SAMARKXNI) REGIONAL STATE UNITIAVR\ ENTERPRISE "St VKVA INANCIAL STATEMENTS ANDN INI)EPENDENT AU DITORS' RIPORT FOR TH 1E YEAR EN DE)D 31 )LCEMBER 2018 Sarnarkand RSUE <�э,7n�;Е1�±г' I�u?' ;�7t' ��1'�'�)s.EaU�:'.� tiI t�1t' E117.t11CI:11 �1:'st<'1пс'11t'.<. 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J `. � - . �� � . . 1>гsгс°сгг�1 � � -,. 1-и�����зt��� 1ti.S11. ;="f " -J ' �, � L- .� _ .,, , <:hi� t :7г.�,ип?;зг:г _ � � 1�.�}�:e�.nil�r,� 1�_.'�,. GrantThornton An instinct for growtK AO 000 «Grant Thornton» PccnyöngKa Y36eEiicTaH. 100128 TauXeHT, yri Mag 11A Ten. +998 (71) 230-45-43 OaKC: +998 (71) 244-47-43 INDE.PENDENT AUDITORYREPORT "Grant Thornton" AO LLC 11 k Abay Str., To the ovmer atid manaoernent of Sarnarkand Tashkent. 100128, Regional State 1-7,nititry Enterprise Republic of Uzbekistan «Stivokova>, Tel +998 (71) 230-45-43 Fax +998 (71} 244-47-43 W ~ grantthorntmuz \Ve do not uxpres, ;in K)j)liil,,ti on thu t_Muncial ýtatcnicnts (n ffix Samarkand Rci!ional slate Ullitarv 1,*:i,(.rl)t-iý,ý,- of !liu ý,l2lllflcý111(:1- (d, 111C nuvels duseribud in Olc 11ýasls f01` 3c(111 able it) obzain Ilftic.iclit apprf)påatc atallt evidencc Io 111,01,11ýc ;1 t(n, ;ý1! m1(111 Jpj!uon ovi lhc,,c ,1;ITcrllcvlts. Wc \vere u- luldit ille t_Mäncial (d' ýhe Sainarkincl S-ate I 'nitars- the vulucli c-ii :Iie t.itemeni poý;itiori as at 31 December2018 -nid the statctncn*, Clit (if clun-cs in cyttiv and stalement of ca-sii tlöxx )r the vear then :j:u: n,ýý,c,ý ui -iii, rlillý'ý!"ci:,... SIatcllicn(,, t,)cltt(liiig ý,i sum m arv of sigi)it'-c.iiit accoLilltilig policics and ý)ihcr (,.\planmory infýmimuon. Misis Mr 1. As it 1, Lllscloýcc; in \f"(, -1 14) 111t, ýiatcnicnt,, ý,is at 31 Decernber2018 tlie net cýirn-li)g v;t.nc ol Ilie pr< ýpcrtv, p'4 rit am l cynpinent anitnitits I 7,S 1-5 .56(1 703 thousatid 1 17" 126 6-1 0"8 vvpi(. 82%, (d dic COIIIpan.ý Ässcis ý2011 7: 80' 1, of the Company'S 3SSC,t»,,,. B.Iýcc, on t11c audiz performe(1 %kc identified ct,riiain indicitörs for iiiip,,iiriiietil ot thesc a,,ý,crs ;i, of flic reportint, (ýmc, ,tich a-s: 11ýc ( Äirnpallv Incurrell loS fr(ý:n itý (3PVratiolls t . or 2DIS Iii rh(, arnourit ofU/S 1.54 665 :ýall(l mid 1r 3 1 Dccc,]ý.)cr 2k l 18 'ht, accurivulated Iosscs amounc 117S 384 033 319 b", Ccin,ýpam`,ý uct _,scr., alnou-c U/S 366 316 -2 16 and are belo-a- its ýhare capnal in Inc amount o: S 37) 36,4 .599 rhousýlnd: and e t'-ere :jiýfýC;JT ()tjý * ]I-t[ -")Ilie ,st flu, propern-, I)Li.nt xicl are obsolete nr phystcallv l jovvever, :Ile Compýý 11', 11ý1; nor carned out an mn-m:rmrnr rcv.c.,ý oll tile propern-, plant ýITI(i Decernber 201S reqil-red bv t1w accounång poljev disclosed -ii tiote cqli,l)lllcrlr ås ..- .1 1. 1 1 i in order to aäj-,ý-,tnicntý art, nccacci -o e inade i<> the cam ng atilount of the Proper:y, -D,Jc to tl,c tiauire and coiiip'cxlty <ýf rlicc assets, wc ,vere not able to ililk-c olir OWi. csnilkde 1o flic valut, of t:iiP-tiriiieii, ýmv,ý:on on Ihe cam,,ingvaluc of the plan7 -ind as at l 2019. i,ýleinl)t-r ot Graiii '1 Immtim lnlurnatiorml GrantThornton An instinct for growth 2. 1Furthermore, based on the audit procedures performed, we have identified that the data in the accounting records are not reconciled with the Registry of property, plant and equipment as at 31 December 2018, for which we did not obtain sufficient relevant data and information. Duc to the nature and conplexity of these assets, we were not able to make our own estinate and to determine if any adjustment should be made of the Company's propert. plant and equipment as at 31 December 2018. Consequentil, we are not in a position to obtain reasonable assurance regarding the completeness of the Company's property, plant and equipment as at 31 December 2018. 3. As it is disclosed in Note 7 to the acCompanyng financial statemenrs, as at 31 December 2018, the balance of Company's inventories amounits UZS 2 034 000 thousand (2017: 1ZS 1 605 373 thousand. Inventories are carried at cost. Based on the audit procedures performed we identified cases of inventory' obsolesce and physical damage. The Company's management did not assess the net reali2able valuc of its inventories as of the reporting date. Owing to the nature and complexity of these assets we were not able to make our own estimates and to determine whether adjustment to the carryni amount of the inventories are needed as at 31 December 2018. -4. As it is disclosed in Note 15 to the accompanying financial statemenis, for the Year ended 31 December 2018 revenues are in the amount of UZS 50 839 423 thousand, Based on the audit procedures performed, we have identified that the data in the billing system for individuals is based on budgetary norms for the use of the sewage system per person, while the actual use of sewerage by individuals may differ materially. Due to the lack of sufficient appropriate data and supporntig documeinits, we were not able to obtain reasonable assurance with the completeness and accuracy of revenues and related receivables from individuals for the year ended 31 December 2018. Furthermore, as it is disclosed in note 15 to the accompanying financial statemenuts, the techuical effcieney of the billig system is limited by branches. Duc to the lack of reliable data and supporting documents, we were not able to obtain sufficient audir evidence to confirm the completeness and accuracy of the proceeds from individuals. We were unable to determine the need to adjust the revenue or receivables from individuals. 5. As it is disclosed in note 23 to the accompanying financial statenients, for the Year ended 31 December 2018 the Company did not disclose nature, type and amounts of its transactions with related parties and key management personnel compensation in accordance with note 3 to the financial statements and International Financing Reporting standards. We were not provided with sufficient appropriate information on nature, type and amounts of its transactions xith related partes and key management personnel compensation. Accordingly, we were not able to determne the nature. tvpe and amounts of its transactions with related parties and key management personnel compensation that should be disclosed in the Company's financial statements as of and for the year ended 31 December 2018. 6. As it is disclosed in the note 11 to the accompanyig financial statements, for the year ended 31 December 2018 indicates that loti-termi borrowings amount to UZS 436 352 452 thousand. However, \ve were not presented with a letter of confimnation on the balance of the long term borrowings. Based on the audit procedures carried out, due to the lack of sufficien relevant data and supporting documents, we were unable to obtaii reasonable assurance with completeness and accuracy of the long term borrowings for the vear ended December 31, 2018. GrantThornton An instinct for growth Matewria1 ucertaint Relatd to Going Concern We draw attention to Noxe 3 of the accompanying inancial statemen-ts, which indicates that the Company incorred a net loss of L7-S 154 778 665 thousand for the year ended 31 December 21 18 and, accumulated losses at that date amounted to I VS 384 033 319 thousand. As further indicared in Note 3 to fhe accompanying finantcial statements, these events or condidons indicate that there is a sibstantial uncertainty that may raise serious doubts in the Company's abiliiy to contInue working as a going concern. Our opnion is not modified mn respect of this matter. R m111mh chg-d witil hmr [he liatnill staeiment Management is responsible for the preparation and fair