all financial covenants.

As at 31 December 2018 the outstanding principle and accrued interests in the total amount of UZS 62,935,586 thousand (2017: UZS 67,048,745 thousand) represents borrowings from International Development Association ("IDA") in the total amount USD 9.165 million at interest rate of 6M Libor and UZS 12,366,000 thousand at the CBU refinance rate of 3% and shall be used for advancing loans to support agricultural entities, with maturity on September 2029 with semi-annual repayment of the principal and interest including 5 years grace period on principal. Under the agreement with IDA, the Bank shall be in compliance with certain financial covenants. At the reporting date the Bank complied with all financial covenants.

As at 31 December 2018 the outstanding principle and accrued interests in the total amount of UZS 37,716,345 thousand (2017: UZS 40,578,781 thousand) represents borrowings from Asian Development Bank ("ADB") in the total amount of USD 20 million and shall be used for advancing loans to small and medium sized enterprises, at interest rate of 6M Libor+0.7% with maturity in February 2025 with semi-annual repayment of the principal and interest including 5 years of grace period on principal. Under the agreement with ADB, the Bank shall be in compliance with certain financial covenants. No financial covenants are stipulated in the loan agreement.

66

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 As at 31 December 2018 the outstanding principle and accrued interests in the total amount of UZS 2,866,240,550 thousand (2017: UZS 552,457,463 thousand) represents the following borrowings from the Ministry of Finance of the Republic of Uzbekistan:

• UZS 1,602,652,883 thousand issued to the Bank at an interest rate of 3.5% per annum for further issuance of loans to private farmers to finance their cotton/grain related crop expenditures at an interest rate of 5% per annum;

• UZS 116,069,080 thousand issued to the Bank at an interest rate of 1% per annum under the State program for the development of textile and clothing industry with maturity in March 2019;

• UZS 4,903,055,475 thousand issued to the Bank at an interest rate of 3.5% per annum for further issuance of loans to private farmers to finance their cotton/grain related crop expenditures at an interest rate of 3% per annum;

• UZS 1,186,000,000 thousand issued to the Bank at an interest rate of 2% per annum for the financing of agricultural service companies with maturity in December 2027 with quarterly repayment of the principal and interest;

• UZS 25,814,219 thousand issued to the Bank at an interest rate of 7% per annum for issuance of microloans on preferential terms to small enterprises for the expansion of production and business development with maturity in July 2021.

No financial covenants are stipulated in the loan agreements signed with the Ministry of Finance of the Republic of Uzbekistan stated above.

As at 31 December 2018 the outstanding principle and accrued interests in the total amount of UZS 236,564,426 thousand (2017: UZS 81,100,601 thousand) represents the following borrowings from the CBU:

• UZS 80,000,000 thousand for issuance of loans to state oil and gas companies for the purchase of imported raw materials and fuel products at an interest rate of 2% per annum with maturity in May 2019 with semi-annual repayment of principal and interest;

• UZS 316,081,030 thousand issued to the Bank under the regulation on the procedure for issuance of microloans by commercial banks to provide public employment at an interest rate of 3% and 5% per annum with maturity in June 2021 with monthly repayment of principal and interest.

No financial covenants are stipulated in the loan agreements signed with the CBU stated above.

As at 31 December 2018 the outstanding principle and accrued interests in the total amount of UZS 729,366,871 thousand (2017: UZS 34,941,421 thousand) represents the following borrowings from the Fund for Reconstruction and Development of the Republic of Uzbekistan:

• USD 30 million for issuance of loans directed at the modernization of water irrigation system project in Namangan Region. This loan is issued at Libor interest rate with maturity in November 2026 with semi-annual repayment of principal and interest. As at 31 December 2018 the Group utilized USD 15 million (2017: USD 15 million);

• USD 5 million issued to the Bank under the implementation of investment projects in small industrial areas of Samarqand Region in the Republic of Uzbekistan, at an interest rate 6M Libor+2% with maturity in November 2028 with semi-annual repayment of principal and interest including 3 years grace period on principal. As at 31 December 2018 the Group utilized USD 60 thousand of the borrowing under this agreement;

• USD 5 million issued to the Bank under the implementation of investment projects in small industrial areas of Surxondaryo Region in the Republic of Uzbekistan, at an interest rate 6M Libor+2% with maturity in November 2028 with semi-annual repayment of principal and interest including 3 years grace period on principal. As at 31 December 2018 the Group utilized USD 103 thousand of the borrowing under this agreement;

• USD 3 million issued to the Bank under the implementation of investment projects in free economic zones of the Republic of Uzbekistan, at an interest rate 6M Libor+2% with maturity in July 2028 with semi-annual repayment of principal and interest including 3 years grace period on principal. As at 31 December 2018 the Group utilized USD 1.230 million of the loan under this agreement;

• USD 55 million issued to the Bank under the creation of family-run business project, at an interest rate of 3% with maturity in 2025 with semi-annual repayment of principal and interest. As at 31 December 2018 the Group completely utilized the borrowing under this agreement including 3 years grace period on principal.

• USD 15 million issued to the Bank under the issuance of microloans on preferential terms to

67


craftsperson, at an interest rate of 2.5% with maturity in July 2023 with semi-annual repayment of principal and interest including 3 years grace period on principal. As at 31 December 2018 the Group completely utilized the borrowing under this agreement.

As at 31 December 2018 the outstanding principle and accrued interests in the total amount of UZS 56,095,306 thousand (2017: 0) represents the borrowings from the Fund for Farmers, Dehkan Households and Private Plots Owners Support in the total amount of UZS 60,483,000 thousand for agricultural enterprises financing and under the State program "Each family is an entrepreneur". The loan is issued at an interest rate from 5% to 14% per annum with monthly repayment of principal and interest.

As at 31 December 2018 the outstanding principle and accrued interests in the total amount of UZS 31,124,164 thousand (2017: 0) represents the borrowings from the Fund for State Development Programs Financing in the total amount of UZS 35,264,164 thousand with maturity in 2034.

The loans from the Ministry of Finance of the Republic of Uzbekistan, CBU and the Fund for Reconstruction and Development of the Republic of Uzbekistan were issued to the Group for financing the state business, agro-industrial and oil and gas industry development programs under the Government Orders. Contractual interest rates on the loans mentioned are lower than average market interest rates. In connection with the direct usage of borrowed loan funds for loan issue the management believes that contractual rates set on loans are market ones.

68

Joint Stock Commercial Bank "Agrobank"

Notes to the Consolidated Financial Statements - December 31, 2018

17 Other liabilities December 31, December 31,

2018 2017

In thousands of Uzbek Soums Other financial liabilities

Liabilities for share subscription - 324,802,800 Payable for inventories and services 15,632,573 6,450,885 Cash collection costs payable 3,773,858 2,877,709 Other banks customers' cash payable 1,465,713 (0) Dividends payable 950,421 231,780 Other financial liabilities 8,973 -

Total other financial liabilities 21,831,538 334,363,174 Other non-financial liabilities

Advances received 6,167,557 20,595,106 Taxes other than income tax payable 7,107,192 131,081 Payable to employees 775,819 136,358 Off-balance liabilities provision - -Total other non-financial liabilities

14,090,065 20,862,545

Total other liabilities 35,921,603 355,225,720

Liabilities for share subscription represents cash obtained from the Fund for Reconstruction and Development of the Republic of Uzbekistan for the further Bank shares repurchase. In 2018, these funds were used for purchase of ordinary shares.

Refer to Note 29 for disclosure of the fair value of other financial liabilities.

18 Share capital

Number of outstanding

In thousands shares of Uzbek (thousands) Soums

Ordinary Inflation Share capital Share Treasury Shares adjustments premium shares

Total

As at 31 December 2016 314,267 367,064,225 25,631,706 392,695,931 1,412,124 (115,000) 393,993,055

Issue of new shares 828,694 967,914,416 - 967,914,416 - - 967,914,404

As at 31 December 2017 1,142,961 1,334,978,641 25,631,706 1,360,610,347 1,412,124 (115,000) 1,361,907,459

Issue of new shares 708,390 827,398,212 - 827,398,212 - - 827,398,212

As at 31 December 2018 1,851,351 2,162,376,853 25,631,706 2,188,008,559 1,412,124 (115,000) 2,189,305,683

The total authorized number of ordinary shares is 1,851,351 thousand (31 December 2017: 1,142,961 thousand shares) with a par value of UZS 1,168 per share (31 December 2017: UZS 1,168 per share). All issued ordinary shares were fully paid.

The total authorized number of preference shares is 500 thousand (31 December 2017: 500 thousand) with a par value of UZS 1,150. Minimum preference share dividends are set at 25 % p.a. (2017: 25 % p.a.) and preference shares are thus classified as a liability (Note 17). Equity component of preference shares was equal to nil as at 31 December 2018 (31 December 2017: nil)

69

Joint Stock Commercial Bank "Agrobank" Notes to the Consolidated Financial Statements - December 31, 2018 Share premium represents the excess of contributions received over the nominal value of shares issued.

1 9 Interest income and expense

In thousands of Uzbek Soums Interest income 2018 2017

Interest income calculated using the effective interest method: Loans and advances to customers Due from other banks Cash and cash equivalents

853,446,906 3,084,250

26,868

510,269,318 162,418

1,002,152

Total interest income calculated using effective interest method 856,558,024 511,433,888

Other interest income Net investment in financial lease 3,400,269 6,851,106

Total interest income 859,958,293 518,284,994

Interest expenses Term deposits of individuals Other borrowed funds Term placements of other banks Term deposits of legal entities Debt securities in issue Current/sett lement accounts

111,967,958 89,583,207 30,229,381 24,471,618 11,403,652

997,751

114,510,742 45,361,985 38,590,876 25,060,753 16,480,583

9,745,702

Total interest expense 268,653,567 249,750,641

Net interest income 591,304,726 268,534,353

2 0 Commission Income and Expense

In thousands of Uzbek Soums 2017 2017 2016

Fee and commission income from: - Settlement transactions - International money transfers - Currency conversion transactions - Other

177,530,853 29,445,144

1,357,241 4,114,044

256,445,357 17,238,500

1,805,809 2,794,043

165,876,024 5,890,254 2,098,465 2,107,106

Total fee and commission income 212,447,282 278,283,709 175,971,849

Fee and commission expense - Cash collection - Settlement transactions - Other

52,591,423 32,294,080

7,666,984

45,440,858 21,974,102

5,298,923

40,495,899 11,885,943 3,819,450

Total fee and commission expense 92,552,487 72,713,883 56,201,292

Net fee and commission income 119,894,795 205,569,826 119,770,557

70


2 1 Other operating income and expenses


Other operating income Fines and penalties 19,177,364 19,935,758 Refund from the State Deposit Insurance Fund 2,379,430 8,229,574 Rental income from payment for processing equipment/terminals 888,449 4,582,741 Gain on disposal of premises and equipment 603,295 -Other 1,140,898 754,627

Total other operating income 24,189,437 33,502,700

2 2 Administrative and other operating expenses

2018 2017 In thousands of Uzbek Soums

Personnel expenses 351,206,718 254,615,099 Security services 47,305,400 38,013,997 Taxes other than income tax 47,230,360 45,394,631 Depreciation and amortization 28,948,381 22,457,761 Stationery and office supplies 19,908,431 18,519,362 Business trip expenses 9,465,514 4,131,856 Cost of maintenance of premises 6,854,343 3,553,835 Utilities 4,989,187 3,215,214 Charity expenses 4,791,622 2,844,200 Loss on sale or disposal of asset 3,914,587 2,533,153 Communication expenses 2,638,563 2,241,029 Consulting and audit expenses 2,567,020 1,516,139 Membership fees 1,254,115 1,632,374 Advertising and marketing services 1,097,586 983,526 Rent expenses 63,367 935,839 Other operating expenses 10,629,914 7,516,717

Total administrative and other operating expenses 542,865,108 410,104,732

23 Income Taxes

Components of income tax expense

Income tax expense comprises the following:

2018 2017 In thousands of Uzbek Soums

Current tax charge 32,573,927 19,181,677 Deferred tax credit (2,815,325) (4,250,382)

Income tax expense for the year 29,758,602 14,931,295

71


Reconciliation between tax expense and profit or loss multiplied by applicable tax rate

The income tax rate applicable to the majority of the Bank's income is comprised of corporate income tax (22%). According to the article 159 of Tax Code of the Republic of Uzbekistan, the company calculated deferred tax at the rate of 20%. The article is introduced by the Law of the Republic of Uzbekistan # 3RU-508 dd. 24 December 2018 and is effective from 1 January 2019.

Reconciliation between the expected and the actual taxation charge is provided below:


IFRS profit before tax 103,109,276 83,756,712

Theoretical tax charge at statutory rate (2018: 22%, 2017: 21.8%) 22,684,041 18,258,963 - Non deductible expense (employee compensation, social tax and representation expenses) 3,187,141 5,867,896 Recognized historical tax loss (unrecognized DTA at tax loss) 3,887,420 Income which is exempt from taxation (privileges from increase of deposits, on charity) (9,195,564)

Income tax expense for the year 29,758,602 14,931,295

Deferred taxes analysed by type of temporary difference

Differences between IFRS and statutory taxation regulations in Uzbekistan give rise to certain temporary differences between the carrying amount of certain assets and liabilities for financial reporting purposes and their tax bases. The tax effect of the movements on these temporary differences is detailed below, and is recorded at the rate of 20% (2017: 21.8%).

In thousands of Uzbek Soums Loans and advances to customers, including f inance lease receivables

Premises and equipment

Other assets


Tax loss carryforward

Balance at 1 January 2018

Recognized IFRS 9 as part of

transition profit or effect loss

13,454,277 (2,025,180) (12,397,793)

4,707,478 63,254

682,830 (534,127) 609,356

(1,531,107) 545,475

13,995,033

Recognized in other

comprehensive Balance at 31 income December 2018

294,996

(968,696)

4,770,732

758,059

(690,636)

13,995,033

Total 17,313,478 (2,559,307) 2,815,325 294,996 17,864,492

2 4 Earnings per share

Basic earnings per share are calculated by dividing the net profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. The Bank has no dilutive potential ordinary shares, therefore, the diluted earnings per share equal the basic earnings per share.