presentaui n of the financial stalements5 in accordance \xth Internafional Financial Reporring Staidards, and for such internal control as mmana genient deterinnes is neCessary to) enable the preparation of financial stateients that are frec from material iisstatement, whether due to fraud or error. In preparing the financial statenits, managenent is respnsible fOr assessing the Companv's abitIV io Coitiltie as a going concern, disclosiig, as applicable, mamters relaed to going concern and using the going cmncern basis of accounting unless managemeit eiher intends to liqnidate the COmpanv or i) cease operations, or has nio realistie alternative but i do s. Management and chise harged with governanc are resp tnsible or oversecint the CompanY's financial reporting process. Au,dior's respons.ibility l>r the auidit of/financwilrsta,tueens Ouår responsibiliiy is to co)ndct an audit of the Company's financial statements ini accordance with nieiiteatnal Standards on Aditing a:d io Issne and:tor's opinion 1 lowever, hecatise f the matters described in the Basis for 1 )iclamer i i( )pio n secton of our reprt, we were niot able ti obtain sufficient appropriate audit evidence to provide a basis fOr an audit opinion on these financial siatements. \\ are independei if the (o mpany in accordaine with he ic al reirtmrements th;a are relevan to nir atd:t o rhe financial statenents aid have f fIlled mir inther resp, n:sibilities uinder ihose erhical reuirememits. Engagement Partner: NIv Karimov Audit manager N.N.ulchiev 28 June, 2019 Tashkent, Uzbekistan Samrkand RSUS ov rin al statemi ents for the y ar ended '31 Decemner 208 lin thousands _ ,/S STATEMENT OF FINANCIAL POSITION As at 31 December As at 31 December 2018 2017 Assets Non-current assets Property, plant and equipment 4 157 560 703 126 651 078 Total Non-current assets 157 560 703 126 651 078 Current assets Inventories 7 2 034 000 1 605 373 Trade and other receivables 8 30 501 646 19 226 315 Cash and Cash Equivalents 9 1 402 262 454 192 Total Current assets 33 937 908 21 285 880 Total Assets 191 498 611 147 936 957 Liabilities Current Liability Accounts Payables 14 25216208 25377025 Current portion of long-term liability 11 5 242 155 1 924 900 Total Current Liability 30 458 363 27 301 925 Long term liability Long-term borrowings 11 436 352 452 285 987 134 Other long-term liabilities 12 91 004 042 46 183 822 Total long term liability 527 356 494 332 170 956 Total Liability 557 814 857 359 472 881 Equity Charter capital 10 13048353 13048353 Restricted Capital 13 4668719 4668719 Accumulated loss (384 033 319) (229 252 996) Total Equity (366 316 246) (211 535 923) Total Liability and Equity 191 498 611 147 936 957 \pprov ed .iJ sigmed on behalf of the Compan's management: 1tre crC Chlef Accountant Ywsups v 111 Kolesnikov D.A. 28 lune, 20119 1 1 lt I - :1 7 SaMakaiind RSJE tSvoKoVa Fwnanc-al statemenTs fo, 'he yeaf ended 31 Ducumr,bu 201 E tho0Sands oif UZS I STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 Decemibcr For the year ended 31 For the year ended 31 December 2018 December 2017 Revenue 15 50839423 44728 175 Cost of sales 16 (39 554 958) (32 961 951) Gross Profit 11 284465 11 766224 Administrative expense 17 (9370655) (9602906) Write off I Provision for impairment of trade receivables (1 054 117) (3 282 705) Government Grant 18 46331 769 5409479 Other income 19 10086297 2850209 Operating profit 57277760 7140301 Finance cost 20 (219 664 695) (201 510 081) Finance income 20 7706960 1 560150 Loss before tax (154 679 975) (192 809 630) income tax expences 21 (98 690) (60 835) Loss for the year (154 778 665) (192 870 464) \pproved and sagned on o eh f of tlie Company's managernent Chief Accounitant Yusup y KS 1. Kolesnikov DA. 28 June, 2019 - - 8---- Samarkard RS11- Siv.kova Friancia s1atemrntts 'or 9 yOar -nded 31 Cecor-ybe 20'8 ir mousancs o' UZS STATEIMENT OF CIANGES IN EQI 1FY I or the year ended 31 December Charter capital Restricted capital Retained earnings Total Balance at January 1 2017 13048353 3959507 (31 811 946) (14804086) Net loss for the year - (192 870 464) (192 870 464) Contribution of the Government of the Republic of Uzbekistan in kind 709 212 709 212 Other changes - (4 570 585) (4 570 585) Balance at December 31 2017 13048353 4668719 (229 252 996) (211 535 923) Effect on impact of IFRS 9 (843) (843) Net loss for the year - (154 778 665) (154 778 665) Contribution of the Government of the Republic of Uzbekistan in kind - - Other changes (815) (815) Balance at December 31 2018 13048353 4668719 (384 033 319) (366 316 246) A\pproved anil s iped on1 bchalf of the C.011i1111IN'S naliagcrnwnt: Director (hief ACCOLUtn Yusupov K.SM KoI snikov D.A. 28 June, 2010 I 9 SamTIArki-nd RSUE7 Savok,ovan Fria staterrents for the y r erded 3 [ecember 20 n 'iumusands Of U/Sl STATEMENT OF CAS I FLOWS For the year ended 31 December Note 31 December 2018 31 December 2017 Operating activities Loss for the year before taxation (154 778 665) (192 870 464) Non-cash adjustments Depreciation 4 9935204 4662882 Net book value of written off/sold assets 4 235 589 211 159 Write off I Provision for impairment of trade receivables 1 054 117 3 282 705 Government grant 18 (46 331 769) (5 409 479) Effect from IFRS 9 2 (843) - Adjustment from prior years (815) (4 570 585) Exchange rate differences, net amount 20 211 957 735 197 422 484 Net cash from operating activities 26454206 10665627 Increase in trade receivables and other receivables (12 329 448) 3 214 948 Change in inventories (428 628) 465 755 Decrease / increase in accounts payable on operating 44659404 1 861 703 activities and other payables Change in working capital 58355535 16208033 Investing activities Purchase of fixed assets (41 080 419) (30 469 775) Government grants 46 331 769 5 409 479 Net cash used in investing activities 5 251 350 (29 760 563 Financing activities Receipt of borrowed funds (61 592417) 16053745 Payment of borrowed funds 3 317255 (38110) Interest paid 20 (4 383 653) (2 527 447) Net cash from financing activities (62 658 815) 13488 188 Net (decrease) in cash and cash equivalents 948 070 (64 342) Cash and cash equivalents at the beginning of the year 9 454192 518534 Cash and cash equivalents, end of year 9 1 402 262 454192 \ pprux cd atd sigivd ciii b-+alf ()f' dic Cimpany's n1ana~gunent: Direcior Chlef Accountant YusupO K.SF1 l KoIesnikov D.A 28 June. 2019 1 TT I II I I: I: 1 1 1 0 Samiarkarkö RSU[ «Suvoova F:nancia st' itm ts for the yeagi ended 311 201 ;IJnLr th,ousan-s ut UZS, NOTES TO THE FINANCIAL STATEMENTS 1. Main activitv of the Com11pamny The state unitary enterprise "Suvokava" (hereinafter referred to as the Conipany) is a commercial organizaton that was formed by the orders of the Cabinet of Ministers of the Republic of Uzbekistan No. 215 dated October 16, 2015 and No. 306 of October 30, 2015 "On Mleasures, for implenenting the Main Directions for the Development of\ Water Supply a,nd Sewerage Organizatuns" . According to the proposal of the (abincr of Ministers of the Republic of Karakalpakstan, regional kiokiniyats, the Ministri of Economy, the NinIstry of Finance of the Republic of Uizbekistan, the Uzbek gecy "Uzkomniunkliiznat", a single. state uninary enterpr[se "Suvokova" was established with branches in cities and regions on the basis of operatng organizations of water supply and sew,verage (hereinafter - Company). Iii accordance with the proposal, the standard structures of the state unitary enrerprises of Suvokova, as well as their city and regional branches, integrated measures to ensure the iipleientanoi of priority tasks for the development and modernizaon of drinking water supply and sewerage systel]s, iprovg the systei for coinnecting business entities to water supply networks and sanitation on a turnkev basis. The enterprise has the righits of an independent economic enterprise and is nianaged in accordance wvith the legislation of the Republic of Uzbekistan. Being a member of the khokimiyat of the Samarkand region, and being the assignee of the Regional Producton Enrerprise "Suvokova" of the Samarkand region, reorganized into the State Unitary Enterprise 'Suvokova" is considered a defendat in all parameters of legal and financial and econonic activities. T he Conpanv operates in Samarkand city and is wholly owned by the Coninunal Service Deparnent on behalf of the Government of the Republic of Uzhekistan and has social and ecomioinc imipcated by the state t: Monitoring and improvement of the activities of branches under the order of the organizatlon hle use of existing sewerage lines, the development of the company's lines, for the continou1s provision of water supply to the population, organizations, institutions and enterprises, improvement, as weil as providing w ater supply in an anount stfficient for irefighting. T Treatment of sewage waste and constant agrtation in the provision of water supply * Participation Ii the devek>pnient of annual and long-term plans for the development of the water sector of the region * Monitoring of the development of the bilfng systen ini cities and regiOns E Ensuring the implementation of foreign investments aimed at the developinent ofk ater suipply and sewage systenis in accordance with the state program. Tlie total number of eiployees as at 31 December, 2018 was 265 people (2017: 246 people). The legal address of the Company: Republic of Uzbekistan, Sattarkand, 104147, 1zbekistan Street, 114 A. In addidon to the nature and objectives of the Conpany's activities, it plays a signiticant role in the ongoing social and economic reforms inplemenred in the Repubbe of Uzbekistan. C-onsequently, the Company's actvitnes are stictly controlled by the state authorities, and, in accordance with the resolution of the Publi Ilities I)epartment No.01 8 of January 9, 2011, utilities like the Company are allo\wed to have a maximum gross nargn of 10` The Government of the Republic of Uzbekistan has accepted the Project on reconstruction of sewage trearment plants in the cites of Bukhara and Sanarkand on the basis of a loan agreement No. 4633-UZ dated Novenber 26. 2009 between the International Development Ageticy (IDA) and the Republic of Uzbekistan 11 bsi a2RSUE buSvccva, o så*exevs cr the year erie: 31 December 201e n tn.sands of UZSi 1. Main activitics of the Company (continued) Consequently, the Company's activities are stnctly controlled by state authorities and, in accordance with the _thties Administration Directive No. 01-8 of january 9, 2011, utilites sjmilar to the Company are allowed to have a maxinum gross margin of 10% In accordance with the Agreement on Addi-onal Financing No. 5698-1 and 5699 UZ dated July 12, 2016 between the International Devekpment Association (hereiniafter 1I) and the Repubbc of Ibekistan, Bukhara Samarkand Sewerage and Water Supply Project (hereinafter - Project). The objectves of this Project are: 'a) to reduce the harmful effects of wa.stewater collection on the environment; b) improving the eftfeiency and sustaimability of sewage systems in the Bukhara RSVE "Suvokova"(hereinafter - BVK) and Samarkand RSUE "Suvokova" (hereinafter - SVK). The total amount of funding for the project is estimated at $ 105 millijon The project is funded by the IDA with a loan of 71,700,000 Special Drawing Rights (equivalent to US S 11)5,0 milbon),, with an interest rate of 1 ,25% of the principal amount under standard conditions (IDA 5698-17Z) and 1.SY for solid conditions (IDA 5699 %). The maintenance fee in respect of the witlidrawn and outstanding part of the sub loan is 0.75r per annum. Ihe interest rate on obligations in the amount of 0,5` per annum should be paid on the unused loarn anounts. The principal amount of the loan niust be repaid every six ionths for 25 years, including 5 years of the grace period, starting from the date of approval by the Board ut )irectors of the World Bank. Tlhis Project is extended to 30I June 2019. 1he iinistry of Finance of the Republic of Uzbekistan is responsible for repaying the loan on behalf of tihe Republic of Uzbekistan in accordance with the Loan Agreenient of jly 12, 2016 No. NL\R 5698 17 and MAR 5699-U1 between MAP and the Republic of Uzbekistan. fowever, tliere are sub credit agreements between the Ministrn of Finance of the Repubhc of Uzbekistan and 1 0) and ICS on the acceptance of obhgazions specified in the Loan Agreement. The project includes the following parts ( omponents) Part A: Institutional Strengthening and Capacity Building 1. Institudonal strengihening and capacity building of BVK and local comiunitles through, Inter ala: (a) provision of staff training in utilitV management with an emphases on improving general management, water and wastewater systeis operation, and consumier orientation; (b design and implenentation of public awareness raising campaigns and customer satisfacdton surevs; and (c: improvement of internal control and accountability systens; (d) enhancement of the accoiunting establishment of BVK; and (e) establshment of a pilot SCADA. 2 Institutonal strengthening and capacity building of SVK and local communities through, inter alia: (a) provision of staff training in utility management with an emphases on inproving general manage ment, water and wastewater systemis operation, and consumer orientation; (b design and implementation of public awareness raising campaigns and customer sans facMOIn surveVs; and (c) unprovement of internal control and accountability svtenis; (d enhancement of the accounting establishment of SVK; and (e) establslsnienit of a pilot SCADA. 3 Institutional strengtheiniig of the Recipieit's warer sector services through ie prov,isioti of technical assistance to review, inter ala: (a) the strategy for the management and development of\, ater scctor servces at the national level; (b) the technical standards apphed n the supply of water sector services; and (c) the price-setting poheies for said services. 4. Financing of feasibility studies for future priority (non-Project investmrients in the water supply and sanitaton sector ot the Recipient. Part B: Physical Investments 1. Rehabihtation of Samarkand Sewerage and Water Supply System, includmg, inter alia: (a) replacement of existng sewers; (b) rehabilitation ot existing wastewater pumping stations and construcIon of an additional wastewater pumping station; (c construction of new sewers; completion of the rehabilitation of Samarkand Wastewa:er Treatment Plant; (i provision of operational equipment; and (f) provision of technical assistance required therefor. 