2018 2017

Profit for the year f rom continuing operations attributable to ordinary shareholders 73,835,721 66,025,539

Profit for the year f rom discontinued operations attributable to ordinary shareholders 55,772,121

Profit for the year attributable to ordinary shareholders of the Bank 73,835,721 121,797,660

72


Weighted average number of ordinary shares in issue (thousands) 1,784,256 1,139,151

Earnings per ordinary share for profit f rom continuing operations attributable to the owners of the Bank

Earnings per ordinary share for profit f rom discontinued operations ^g attributable to the owners of the Bank -

2 5 Segment Analysis

Operating segments are components that engage in business activities that may earn revenues or incur expenses, whose operating results are regularly reviewed by the chief operating decision maker (CODM), and for which discrete financial information is available. The CODM is the person - or group of persons -who allocates resources and assesses the performance for the entity. The functions of the CODM are performed by Management Board of the Group. (a) Description of products and services from which each reportable segment derives its revenue The Group is organized on the basis of two main business segments: - Head office - carries out the same operations as other branches below, and in addition money market

operations and foreign currency transactions. It is located in Tashkent. - Branches - representing private banking services, private customer current accounts, savings,

deposits, investment savings products, custody, debit cards, consumer loans and mortgages and other credit facilities. They are located in other regions of Uzbekistan.

(b) Factors that management used to identify the reportable segments The Group's segments are strategic business units that focus on different customers. They are managed separately because each business unit requires different marketing strategies and service level. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance, as explained in the table below, is measured based on profit or loss in the consolidated financial statements. Income taxes are managed on a Group basis and are not allocated to operating segments. (c) Measurement of operating segments' profit or loss, assets and liabilities

The CODM reviews financial information prepared based on Uzbekistan accounting standards and CBU instructions adjusted to meet the requirements of internal reporting. This financial information differs in certain aspects from International Financial Reporting Standards:

(i) deferred taxes are not calculated and accounted; (ii) funds are generally reallocated between segments at internal interest rates set by the treasury

department, which are determined by reference to market interest rate benchmarks, contractual maturities for loans and observed actual maturities of customer accounts balances;

(iii) income taxes are not allocated to segments;

(iv) loan provisions are recognized based on CBU instructions, management judgement and availability of information, rather than based on the incurred loss model prescribed in IAS 39;

(v) per Uzbekistan accounting legislation, premises and equipment are subject to obligatory revaluation at 1 January each year;

(vi) commission income relating to lending is recognized immediately rather than deferred using the effective interest method.

73


Segment information of the reportable assets, liabilities and capital expenditure of the Group as at 31 December 2018 is set out below:

In thousands of Uzbek Soums Head office Branches Eliminations Total

Cash and cash equivalents 433,948,405 490,579,776 924,528,181 Due from other banks 333,770,132 333,770,132 Loans and advances to customers,

including finance lease receivables 8,597,916,571 8,597,916,571 Investment securities 6,544,914 11,898,866 18,443,780 Investment in associates 105,304,764 24,101,995 129,406,759 Property, equipment and intangible

assets 31,706,368 280,367,937 312,074,305 Other assets 14,972,858 21,920,538 36,893,396 Current income tax prepayment 9,924,140 9,924,140 Interbranch 9,052,819,683 1,884,548,058 (10,937,367,741) -

Total reportable segment assets 9,979,067,125 11,321,257,882 (10,937,367,741) 10,362,957,264

Due to other banks 534,366,716 24,383 534,391,099 Customer accounts 732,460,213 2,270,681,545 3,003,141,758 Debt securities issued 97,587,416 16,315 97,603,731 Other borrowed funds 4,433,702,762 49,593,502 4,483,296,264 Other liabilities 4,719,371 15,900,773 20,620,144 Current income tax liability 3,724,723 5,993,775 9,718,498 Interbranch 1,896,453,743 9,040,913,999 (10,937,367,741) -

Total reportable segment liabilities 7,703,014,944 11,383,124,292 (10,937,367,741) 8,148,771,494

Capital expenditure - 76,882,678 - 76,882,678

74


Segment information for the reportable segments for the twelve month ended 31 December 2018 is set out below: In thousands of Uzbek Soums Head office Branches Eliminations Total

Interest income Commission income Other operating income Dividend income Income net of expense upon

initial recognition of assets at below-market rates

241,421,291 5 1,292,806

1 ,155,421 2 ,498,380

7 6,407

783,791,512 225,878,140

23,034,017 2 2,532

(247,695,556) 777,517,247 277,170,946

24,189,438 2,520,912

7 6,407

Total revenues 296,444,305 1 ,032,726,201 (247,695,556) 1 ,081,474,950

Interest expense Commission expense Administrative and other

operating expenses

Provision for impairment of other assets

Provision reversal / (provision for loan portfolio impairment) (Expenses) / foreign exchange

translation gains

( 146,835,722) ( 20,633,874)

(3,534,418)

(369,389,401) ( 69,379,995)

(67,141,600) (473,943,717)

( 6,948,802)

271,522 ( 117,954,405)

( 27,865,789) 6 ,891,421

2 47,695,556 (268,529,567) (90,013,868)

(541,085,316)

( 10,483,221)

( 117,682,882)

( 20,974,368)

Total expenses (265,739,881) (1,030,724,898) 247,695,556 (1,048,769,223)

Income before tax per management reporting (unaudited)

3 0,704,424 2,001,303 3 2,705,727

Income tax expense (7,369,199) (21,023,902) (28,393,101)

Net income per management reporting (data)

2 3,335,225 (19,022,599) 4,312,626

75


Segment information of the reportable assets, liabilities and capital expenditure of the Group as at 31 December 2017 is set out below:


Cash and cash equivalents 405,395,001 734,264,043 - 1,139,659,044 Due from other banks 66,425,787 - - 66,425,787 Loans and advances to customers,

including finance lease receivables - 3,361,339,187 - 3,361,339,187 Investment securities 95,969,890 40,432,029 - 136,401,919 Investment in associates 32,301,779 - - 32,301,779 Property, equipment and intangible

assets 33,866,074 157,890,845 - 191,756,918 Other assets 15,726,321 32,507,100 - 48,233,421 Current income tax prepayment 2,462,787 2,933,262 - 5,396,048 Interbranch 3,298,866,866 1,776,168,723 (5,075,035,588) -

Total reportable segment assets 3,951,014,505 6,105,535,188 (5,075,035,588) 4,981,514,104

Due to other banks 61,644,849 27,290 - 61,672,139 Customer accounts 40,327,063 1,905,559,042 - 1,945,886,106 Debt securities issued 104,038,862 31,567,612 - 135,606,474 Other borrowed funds 1,112,956,838 162,000 - 1,113,118,838 Other liabilities 326,551,345 16,133,652 - 342,684,996 Current income tax liability - 8,605,546 - 8,605,546 Interbranch 787,217,072 4,287,818,516 (5,075,035,588) -

Total reportable segment liabilities 2,432,736,029 6,249,873,659 (5,075,035,588) 3,607,574,099