12 Sa'nlnt~and RSUF «Suvckova;> Finanufl sa:eientis for thie var erlded * D,ernbe r 2C1 n ti ousands of UZS l. Main activities of the Company (continued) 2 Rehabilitation of Samarkand Sewerage System, including inter alia: (a) replacement of existing sewers; Yh) rehabilitation of existing wastew-ater pumping stations and construction of an additional wastewater punping station; (c) construction of new sewers; (d) completion of the rehabilitation and upgrading of the Samarkand main wastewater treatment plant; (c: provision of operational equipment; and (f) provision of technical assistance required therefor; and (g) construction of a new \w aste\w ater treatment plant located in Farhad. Part C: Project Management Strengthemngi., the PCG's and the respecte- PIV's Project managenirit, monitoring and coordination capacity through the provision of goods and consultant services (including Project auditing services), Training, and Operating Costs. The economic einvironmincit in wvhich the Companv operates The econony of the Republic of Uzbekistan continues to show some features of the developing market. The governinment develops the legislative, tax and regulatory framework required in a market econony, and also conducts significant economic and social changes. The future stabihty of the Uzbek econony largely depends on the ongoing reforms and transtormations, as well as on the effectiveness f ecotonmic, financial and monetary measures undertaken by the Govermnnit, In view of the fact that the reform process is still incomplete, the operations conducted in Uzbekistan involve risks that are not typical for econoincally developed countries. Among them, in particular, the incon-ertibilit, of UZS in most coiuntres outside the Republic of Uzbekistan, there is a low level of liquidity -i the debt securities iarket and the capital market. as wvell as eonnnuin g iitlation. According to the Decree of the President of the Republic of Uzbekistan No. UP-49474 dated February 7, 2017 "On the strategy for further development of the Republic of Uzbekistan", an Action Strategy for tlie priorny areas of the Republic of Uzbekistan in 2017-2021 was approved, providmg for the Action Strategy in fise priority areas, one of which is ie dev elopmuent and liberalizanon of the econonv, including monietary and tax liberalization. According to the Decrec of the President of the Republic of Uzbekistan No. UP 5177 dated September 2, 2017, "On Priority Measures to Liberalize NIonetar- Pohcy," legal entities are free to purchasc foreign currency to pay for current operations (import of goods and services, repaynent of loans. travel expenses and etc.) in cominercial banks from September 5, 2017. Obligatory sale of foreign currency recenved frmi exporis to the Govcrnment was also cancelled, which in the past as 50' and then 25% a. his means that the rmonetary policy of a country that has been very restrictive for nany years is now hierairzed sigificantly. Also, Presidential Decree No. UP-15468 "On the Concept of Improving the Lax Policy of the Republic of Uzbekistan" dated June 29, 2018 provides for a consistent reduction of the tax burden, simplificanon of the tax system and improvement of tax administration, which are essential conditions for accelerated economic developnent and 1iproving the country's investment attrativeness . Ilie document provides for January 1, 2019: ** reducing the tax burden on the wage fund; 9 iiprov,ement of the taxation of taxpayers of gencrall established and suipiftied taxes with the optimiation of taxes on tuirnover. as well as the criteria for the transition to a simplified tax regime; imeasures are being iniplemented to reduce the negative impact of iiprov ig tax policy on taxpayers of the simpitfied tax regivme; and 'I Te procedure for caIculating and paving value added tax and excise tax is being improved The following refinancing rates were set by the Central Bank of the Republic of Uzbekistain: 13 Samarkand RSUE «Suvokova» Financial staternents for the year ended 31 DecernDer 2018 in thousan2s of UZS The CConom011ic elviroltnllt in xlich the Conipany opcrates (contxiued) Refinancing rate from 01 01 2017 to 27 06.2017 9% from 28,06-2017 to 24 09.2018 14% from 25.09.2019 16% The state of the cconomv of the Republic of Uzbekistan is charactcrizcd by a relatively average inflation rate. During 2018, the inflation rate was 14.3 percent (in 2017: 14.4 percent). ( rowth and macroeconomic stability are ensured in Uzbekistan. lhe (PIV growrh in Uzbekisran in 2018 was 5.1 perceit (in 2017: 5.3 percent). Th1e following table shows the official exchange rate of the VZS of Czb)ekistan hereinafter referred to as "V2S") to one VS dollar (hereinafter referred to as the "1S dollar") established by the ( entral Bank of the Republic of Uzbekistan in relation to the indicators of the previous year: exchange rate change (%) 31 December 2018 8339.55 3% 31 December2017 8120,07 151% According to Presidental Decree No. UP-5177 "On Priority Measures to 1Libetalsze Monetary Policy" dated Septeiber 2, 2017, the counritrs monetarv policy was liberalized and on September 5, 2017, the exchange rate of 1 US dollar was increased from -1,210.35 souns to 8 100 suni. 2. Newv and Revised International Financial Reporting Standard, Standards and interpretations adopted this vear 1The accounting policy adopred in the preparation of the financial stateMenS s is Consistent wich that applied in the preparation of the Company's financial statements for the year ended December 31, 2017, except for the newly adopted standards and interpretations effective as at January 1, 2018. 1he Companv has not carly adopted anv other standard, interpretation or amendment that has been issued but not vet ettective. The (ompany tirst applies IVRS 15 Revenue under contracts with custoniers and IFRS 9 Financial Instruments, which require a recaleulation of pretously presented financial statements. The nature and :mpact of these changes is disclosed below. The Company also apphed s,one other amiietdments and clarifications for the first time in 2018, but they did not have a material impact on its financial statements. JHUR 15 *'Revenui,,e ,,pomji, Contrct wthCutoe IFRS 15 establishes a comprehensive tfranewvork for determining wrhether, how much and when revenue is recognized. It replaces existing revenue recognition guidance standard, including IAS 18 Revenue, IAS 11 Construction C(otracts and IFRIC 13 Customer Lovalty Progrunnes. IFRS 15 is effecuve for annual reporting penods beginning on or after 1 january 2018.IFRS 15 establishes a ixve-step model to account for revenue arising from contraets with eustoners. It requiLres revenue to be recognised vhen (or as) control of a good or service transfers to a custoner at an amount that refleets the consideration to which an entity expects to be enttled in exchange for transferring goods or services to a customer. IVRS 15 requires entities to exercise judgenent, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their custoners. 'Tlhe standard also specifies the accounting tr the incremental costs of obtaining a contract and 14 Samarkand RSUE «Suvokojj» -nancil3 s 1erets 4cr the yea' e'-ded 31 December 20O8 in thmisands df UIS. 2. New and Revised Iiiteriationial Financial Reporting Saiidards (continued) the costs directly related to fulfilling a contract. In addition, the standard requires enhanced and extensive disclosures ahout revenuc to help investors better understand the nature, arntount, timing and uncertainty of revenue and cash flows front contracts with customers. The Company has applied the standard in preparing the financial statements for the year ended 31 December 2018. The Company's revenue from contracts with cusitomers comprises one nain stream being the salc of drinking water and collecuon of waste \water. Tbe Company undertook a comprehensive aalysis of the impaet of the new revenue standard based on a review of the contractual terns of its principal revenue streat with the pnnarn fOeus being to unders:and whther tbe timing and amount of revenuc recognised could differ under 11R-S 15, itor fie < ompany's reve.uc stream, the nature and tining ot satisfaction of the perfornance obbgations, and, bence, te anount and tining of reveinue recognised under IRS 15, is the same as tbat under IAS 18. IFRS 9 "F inancial Instruments " IFRS 9, replaces :he eing g:dance I A \S 39 Financ:al Instrunments Recognition and Niasurenient. IFRS 9 mehides revised guldance on tbe clnss]ficalon and imeas.ureienr of financial instruments, including a new expected credit loss model for caleulatnin if iipairmei on financial assets, and the rie general iedge accounting requireiieits. Ii also carries fonard the guidance on reces not provide evidence of a change in use. 