Capital expenditure 94,113,135 94,113,135

76


Segment information for the reportable segments for the twelve month ended 31 December 2017 is set out below:


Interest income Commission income Other operating income Dividend income Provision for impairment recovery

Net income from foreign currency revaluation

1 59,870,062 32,900,615

755,192 3 9,627,868

475,188

25,163,864

446,155,927 329,739,558

42,262,348 3 ,446

7 ,218,979

1 61,781

( 196,666,094) 409,359,896 362,640,172

43,017,539 39,631,314

7,694,168

25,325,645

Total revenues 2 58,792,789 8 25,542,039 (196,666,094) 8 87,668,734

Interest expense Commission expense Administrative and other

operating expenses Al lowance for impairment of other

assets

( 113,133,858) ( 13,413,047)

(54,669,978)

( 135,138,800)

(333,120,372) (59,739,938)

(352,208,645)

(2,149,365)

1 96,666,094 (249,588,137) (73,152,985)

(406,878,623)

( 137,288,165)

Total expenses (316,355,684) (747,218,321) 1 96,666,094 (866,907,911)

Income before tax per management reporting (unaudited)

( 57,562,895) 78,323,718 - 2 0,760,823

Income tax expense - ( 18,093,072) - ( 18,093,072)

Net income per management reporting (unaudited)

(57,562,895)

r

60,230,646 - 2 ,667,751

77


(d) Reconciliation of reportable profit or loss, assets and liabilities

Variance analysis between aggregate values of assets/liabilities of all segments per management reporting data and assets/liabilities totals per IFRS data provided in this consolidated financial statements at 31 December 2018 and 31 December 2017 is as follows:

In thousands of Uzbek Soums 2018 2017 Assets Liabilities Assets Liabilities

Total assets/liabilities per management reporting data (unaudited) 10,362,957,265 8,148,771,493 4,981,514,104 3,607,574,099

Consolidation adjustments 15,689,278 9,113,192 57,871,415 66,147,061

Accrual of loan impairment provision / lease to clients and financial asset derecognit ion Expense recognition in incorrect period Current and deferred tax assets and liabilities adjustments

(22,916,778)

(17,053,084)

17,864,492

28,311

4,706,662

(62,595,553)

(30,800,213)

2 4 , 0 5 8,559

2,244,330

Other adjustments 22,184,787 786,014 (18,834,734) (85,908,885)

Total assets/liabilities per IFRS consolidated financial statements data 10,378,725,960 8,163,405,672 4,951,213,577 3,590,446,214

78


Variance analysis between combined income before tax of all segments per management reporting data and total income before tax per data provided in this consolidated financial statements for the year ended 31 December 2018 and 31 December 2017 is as follows:

Income before tax per management reporting data (unaud ited data)

Consolidation adjustments

Expense recognition in incorrect period

Accrual of loan impairment provision / lease to clients and financial asset derecognit ion

Other adjustments

Income before tax per IFRS consolidated financial statements data

2018

32,705,727

11,597,558

14,000,167

35,035,976

9,769,849

103,109,276

2017

20,760,823

1,143,875

10,168,605

42,020,715

9,662,694

83,756,712

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(e) Analysis of revenues by products and services

The Group's revenues are analyzed by products and services in Note 19 (Interest Income and Expenses) and in Note 20 (Fee and Commission Income and Expense).

(f) Geographical information

The Group conducts its operations in Uzbekistan and operations of the Group with their foreign counterparties. Significant part of revenue of the Group is generated within Uzbekistan, since most of financial assets outside Uzbekistan are noninterest bearing.

(g) Major customers

The Group does not have customers with the revenues exceeding 10% of the total revenue of the Group assets.

26 Financial Risk Management

The risk management function within the Group is carried out in respect of financial risks, operational risks and legal risks. Financial risk comprises market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk. The primary objectives of the financial risk management function are to establish risk limits, and then ensure that exposure to risks stays within these limits. The operational and legal risk management functions are intended to ensure proper functioning of internal policies and procedures, in order to minimize operational and legal risks.

Credit risk. The Group takes on exposure to credit risk, which is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Exposure to credit risk arises as a result of the Group's lending and other transactions with counterparties giving rise to financial assets.

The Group's maximum exposure to credit risk is reflected in the carrying amounts of financial assets on the consolidated statement of financial position. The impact of possible netting of assets and liabilities to reduce potential credit exposure is not significant.

For guarantees and commitments to extend credit, the maximum exposure to credit risk is the amount of the commitment. The credit risk is mitigated by collateral and other credit enhancements as disclosed in Note 26.

The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers, and to geographical and industry segments. Limits on the level of credit risk by product and industry sector are approved regularly by management. Such risks are monitored on a revolving basis and are subject to an annual, or more frequent, review.

The Group has established a credit quality review process to provide early identification of possible changes in the creditworthiness of counterparties, including regular collateral revisions.

Counterparty limits are established by the use of the Group's internal credit rating system, which assigns each counterparty a risk rating. The credit quality review process aims to allow the Group to assess the potential loss as a result of the risks to which it is exposed and take corrective action.

Clients of the Bank are segmented into five rating classes. The Group's rating scale, which is shown below, reflects the range of default probabilities defined for each rating class. This means that, in principle, exposures migrate between classes as the assessment of their probability of default changes.

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Group's internal ratings scale:

Standard 1 Timely repayment of "standard" loans is not in doubt. The borrower is a financially stable company, which has an adequate capital level, high level profitability and sufficient cash flow to meet its all existing obligations, including present debt. When assessing the reputation of the borrower such factors as the history of previous repayments, marketability of collateral (movable and immovable property guarantee) are taken into consideration.

Sub-standard 2 As a whole, the financial position of a borrower is stable, but some unfavorable circumstances or tendencies are present, which, if not disposed of, raise some doubts about the borrower's ability to repay on time. "Standard" loans with insufficient information in the credit file or missing information on collateral could be also classified as "Substandard" loans.

Unsatisfactory 3 The primary source of repayment is not sufficient and the Bank has to seek additional loan repayment sources. The financial position of a borrower or forecasted cash flows is not sufficient to settle obligations. The value of collateral is not exceeding or equal to outstanding loan amount.

Doubtful 4 "Doubtful" are loans which, in addition to having the characteristics of "Unsatisfactory" loans, have additional shortcomings, which make it doubtful that the loan will be repaid in full under the existing circumstances. There is a probability of partial repayment of the loan in the near terms.

Uncollected 5 Loans classified as "uncollected" are considered uncollectible and have such a little value that their continuance as assets of the Bank is not worth. This classification does not mean that the loans have absolutely no likelihood of recovery, but rather means that the Bank should cease recognizing such loans and make every effort to liquidate such debts through selling of collateral or collection of the outstanding loan.

Risk limits control and mitigation policies. The Group manages, limits and controls concentrations of credit risk wherever they are identified - in particular, to individual counterparties and groups, and to industries. The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers, and to geographical and industry segments. Such risks are monitored on a revolving basis and subject to an annual or more frequent review, when considered necessary. Limits on the level of credit risk by product, industry sector and by geographic regions are approved annually by the Bank's Council.

Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations and by changing these lending limits where appropriate.

Some other specific control and mitigation measures are outlined below.

(а) Limits. The Group established a number of credit committees which are responsible for approving credit limits for individual borrowers:

• The Credit Committee of Head office reviews and approves limits up to amount equivalent to 10 percent of Bank's tier 1 capital;

• The Bank Council reviews and approves limits above the amount equivalent to 10 percent of Bank's tier 1 capital;

Loan applications, along with financial analysis of loan applicant which includes liquidity, profitability, interest coverage and debt service coverage ratios, originated by the relevant client relationship managers are passed on to the relevant credit committee or Bank Council for approval of credit limit.

81


(b) Collateral. The Group employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of security for funds advances, which is a common practice. The Group implements guidelines on the acceptability of specific classes of collateral or credit risk mitigation.

The principal collateral types for loans and advances and finance leases are:

letter of surety real estate equipment and motor vehicles used in borrower's business Insurance policy inventory cash deposit

(c) Concentration of risks of financial assets with credit risk exposure. Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Group's performance to developments affecting a particular industry or geographical location. The Group's management focuses on concentration risk:

In order to avoid excessive concentrations of risks, the Group's Credit policy and procedures include specific CBU guidelines to focus on maintaining a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly. The Group's management focuses on concentration risk as follows:

- The maximum risk to single borrower or group of affiliated borrowers shall not exceed 25% of the Bank's tier 1 capital;

- The maximum risk for unsecured credits shall not exceed 5% of Bank's tier 1 capital;

- Total amount of all large credits cannot exceed bank's tier 1 capital by more than 8 times; and

- Total loan amount to related party shall not exceed Bank's tier 1 capital.

In order to monitor credit risk exposures, weekly reports are produced by the credit department's officers based on a structured analysis focusing on the customer's business and financial performance, which includes overdue balances, disbursements and repayments, outstanding balances and maturity of loan as well as grade of loan and collateral. Any significant exposures against customers with deteriorating creditworthiness are reported to and reviewed by the management daily. Management monitors and follows up past due balances.

Impairment and provisioning policies. The internal rating tool assists management to determine whether objective evidence of impairment exists under IAS 39, based on the following criteria set out by the Group:

- Delinquency in contractual payments of principal or interest; - Cash flow difficulties experienced by the borrower (e.g. equity ratio, net income

percentage of sales); - Breach of loan covenants or conditions; - Initiation of bankruptcy proceedings; and - Deterioration in the value of collateral.

The Group's policy requires the review of individual financial assets that are above certain materiality thresholds at least annually or more regularly when individual circumstances require. Impairment allowances on individually assessed accounts are determined by an evaluation of the incurred loss at the reporting date on a case-by-case basis, and are applied to all individually significant accounts. The assessment normally encompasses collateral held (including re-confirmation of its enforceability) and the anticipated receipts for that individual account.

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Collectively assessed impairment allowances are provided for: (i) portfolios of homogenous assets that are individually below materiality thresholds; and (ii) losses that have been incurred but have not yet been identified, by using the available empirical data, experienced judgment and statistical techniques. Credit risk for off-balance sheet financial instruments is defined as the possibility of sustaining a loss as the result of another party to a financial instrument failing to perform in accordance with the terms of the contract. The Group uses the same credit policies in assuming conditional obligations as it does for on-balance sheet financial instruments, through established credit approvals, risk control limits and monitoring procedures. Market risk. The Group takes on exposure to market risks. Market risks arise from open positions in (a) currency, (b) interest rates and (c) equity products, all of which are exposed to general and specific market movements. Management sets limits on the value of risk that may be accepted, which is monitored on a daily basis. However, the use of this approach does not prevent losses outside of these limits in the event of more significant market movements. Currency risk. The table below summarizes the Group's exposure to foreign currency exchange rate risk at the reporting date:

In thousands of Uzbek Soums Monetary

financial assets Monetary

financial liabilities Net balance

sheet position

31 December 2018 US Dollars 1,370,258,095 (1,573,663,186) (203,405,091) Euros 14,391,633 (5,414,655) 8,976,978 UZS 8,664,774,626 (6,560,509,674) 2, 1 04,264,952

Total 10,049,424,354 (8,139,587,515) 1,909,836,839

31 December 2017 US Dollars 1,254,613,798 (839,995,066) 4 14,618,732 Euros 27,180,183 (20,518,183) 6,662,000 UZS 3,256,201,886 (2,698,986,660) 557,215,226

Total 4,537,995,867 (3,559,499,909) 978,495,958

The Group takes on exposure to the effect of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. In respect of currency risk, the Bank Council sets limits on the level of exposure by currency and in total for both overnight and intra-day positions, which are monitored daily.

The Bank's Treasury Department measures its currency risk by matching financial assets and liabilities denominated in same currency and analyses effect of actual annual appreciation/depreciation of that currency against Uzbek Soums to the profit and loss of the Group.

The following table presents sensitivities of profit and loss to reasonably possible changes in exchange rates applied at the reporting date, with all other variables held constant. The exposure was calculated only for monetary balances denominated in currencies other than the functional currency of the Group:

December 31, 2018

December 31, 2017

Impact on profit or loss, after tax

Impact on profit or loss, after tax


Strengthening of US Dollars by 10% (2017: 20%)

Weakening of US Dollars by 10% (2017: 20%) (20,340,509)

20,340,509

82,923,746

(82,923,746)

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Strengthening of Euro by 10% (2017: 20%)

Weakening of Euro by 10% (2017: 20%) 897,698

(897,698)

1,998,600

(1,998,600)

Interest rate risk. The Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. Interest margins may increase as a result of such changes but may reduce or create losses in the event that unexpected movements arise.

Management monitors on a daily basis and sets limits on the level of mismatch of interest rate re-pricing that may be undertaken.

The table below summarizes the Group's exposure to interest rate risks. The table represents the aggregated amounts of the Group's financial assets and liabilities at carrying amounts, categorized by the earlier of contractual interest repricing or maturity dates:


Demand and less than

1 month

From 1 to 6 months

From 6 to 12 months

Over 12 months

Overdue Total

31 December 2018 Total financial assets

Total financial liabilities

1 ,344,924,761

1 ,376,115,952

708,946,168

1 ,472,686,629

2 ,627,241,804

2 ,509,592,683

5,047,258,208

2 ,781,571,544

1 79,528,507 9 ,907,899,448

8,139,966,808

Net interest sensitivity gap at 31 December 2018

(31,191,191) (763,740,461) 1 17,649,121 2 ,265,686,664 1 79,528,507 1 ,767,932,639

31 December 2017 Total financial assets


1 ,156,783,302

1 ,640,420,962

252,452,852

521,805,405

1 ,065,369,786

771,863,421

2 ,018,373,861

625,410,121

33,773,047 4 ,526,752,848

3 ,559,499,909

Net interest sensitivity gap at 31 December 2017 ( 483,637,660) (269,352,553) 2 93,506,365 1 ,392,963,740 3 3,773,047 9 67,252,939