'hese amendments do not have aiy unpact on the Companv's financial statements. Amnendwenia to IFTU 2 Cior,/ictio and Meaoemnt ofThar-based I;men Trun action. The IASB issued amendments to IFRS 2 Share-based Pavinent that address three main areas; the effects of vesting conditions on the neasurement of a cash-settled share based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting vhere a modification to the terms and coniditions of a share-based payment transaction changes its classifEcation from cash settled to equit. settled. On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other enteria are met. These aneidirents are nor applicable to the Company, lmendmelt. to IFR-V 4 Ap/jt Xv IFRS 9 witanial Intm,et.i with IFRN 4 Inaw.ar Contndb Tlhe amendments address concerns arising from implerentlng the nrew.' CIMan1cil instruments standard, IFRS 9, before implementing IFRS 17 Insurance Contracts, which replaces IFRS 4. ihe amendments Introduce two options for entitieS ssuing insurance contracts: a remporary exemption from applying IFRS 9 and an ovenav approach. These amendments are not applicable to the Company. 16 Samar-and RSUE «Suvekova», Financial statements for tie year erded 31 December 2018 ir ticusands oif UZSI 2. New and Revised Iiternatioiial Financial Reporting Standards (titinuied) Aen'ents tlo L1 28 fnvestment in Asas anå j'ln! n Ventres Cnfiatin 161 e n vees a! '1Hjir va[i)lu hiufn prt r isj Lý an nstt-bnvejmen choi Tlhc atendmenrs clanfy that an entiy that is a venture capital organisation, or other qualifving enitv, may elect, at initial recognition on an investmenrt by investment basis, to measure its investmenits in associates and joint ventures at fair valuc through profit or loss. These amendrents are not applicable to the Company. New and revised IFRS - issued, but not effective The Company did not adopt the following new and revis ed I[RS and lnterpretations (issued, but not yet effecti-e): JPKS' 16 -I_es" IFRS 16 will replace IAS 17 "1.ease.s", IVRIC 4 Determining whether an Arrangement contains a Lease, SIC- 15 Operating Leases-Incentives and SIC-27 valuatn the Substance of Transactions Involving the L egal Frm of a L easc. It completes the 1ASH's long running project to overhaul lease accounting. IFRS 16 sets out the principles for the recognition, measuremnent, presentltion and disekilsure of leases and rejuires lessees to account for all leases under a single on-balance sheet iodel similar to the accounting f or finance leases under IAS 17. Th standard includes two recognitlion exemptions for lessees - leases of 'low- valuc assets and short-term leases. IFRS 16 is effeetive from periods begining on or after 1 january 2019. VarlY adoption is permitted; however, the Company have decided not to early adopt. The Company is planning to adopt IFRS 16 on 1 January 2019 using the Standard's modified retrospective approach. Under this approach the cumulative effeet of initially applying IFRS 16 is recognized as an ad,ustment to equitY at the date of initial application. lhe Company assessed the effect from the adoptn' and concluded that the effect from the adoption of IFRS 16 on the Comilpany'7s financial statements is not sign tiean t. Thus, the comnuparative infornanion til niot he restated. D FRS, 1? Jnjunjn- Contýistj' In May 2017, the IASB issued Il-RS 17 Insiirance Contracts :IFRS 17), a comprebensive new accounting standard for insurance contracts covering recognition and ieasurenieti, presentation and disclosure. Once effective, IFRS 1 will replace IFRS 4 Insuraice Contraets (IVRS 4) that was issued in 2005, 'The overall ohjecve of IFRS 17 ,s to provide an accounting model for insurance contraets that is more useful and consistent for insurers. In contrast to the rcqUrements in IFRS 4, which are largely based on grandfatheting previous local accounting poheles, IFRS 17 provides a cotmprehensive model for insurance contracts, covering all relevant accounung aspeets. Tius szandard Is not applicable :o :he Company. IjFRC 2nteputation 3 Ln.rtaint) ovr Inajm Tax Treament The Interpretation addresses the accounting for incorne taxes when ta\ treatments involve uncertaintv that affects the application of IAS 12 and does not apply to taxes or leies out,ide he seop of LAS 12, nor does it specificallv include requirements relating to interest and penalties associated uith uncertain tax treatmetits. The Interpretation specirically addresses the following: 17 Samarxar RSUE «Suvc-ova», F iancial s:aiemenS tor tle vear ended 3' De r te 2GI i ir t osaius uf UZS; 2. New and Revised International Financial Reporting Standards (continiied) • Wherher an entiy considers uncertain tax treatments separately; • The assumptions an enty, iakes about the examinarion of tax treatments by taxation authorities; • How an enuty determines taxable profft (zax loss), tax bases, unused tax losses, unused tax credits and ,ax rales; • Iox an entity considers changes in faets and circumstances. I F R, 2C 1neprto D n &nra n,vr Inýome Taxv Trratmen.,cotnud An entiv has to dereri-ne whether to consider cach uncertain tax treatment separately or together with one or more other uncertain tax treatients. The approach that better prediters the resolution of the uncertainry should be followed. The mterpretation is effecnve for annual reporung periods begining on or after 1 January 2019, but certain transition reliefs are available. The Company will apply the interpretatioii froni its eftective date. Jmenwentå to I!RS 9: Pn'pay;m'went Fature' wii Negtr Copensation Uinder IFRS 9, a debt instrument can be measured at amornsed costi or at fair value through other comprehensive incone, provided that the contractual cash flows are 'solely payments ft principal and interest on the principal amount outstanding' (the SPPI criterion) and the instrument is held within the appropriate business model for that elassifcation. The amendments to HRS 9 clarify that a financial asset passes the SPPI erterion regardless of the event or circkutiance ithat causes Ihe early terminantion of the contract and irrespeceti\e or which party pays or receives reasonable Compensation for the earlY terminaon of the cotract. The amendnents should be appled retrospectvely and are effecuve from 1 lanuary 2019, with earlier apphcaton permitted. hese atncdments have no impact on the financial stateme ds of the Compan. Amtndmen loRS 1/ and L-S 28: Sa or nimion & ~Wset be an Investor and ots rte or joint Ventur The amendmnents address the contict beTween IFRS 1 and IAS 28 i dealing with the loss of conrod of a subsidiar- that is sold or contributed tIo an assoiate or oint venture. The amendients clarify that the gain or loss resulting from the sale or contribution of awsets that consiture a business, as defined in IORS 3, between an inestor and its asstiate or loint venture, is recogised in full Any gain or koss reslnig krom the sate or contribution of assets that do not consritute a business, however, is