Sensitivity analysis of the net interest income for the year to the risk of revision of interest rates based on the simplified scenario of a fall or a rise of yield curve by 200 basis points, and positions on interest assets and liabilities, in force at 31 December, is as follows:

2018 2017 Interest rate change in basis points Interest income sensitivity

+200 -200

(9,269,671) 9,269,671

( 11,934,021) 1 1,934,021

The Group monitors interest rates for its financial instruments. The table below summarizes interest rates at the respective reporting date based on reports reviewed by key management personnel:

In % p.a. UZS December 31, 2018

USD Euro

Assets Cash and cash equivalents Due from other banks Loans and advances to customers, inclu ding finance lease receivables

0-16 0-3

0.5-36

0-Ubor-2% 0-3%

2.5-11.8

0-EONIA-1%

Liabilities Due to other banks Debt securities issued Customer accounts

- current/demand accounts - term deposits


- borrowings from International Financial Institutions — - borrowings from Domestic Financial Institutions

3-16 14

0-30

0-12

0-5

0 - 1 1.2

Libor+2%-6mLibor+5%

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Other price risk. There is no active market for equity instruments in Uzbekistan and therefore it is difficult to assess the Group's exposure to equity price risk.

Geographical risk. The geographical concentration of the Group's financial assets and liabilities at 31 December 2018 is set out below:

In thousands of Uzbek Soums Uzbekistan OECD Non OECD Total

Financial assets Cash and cash equivalents Due from other banks

Loans and advances to customers, including finance lease receivables

Investment securities Other financial assets

1 ,116,573,735 1 35,209,907

8,619,533,978

1 6,837,819 1 3,903,825

858,630 2,401,992 1 ,119,834,357

- 2,579,562 1 37,789,469

- - 8 ,619,533,978

- - 1 6,837,819 - - 1 3,903,825

Total financial assets 9,902,059,264 8 58,630 4,981,554 9,907,899,448

Financial liabilities Due to other banks Customer accounts Debt securities issued Other borrowed funds Other financial liabilities


Net position in on-balance sheet financial instruments

Credit related commitments

454,508,703 2,998,702,735

9 7,603,731 4,063,046,451

21,831,538

20,708,165

420,145,286

7,635,693,158 440,853,451

6 0,077,531 5 35,294,399 3,342,668 3,002,045,403

- 9 7,603,731 - 4,483,191,737 - 21,831,538

63,420,199 8,139,966,808

2,266,366,106 (439,994,821) (58,438,645) 1 ,767,932,640

1 02,729,934 - - 1 02,729,934

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The geographical concentration of the Group's financial assets and liabilities at 31 December 2017 is set out below:

Cash and cash equivalents, due from other banks and due to other banks in OECD countries include accounts in German and Austrian banks.

Cash and cash equivalents, due from other banks and due to other banks in Non-OECD countries include accounts in banks of Kazakhstan and Russia.

Assets, liabilities and credit related commitments have generally been based on the country in which the counterparty is located. Cash on hand, due from other banks have been allocated based on the country in which they are physically held.

Liquidity risk. Liquidity risk is defined as the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Bank is exposed to daily calls on its available cash resources from overnight deposits, current accounts, maturing deposits, loan draw downs, guarantees and from margin and other calls on cash settled derivative instruments. The Group does not maintain cash resources to meet all of these needs as experience shows that a minimum level of reinvestment of maturing funds can be predicted with a high level of certainty. Liquidity risk is managed by the Treasury Department.

The Group seeks to maintain a stable funding base comprising primarily amounts due to other banks, corporate and retail customer deposits and [debt securities]. The group invests the funds in inter-bank placements of liquid assets, in order to be able to respond quickly and smoothly to unforeseen liquidity requirements.

The liquidity management of the Group requires considering the level of liquid assets necessary to settle obligations as they fall due; maintaining access to a range of funding sources; maintaining funding contingency plans and monitoring balance sheet liquidity ratios against regulatory requirements. The Group calculates liquidity ratios on a monthly basis in accordance with the requirement of the Central Bank of Uzbekistan. These ratios are (ratios are calculated using unaudited figures based on National Accounting Standards):

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Current ratio (not to be less than 0.30), which is calculated as the ratio of liquid assets to liabilities payable on demand; the ratio was 0.59 at 31 December 2018 (31 December 2017: 0.55).

The Treasury Department receives information about the liquidity profile of the financial assets and liabilities. The Treasury Department then provides for an adequate portfolio of short-term liquid assets, largely made up of short-term liquid trading securities, deposits with banks and other inter-bank facilities, to ensure that sufficient liquidity is maintained within the Group as a whole.

The daily liquidity position is monitored and regular liquidity stress testing under a variety of scenarios covering both normal and more severe market conditions is performed by the Treasury Department.

The table below shows liabilities at 31 December 2017 by their remaining contractual maturity. The amounts of liabilities disclosed in the maturity table are the contractual undiscounted cash flows, including gross loan commitments and financial guarantees.

The table below shows the maturity analysis of non-derivative financial assets at their carrying amounts and based on their contractual maturities.

When the amount payable is not fixed, the amount disclosed is determined by reference to the conditions existing at the reporting date. Foreign currency payments are translated using the spot exchange rate at the end of the reporting period.

The following tables recognize the structure of assets and liabilities at 31 accordance with the contractual maturities.

December in

Completely overdue loans to clients and partially overdue loans to clients in the total of overdue payments are included into the category Overdue. If an instalment loan payment is overdue, such loan is included into the category Overdue in its full amount. If overdue and undue loans contribute to the same borrower, overdue loans are included into the category Overdue while undue loans are included into the categories other than Overdue according to their contractual maturities.

The undiscounted maturity analysis of financial assets and liabilities at 31 December 2018 is as follows:


Demand and less than 1 month

From 1 to 6 months

From 6 to 12 months

Over 12 months Overdue Total

Cash and cash equivalents Due from other banks Loans and advances to clients, including finance lease receivables Investment securities available for sale Other financial assets

1,119,834,357

137,789,469

56,559,291

16,837,819

13,903,825

708,946,168 2,627,241,804 5,047,258,208 179,528,507

1,119,834,357

137,789,469

8,619,533,978

16,837,819

13,903,825

Total financial assets 1,344,924,761 708,946,168 2,627,241,804 5,047,258,208 179,528,507 9,907,899,448

Due to other banks Customer accounts Debt securities issued Other borrowed funds Other financial liabilities

1,369,916,987

6,198,965

256,791,000 533,874,101

64,775,097 601,613,858

15,632,573

33,663,183 805,358,020

32,828,634 1,637,742,846

244,840,216 292,896,295

2,243,835,033

-535,294,399

3,002,045,403 97,603,731

4,483,191,737 21,831,538

Total financial liabilities 1,376,115,952 1,472,686,629 2,509,592,683 2,781,571,544 - 8,139,966,808

Net liquidity gap based on expected maturities (31,191,191) (763,740,461) 117,649,121 2,265,686,664 179,528,507 1,767,932,639

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The undiscounted maturity analysis of financial assets and liabilities at 31 December 2017 is as follows: In thousands of Uzbek Demand and less than 1 From 1 to 6 From 6 to 12 Over 12 months Overdue Total Soums month months months Total f inancial assets - 252,452,852 1,065,369,786 2,018,373,861 33,773,047 3,369,969,546 Total f inancial liabilities 1,640,420,962 521,805,405 771,863,421 625,410,121 - 3,559,499,909