recognised only to the extent of unrelated investors' interests in the associate or joint venture. Ihe IASH has deferred the effeccve date of these ame1Cndments indefinitely, but an enriy that early adopts the arenidments must apply them prospectively. These arendments are not aplcable to the Company. Fmwenäfdments lo L.5, 19: P4¼n Amndn, Curutainr The amendnens to IAS 19 address the accounting when a plan arendmient, curtaiient or settlemient occurs during a reportaig period. The amendients specify that when a plan amenidmen-, curtaminent or settleient occurs during the annual reporug period, an entity is required to: • Deterrnine current service cost for the remainder of the period after the plan amendnent. curtilment or setiement, using the actuarial assunptions used to remeasure the net defined benefit habilty (asset) reiecting the benefits offered under the plan and the platt assets after that event; " Determine net interest for the remainder of the period after the plan amendnient, curtailment or settlenent using: the net defined benefit labhty (asset) reflectng Ihe beiieuits offered under the plati and the plan assets after that event; and the discount rate used to reicasure that ner defined benefit liabilty (asset). 18 SamarKard RSUE >Suvo:nation, Tlhe amendments clarify that, when an entity obtains control of a business that is a ýoint operation, it applies the reqiirements for a business combination achieved in stages, indluding reneasuring prev IOuSly held interesrs in the assets and habilities of the loint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation. An entity applies thosc amendments to business comibinations for which the acquisition date is on or after the beginning of the first annual reportng period beginning on or after 1 J anuary, 2019, with early applicatin permlitted. Te amendments will not have an impact on the Company's financial statements. IFR I1 JOinA e A party that parncipares in, but does not have joinr control of, a joint operation nIight obtain jolnt control of the joinit operadon in which the actv of the joint operation constitutes a business as defined in IFRS 3. The amendments clarif that the previousli held 1nterests in that joint operation are not remneasured An eitity applies those amendnients ro transactnons in whIch it obtains joint control on or after the beginning of the tirst annual reporting period beginning on or after 1 January 2019, with carly application permited. 'Ihese amendinents are currently not applicable to the Company but may apply to future transactions. IAS 12 ne4onv Taves The amrendments clanfy tiat the incoie 1ax CorIseqluetnecs of dividends are hnked more directl to past transactions or events that generated distributable profits than to distributions to Owners. Therefore, an entiry recognizes the income rax consequenes of dividends in profit or loss, other comprehensive incorne or equity according to w-here the entity originally recognized those past transaenons or events. An entity apphes those amendments pr annual reporung periods beginning on or after 1 Januar\ 2019, wvith carly appIeation is permitred. When an entity f:rst applcs triose anendients, it appies themi to the incme tax consequences of dividends recognized on or af:er the hegining of the carliest comparative period, The Company does not expect signicant effect on its financial statements. 19 Sænara,-d RSL[ (SvcKova, nanIal stern:its c year erced .31 Oecýtr'ietr 20'. r il,a-ds of IMSi 2. New and Revised International Financial Reporting Standards (c>ntinied) L iS 23 BorrowiYo Ilie aimendmuents clarify that an entity treats as part of general borrowings any borrowmng originally made to develop a qualifying asset -when substantially all of the acivities necessary to prepare that asset for its intended use or sale are complete. An entity applies those arnendments to borrowing costs incurred on or after the begining of the annual reporting period in which the entity firsr applies those amendments. An entity apphes those amendments for annual reporting periods begiimng on or after 1 January 2019, with early applicaon pernmittd. Ihe Companv dotes not expect sigfnicant etfect on its financial statements. 3. Significanit Accounting Polices Statement of compliance Ilie financial statenents of the Comupany have been prepared in accordance with International 1inancial Reportnig Siandards (iFRS") as issued by the International Accounting Standards Board. Basis of preparation The financial statemenits have been prepared on the historical cost basis e\cept for certain financial instruntets ininallv rectnized at fair value. Ilie fniancia, statements of the CoMpanv are presened in ( zbck Soums (liereinafter - "U 7tS"). 1 he pnncipal accounting policies applied in the preparation of these financial statements are set ont below. These pol cies have been consistently apphed to all the periods presened, unless otherwvise stated. Ihe finetional and presentation eurrency of the financial statements of the Company is UZS. All aimouits in these fnitancial statenents are rounded to thousand unIess otherwise stated. Going concern basis These fnancial statenents reflect the current assessnent by the anaiageient of the Company- of the iimpacts that affect the operations and financial position of the Company Tlie future development of the econot of the Republic of Uzbekian largely depends on the effeetiveness of the nicasures taken by the Government of the Republie of Uzbekistan and other factors, including legislatve and political events that are not controlled by the Company. 'Ilie Com pany's managenent is not in a position to prerhet the effects of these factors on the financial condition in the future. Manageinent believes that the Company wxill continue to operate as going concern basis. In making this decisin, managenient had in mnd the current intent and conunued support of the State. Management believes that the State will enable the Company to fulfill its obligations in the future. Acerual basis h1ese financial statenents were prepared on the acerial basis. The acerual basis assunies ensures recognition of the resuhs of business operauons, as well as events when they occorred, regardless of the uime of payment. Transactions and evcnts are recorded in the accountng and ineduded in the inancial statements for the periods to which theY relate. 20 Sarnarkrnd RSUE «Suvoxovan Finaicial staerents for tri Year ended 31 December 2018 on thousands of UZSi 3. Significant Accounting Policies (coitinued) Recognition of the lements of financial statements These financial statements ticlude all assets, Labiliies, equin, income and expenses, which are the elements of the financial statcllerits. All elements of the financial statements are presented on a linear basis. The inclusion of several elements of the financial statemenits into a single item is made takmng into account their charactenstics (functions) in the Company's operat1ons. Each matera! class of similar iterns is presented separately :n the financial statements. kenis of a dissimnlar nature or funcuon are presented separately unless they are imrniaterial. Foreign currency translation In preparing the financial stateients. transactions in ii foreii currencies other than the functional currency ( frein eurrency) are carried at the exchange rates prevailing as at the transacnon date. Monetary items denominated in foreign currencies are transLated at the exchange rates prevailing as at the reportng date. Non -nonetary items denominared in foreign currencies that are neasured at fair