Net liquidity gap based on expected maturities (1,640,420,962) (269,352,553) 293,506,365 1,392,963,740 33,773,047 (189,530,363)

The undiscounted maturity analysis of financial liabilities at 31 December 2017 is as follows:

In thousands of Uzbekistan Soums

Demand and less than 1 month

From 1 to 6 months

From 6 to 12 months

Over 12 months Total

Liabilities Due to other banks Customer accounts Debt securities issued Other borrowed funds Other financial liabilities Letters of credit Guarantees Undrawn loan commitments

6,888,236 - - 70,128,771 77,017,007 1,275,731,160 379,910,043 275,494,651 39,443,026 1,970,578,880

18,444,129 103,585,500 15,466,408 - 137,496,037 4,994,262 44,565,275 550,818,956 644,685,310 1,245,063,803

334,363,175 - - - 334,363,175 6,210,701 75,969,214 57,105,252 5,559,406 144,844,573 5,579,305 60,399,977 350,000 400,000 66,729,282

18,191,445 - - - 18,191,445

Total potential future payments for financial obligations 1,670,402,413 664,430,009 899,235,267 760,216,513 3,994,284,202

Management believes that undiscounted cash flows on financial liabilities and credit-related commitments as at 31 December 2017 do not differ in substantive terms from the amounts mentioned above.

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Customer accounts are classified in the above analysis based on contractual maturities. However, in accordance with Uzbekistan Civil Code, individuals have a right to withdraw their deposits prior to maturity if they forfeit their right to accrued interest.

The following table shows undiscounted cash flows on financial liabilities and credit-related contingencies by the earliest contractual maturity. Total gross cash flow amounts outflow disclosed in these tables are contractual undiscounted cash flows on financial liabilities and credit-related contingencies. In relation to financial guarantee contracts the maximum guarantee amount falls within the earliest period when the guarantee might be used.


Demand and less than 1

month

From 1 to 6 months

From 6 to 12 Over 12 months months Total gross

cash flow amount outflow

Carrying amount

31 December 2018

Due to other banks

Customer accounts

Debt securities in issue


Other financial liabilities

1,370,380,671

21,822,565

275,182,072 45,385,340

552,908,190 897,793,406

67,528,042 36,551,467

603,123,855 1,680,123,233

291,329,083 611,896,495 535,294,398

375,182,976 3,196,265,243 3,002,045,403

- 104,079,509 97,603,731

2, 7 1 8, 1 7 2,8 4 6 5,001,419,934 4,483,191,737

- 21,822,565 21,831,538

Total financial liabilities 1,392,203,236 1,498,742,159 2,659,853,446 3,384,684,905 8,935,483,745 8,139,966,807

Credit-related commitments

102,729,934 102,729,934 102,729,934

The matching and/or controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the Group. It is unusual for banks ever to be completely matched since business transacted is often of an uncertain term and of different types. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they mature, are important factors in assessing the liquidity of the Group and its exposure to changes in interest and exchange rates.

Management believes that in spite of the fact that a substantial portion of customer accounts is on demand, diversification of these deposits by number and type of depositors, and the past experience of the Group would indicate that these customer accounts provide a long-term and stable source of funding for the Group. Thus, the management believes that significant maturity mismatch between assets and liabilities with maturity up to 12 months and more does not represent significant risk to the Group's liquidity, as very low proportion of due to other banks, demand deposits and short-term deposits is expected to be withdrawn based on the Group's past years' and current year experience, which is consistent with the general banking practices in the banking sector of Uzbekistan.

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27 Management of Capital

The Group's objectives when managing capital are (i) to comply with the capital requirements set by the CBU and (ii) to safeguard the Group's ability to continue as a going concern. Compliance with capital adequacy ratios set by the CBU is monitored monthly, with reports outlining their calculation reviewed and signed by the Bank's Chairman and Chief Accountant.

Under the current capital requirements set by the CBU, banks have to maintain ratios of:

• Ratio of regulatory capital to risk weighted assets ("Regulatory capital ratio") above a prescribed minimum level of 12.5% (since 1 January 2019 the banks have to maintain the minimum value at a rate of 13.0% taking into account capital conservation buffer at a rate of 3.0% from risk-weighted assets) vs actual of 20.0%;

• Ratio of Group's tier 1 capital to risk weighted assets ("Capital adequacy ratio") above a prescribed minimum level of 9.5% (since 1 January 2019 the minimum level is set at a rate of 10.0%) vs actual of 19.9%; and

• Ratio of Group's tier 1 capital to total assets less intangibles ("Leverage ratio") above a prescribed minimum level of 6% (31 December 2016: 6%) vs actual of 19.82%.

Total capital is based on the Group's reports prepared under Uzbekistan Accounting Legislation and related instructions and comprises: In thousands of 2018 2017 Uzbek Soums unaudited unaudited

Tier 1 capital 2,192,218,074 1,391,948,091 Tier 2 capital 9,817,090 6,193,400 Less: deductions f rom capital (147,867,646) (125,812,081)

Total regulatory capital 2,054,167,518 1,272,329,410

Regulatory capital consists of Tier 1 capital, which comprises share capital, additional paid in capital, retained earnings, excluding current year profit, less intangible assets. The other component of regulatory capital is Tier 2 capital, which includes current year profit.

2 8 Contingencies and Commitments

Legal proceedings. From time to time and in the normal course of business, claims against the Group are received. On the basis of its own estimates and both internal and external professional advice Management is of the opinion that no material losses will be incurred in respect of claims and accordingly no provision has been made in these consolidated financial statements.

Tax legislation. Uzbekistan tax, currency and customs legislation is subject to varying interpretations can occur frequently. Management's interpretation of legislation as applied to the transactions and activity of the Bank may be challenged by the relevant regional and federal authorities. Recent events within Uzbekistan suggest that the tax authorities may be taking a more assertive position in their interpretation of the legislation assessments, and it is possible that transactions and activities that have not been challenged in the past may be challenged. As a result, significant additional taxes, penalties and interest may be assessed. Fiscal periods remain open to review by the authorities in respect of taxes for five calendar years preceding the year of review. Under certain circumstances reviews may cover longer periods.

Management believes that its interpretation of the relevant legislation is appropriate and the Group's tax, currency legislation and customs positions will be sustained. Accordingly, at 31 December 2018 and 31 December 2017 no provision for potential tax liabilities had been recorded. The Group estimates that it has no potential obligations from exposure to other than remote tax risks.

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Capital commitments - The Group had no material capital commitments outstanding at 31 December 2018 and 31 December 2017.

Operating lease commitments - The Group had no material operating lease commitments outstanding at 31 December 2018 and 31 December 2017.

Credit related commitments. The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and standby letters of credit, which represent irrevocable assurances that the Group will make payments in the event that a customer cannot meet its obligations to third parties, carry the same credit risk as loans. Documentary and commercial letters of credit, which are written undertakings by the Group on behalf of a customer authorizing a third party to draw drafts on the Group up to a stipulated amount under specific terms and conditions, are collateralized by the underlying shipments of goods to which they relate or cash deposits and therefore carry less risk than a direct borrowing.