vakue are translated at the exchange rates prevailing at the date of deternination of fair valuc Non-nionetary items mieasured at historical cost, denoilnated in ireign currency. are no[ t retranslated. Exchange differences on monetary items, which arise as a result of changes in the exchange rates, are recogized in profit or ko-ss in Ilie period wieui tiey arise. The Uzbek sun was chosen as the functional currency, as well as the currency mo which tliese financial 5statenents are presented. All financial stateinent data has been rounded to the nearest thousand. Foreign currencies, especially the 1S dollar and the Euro, play a significant role in deterining the econonmic paraniters of nany business trarisacilions iii the Republic of Uzbekistan. The table below slouvs the rates of Uzbek Som against the US dollar and 1uro, estabhlshed by the Central B3ank of tzhekisti: USD Dollar Euro 31 December, 2018 8 33955 9479.57 31 December, 2017 8 120,07 9624.72 According to the Decree of the President of the Republic of Uzbekistan "On Prionity Nleasures for the 1 aberabzation of Monetary Policy" No. 5177 dated September 2, 201]7, in order to icrease the efficiency of foreign exChange flows based on market principles, create a favorable invesuinent and business cliiate to attract foreign investment, as wk,ell as icrease the sumuilaunig the role of mioietary pohcy in foreign trade, the rate of national currency in relation ro foreign currencies is established at the interhank electronic trading of the foreign exchange iuchitelo based on supply and demand. Since September 5. 2017, i:he national currency of the UZS has been devalued, the rate of 1 (one) VS dollar is equal to 8,1(0O 17ZS (before the devaluation of 4,210.35 UZS). 21 Smar.ad R5UL- «SuvoKova» Hinaii s:ar turna s fo, the year erded 31 DecerCer 2018 (1' thoisands of LjZS 3. Signilficant Accounting Policies (cotinued) Propertv, plant and equipment An iten is recognized as property, plant and eqtupment when it :s hily probable that furure econonic benefit:s associated with the itcm will flow to the Company, and the acmal acquisiton cost of the asset can be imeasured relialy). Historical cost of property., plant and equipment includes the purchase pr-we as well as import dunes and other non recoverahle taxes, borrowing costs, ilch are directly attributable to coristruction of long-term projeets it recoginition criteria are met, and also direct costs attrihutable to bringing tie asset to the working condition and dehvery to the place of its intended use. Subsequent costs incurred after the entry of property, plant and equipment into operatons. such as repair and maintenance costs are usually recognized as an expense in the period ni which these costs are incurred. Costs, which result in an increase in the expected future ecoromic benetfits embodied in the asset beyond its oriinal assessed performance are capitalized as an additional cost of propern-, plant and equipment. All other costs are recognized as expenses in the reporting period when thev incurred. After initial recognitLon as an asset, lte liem of property, plant and equipient is stated at historical cost less depreciation and iainent losse", if any. The useful life of properry, plant and equieii is deternined taking into aceonIt the expected use of an asset and may be shorter than its ccononic lif TIhe useful fie of propery, plant and equipmnent is a matter of idgment based on the e\perience with similar assets. The Company determnes the following useful lives for property, plant and equipment: Category of property, plant and equipment U seful life BuIlding-s and construetons 30 years Maclhinery and e]lipment 8-12 vears V\ehicles 5 years )ther vears 1e useful life of itIIs of property, plant and equiptnent and their residual value may be revised by managetment as necessary considerlig all factors, which influence future economic benetits and the Company's intentons with respect to the use of property, plant atid equipment. D>epreciation of propertn, piant and equip:nt is recog:ized in the statemetit o: ci imprehensive incoime and is caculated uing the straight line metiod over the c\peered iseful ies ot the assets. Upon sale or disposal of assets, its cost and accuimulated depreciation are elinutlated from the respectixve accounts, and any gain or loss resulted from its disposal is included in the statement of comprehensive income. Impairnient of non-financial assets An assesstmint is miade ax each reporting date vhether there is an indication tha: an asset may be impaired. It any such indicat:on exIsts, or when annual impairment testing .or an asset is required, Management estniates the asset's recoverable arnount. Att asse's recoverable aunotti is the higher of an asse:'s or a cash-generating unit's (CGV) fair valuc less costs to sell and its value in ise and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of 22 sTr:ald RSJF KStuvoes not have the practieal ability io seil the asset in its entiretY to an unrelated third party without needig to inpose additional restitions on the sale. 27 SarrarKand RSUE «Suvokovaj Fmancial statements for the year ended 3 December 218 i ri thusands of UZS 3. Significant Accounting Policies (continued) Im&pimn' o|jinnal .ors carried at amanisedl cos[ Expected irnpairnent losses are defined as the difference between all the contractual cash flows that are due to an enUty and the cash flows that it actually expeets to recenive (~cash shortfalls"). TUs difference is discounted at the oimal effective itrerest rate lor credit-adjusted efecrve interest rate for purchased or originated credit impaired financial assets). The assessnient of impairmetit tor tinancial assets can cither be indwiidually or collectively and Is based on how an endty mnages its credit risk. If an entity has a small niumber of receiv,ables with large value and these receivables are managed on an account basis .e. individually) it tnay not be appropriate in that case to base the im~pairmet on a provision matrix as such a matrix would unlikely be n ine wvith the expected credit loss of the individual receivable. Recognition of credit losses is no longer dependent on the Corpany first identliying a credit loss event. Instead the Company considers a broader range of initoriation when assessing credit risk and measuring expected credit losses, including past events, cirrent conditions, reasonable and supportable forecasts that affect the expected collectabilty of the fltiire cash flows of the iistrunent. In applyling this for\xard looking approach, a distinction is made berween: " financial InstruMnents that have not deteriorated significantly in cred: quality since initial recognition or trat have low credit risk (Sage 1" ) • financial instruments that have deteriorated significan min credit quality since initial reco,glition and whose credit risk is not lo\x ("Stage 2"). • "Stage 3" xould cover financial assets that have objective evidence or iipairmetit it the reporting date. "12-mxonth expected credit losses" are recognised for the first catcgoiy while 11t-etimne expected credit losses' are reco gnised for the second category If the terins of ain inpaired financial asset held at aioruzed cost are renegotiated or othferwise modified because of flnancial difficulties of the counterparty, impairienit is meastired using the orlinal effeCtive interest rate before the ttmoidifciation of terns. Etncollectible assets are wrtten off against the relared inpairtnent loss provision after all the neessarvy procedures to recover the asset have been completed