Commitments to extend credit represent unused portions of authorizations to extend credit in the form of loans, guarantees or letters of credit.

With respect to credit risk on commitments to extend credit, the Group is potentially exposed to loss in an amount equal to the total unused commitments, if the unused amounts were to be drawn down. However, the likely amount of loss is less than the total unused commitments since most commitments to extend credit are contingent upon customers maintaining specific credit standards. The Group monitors the term to maturity of credit related commitments, because longer-term commitments generally have a greater degree of credit risk than shorter-term commitments.

Outstanding credit related commitments are as follows: In thousands of

Uzbek Soums 2018 2017

Letters of credi t 30 ,952,103 144,844,573 Financia l guarantees issued 40,815,641 66 ,729 ,282 Undrawn credi t l ines 30,962,190 18,191,445

Total credit related commi tments 102,729,934 229 ,765 ,300

Less: Commitments col later ised by cash deposi ts (30,952,103) (144,193,646)

Total credit related commi tments 71,777,831 85 ,571,654

The total outstanding contractual amount of letters of credit, guarantees issued and undrawn credit lines does not necessarily represent future cash requirements as these financial instruments may expire or terminate without being funded.

Credit related commitments are denominated in currencies as follows: In thousands of 31 December 31 December Uzbek Soums 2018 2017

USD 30,947,736 156,549,338 UZS 58,337,378 EUR 40,820,008 14,878,584

Total credit related commitments 71,767,744 229,765,300

29 Fair Value of Financial Instruments

Fair value measurements are analyzed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements are valuations techniques with all material inputs observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are valuations not based on observable market data (that is, unobservable inputs).

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Management applies judgement in categorizing financial instruments using the fair value hierarchy. If a fair value measurement uses observable inputs that require significant adjustment, that measurement is a Level 3 measurement. The significance of a valuation input is assessed against the fair value measurement in its entirety.

(a) Recurring fair value measurements

Recurring fair value measurements are those that the accounting standards require of permit in the statement of financial position at the end of each reporting period. The level in the fair value hierarchy into which the recurring fair value measurements are categorized are as follows:


In thousands of Uzbek Soums Level 1 Level 3 Total

As at 1 January 2018

Purchases

Sales

Revaluation as other comprehensive income

Loss recognized in profit or loss

Transition to the associate category

9,385,793 30,071,490

- 948,070

(3,574,578) (1,956,117)

(1,590,018) -

(9,380,333)

- (7,066,488)

39,457,283

As at 31 December 2018 4,221,197 12,616,622 16,837,819

(b) Assets and liabilities not measured at fair value but for which fair value is disclosed

The Group believes that the fair value of all other financial assets and liabilities carried at amortized cost is approximately equal to their carrying amount recognized in statement of financial position.

Valuation techniques and assumptions

The following describes the methodologies and assumptions used to determine fair values of assets and liabilities recorded at fair value in the financial statements and of those items that are not measured at fair value in the statement of financial position, but their fair value is disclosed.

Assets for which fair value approximates carrying amount

For financial assets and financial liabilities that are liquid or have a short-term maturity (less than three months) it is assumed that the carrying amounts approximate their fair value. This assumption is also applied to demand deposits and savings accounts without a specific maturity.

Investment securities measured at fair value through other comprehensive income (FVOCI), and investment securities measured at fair value through profit and loss (FVTPL)

Investment securities measured at FVOCI value of which is determined by a valuation technique or pricing model consist mainly of unquoted ratios. These securities are valued using models which in some cases only incorporate data observable in the market and in other cases use both observable and non-observable data. The non-observable inputs to the models include assumptions regarding the future financial performance of the investee, its risk profile, and economic assumptions regarding the industry and geographical jurisdiction in which the investee operates.

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To measure the fair value of unquoted shares and shares, the Group uses the net assets method: the fair value of investments in unquoted shares or companies' shares is the fair value of the Company's net assets, which corresponds to the share of the Group's investments in shares or shares of specified companies. These data are not publicly available market data and are estimates based on judgments.

Financial assets and financial liabilities carried at amortized cost

The fair value of unquoted instruments, loans to customers, customer deposits, amounts due from credit institutions and amounts due to the CBR and credit institutions and other financial assets and liabilities, obligations under finance leases is estimated by discounting future cash flows using rates currently available for debt with similar terms, credit risk and remaining maturities.

30 Related Party Transactions

For the purposes of these consolidated financial statements, parties are considered to be related if one party has the ability to control the other party, is under common control, or can exercise significant influence or joint control over the other party in making financial or operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form.

Key management compensation is presented below:


Salaries and other short term benefits Social security contribution

1,102,544 275,636

554,955 138,739

Total 1,378,180 693,694

At 31 December 2018, the outstanding balances with related parties were as follows:

Significant shareholders

Government related

entities

Associates Key management

personnel

Total


Cash and cash equivalents -Due from other banks -Loans and advances to customers, including finance lease receivables (contractual interest rate (3% - 22%)


141,7 75,352 57,292,709

32,524,940 24,211

141,775,352 57,292,709

32,549,152

Investment in associates -

Other assets -

Due to other banks (5% - 14%) -

Customer accounts 250,000,000 Other borrowed funds (1% - 13%) 3,569,546,087

64,575 422,624,029

317,141,776

42,223,208 -

503,572 -

42,223,208 64,575

422,624,029 250,503,572

3,886,687,863

At 31 December 2017, the outstanding balances with related parties were as follows:

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Significant Government Associates Key shareholders related management

entities personnel

Total


Cash and cash equivalents Due from other banks Loans and advances to customers,

234,466,925 71,792,463

234,466,925 71,792,463

including finance lease receivables (contractual interest rate (3% - 22%)

Investment securities - - 24,649,985 11,771 24,661,756

Investment in associates Other assets Due to other banks (5% - 14%) Customer accounts Other borrowed funds (1% - 13%) Other liabilities

2,501,429 587,398,884

293,750 -- 18,538,052 - 89,145

27,825,000 -- 140,535

81,100,601 -6,284 -

-

293,750 18,538,052

89,145 27,825,000

2,641,964 668,499,485

6,284

The income and expense items with related parties for 2018 were as follows: In thousands of Uzbek Soums

Significant Government shareholders related entities

Associates Total

Interest income Interest expense Fee and commission income Other operating expense

(37,212,973) -5,751,312

771,957 85,085

5,751,312 (37,212,973)

771,957 85,085

The income and expense items with related parties for 2017 were as follows: In thousands of Uzbek Soums

Significant Government shareholders related entities

Associates Total

Interest income Interest expense Fee and commission income Other operating expense Share of result of associates

(20,080,393) (373,712) 2,131,544

89,639 (14,496)

12,927,818

2,131,544 (20,454,104)

89,639 (14,496)

12,927,818

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3 1 Subsequent events

In April 2019, the Group obtained a subordinated loan in the amount of USD 20 mln from the Ministry of Finance of the Republic of Uzbekistan.

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