and the anount of the loss has been determined. Subseqiuenit recoveries of aniounts previously wvritten off are credited to imipairieit loss account within the profit or loss for the year. Current corporate income tax Tax assets and liabililies attributable to the current corporate income tax tor the current and previous periods are measured at the amount recoverable from tax authorites, or payable to tax authorities. Tax rares and tax laws used to calculate these aiounts, are the rates and laws, wlhich have been actually adopted as at the reporting date in the countries in vhich the Company operaies and generates taxable incone. Current corporate incone tax attnbutable ti items recognized direcuy in equit is recognized in equin. Capital Share capita. is the aggregate in inonetary terms of cottnbuntios (shares at a nonunal valie) of the founders (shareholders) in the lConpany's property when it is created to support the activities within the framework defined by the constimient documents. The share capita! of the Cotnpany is the collective property of the founders and at the satne tine the property of Ilie (ompanv as a legal entiry. The procedure for forming and changing the shiare capital is regulated by the legislation of the Republic of Uzbekistan. 28 F rar r al slvt rits f t. e a eided 31 Debernt 201 Hn tnousn r ds of UZS 3. Sitiificant Accontiting Policies (continued) Capital of restricted use Conrions of the Government of the Repuhlic of Uzbekistan are capitabzed upon receipt and are recorded at fair value, wvhich are designiated as cash and in kind as Capital of restricted use i equty. Foreign currency revaluation Ihe functional currency of the Company is the currency of the utinderlying econornic environment in which the corpany operates. The functional currency and rporting currency of the Coinpany is the iational curreney of the Republic of Uzbekisran Uzbek Sun (lhereinafter referred to as "UZS Monetan assets and labilties are transferred to the funcnonal currency of the Company at the offcial exchange rate of the Central Bank of the Repubåic of Lzbekistan (CBU), for the respective reporring dates. The gains and losses arising from the se nleint and the translation of monetary assets and liabiles into the funcional eurrency of the conipany at the f6ial rate at the end of the year are recognized in the statement of corprehensive income. Recaiculation at the exchange rate at the end of the year is nt t carried otut with respect t) non monetary items of the balance sheet, measured at actual osts. Events after the reporting date Post-year-end events that previde additional information about a (orpan's positon at the statement of financial posiion date (adpusting events) are reflected in the financial statements. Pst-year-end events thai are not adjusting events are diselosed in the ntges when material In terns of its produets, the Company has one business segmenit, te producnoin and sale of additives and materials for the construction industry. Related party transactions Aeeordit:g to lAS 24, "Related party, disore",å the Company discloses the nature of th related party relationships as wHel as infrmnation about those transactions and outstanding accouit balances necessary for an understanding of the potential effect of the relationships on -lie finaicial stateinents. In these fnancial statements related parties are considered to be those that have the ailr to control or exerce signincant influence over operating and frnancial decisions of other party. \Wher, deciding on whether the parties are related, a substance of the relamonship :s taken into account, and not nerely its legal forn. Significant accounting judgments and estinates Preparation of financial statements in accordatice fith IVRS requires the preparation of judgments by managemtent of the (Compan and use of subjective estinates and assumptions that affeet recorded ainounts of assets and abilities and disclosure of information about potenual assets and habilties at the reporting date of financial staterents and recorded anunts of income and expenses durig the reporting period. Eiven though the estimates are based on histocal knowedge and other significant factors, events or actions may anse in such a manner, so actual results may differ fron these estinations. Key assumptions for future and other key sokurces of estimation of uncerta:ntv at the reporting date that have a significant risk of material adjustment to tue carring amouts of assets and hiab:it: w:thm the next financial year are presented beloV: Impairment" of proper. påm! and euipmen: The Company assesses whether there are any indicators o-tf impairment of the carryrig amount or property, plant and euiptnent at cach reporting date 29 Samarkand RSUE uSovcovan FmnanEmal staterents for tie year ended 3' December 2018 (n thousands of U/S 3. Significant Accounting Policies (continued) Impairment is based on many factors such as: current competitive environment, changes in the expected growth of industry, changes in the availability of financing in the future, technological obsolescence, discondinuance of services, current replacement costs and other changes in conditionq that indicate a significant impairment. If any such indicators exist, the recoverable amount of asset is estimated and compared to its carrying amount. If the carrying amount exceeds the recoverable amount of assets, impairment is recogni/ed. The recoverable amount is determined as the higher of two values: fair value less costs to sell or value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate before tax, hich, in management's opinion, reflects current market assessments of rime value of money and assets' inherent nIsks. The change in estimated recoverable anmount can lead to impairment or its recovery in future periods. Based on t-he assessment, the CompanY concluded that there are no any indicators of impairment as at December 31, 2018, In assessing tax risks, Management considers probable obligations the known areas au tax Positions wVhich the Company would not appeal or does not believe it could successfully appeal, it assessed by tax authorities. Such determinations inherently involve significant jiudgment and are subject to change as a result of changes in tax laws and reg ulations, the determination of expected outcomes from pending tax proceedings and the outcome ot ongoing compliince audits by tax authorities. Further uncertainties related to taxes are detailed in Note 22, P,roiion jor dubih debt The Company recognizes provisions for doubtful account. receivable. Doubtful accounts are esumated considering previous and expected performance results of the customer Changes in the ecoronomy, the sector, or the specific characteristics of the customer maY require adiustimients in the provision for doubtful debts reflected in the financial statements. Contingen';i t se and i'a Contingent assets are not recognized in the statement of financial posmtron, and information about them is disclosed in the financial Statements in cases where it is probable that the economic bencfits associated with them will be received. Contingent habilities are not recorded in the statement of financial position, and nformat on about them is disclosed in the financial statements, unless the outflowV of resources due to their redemption is unlikely. 30 Swra,kandr RSUE aSuv,o-ova Fiarcia statemeis for the year eanccd 31 Decemn4r 208 n sads of UZS; 4 Proper-ty, plailt and v(piiulent Buildings and Machinery and Computers and Other Construction in constructions equipment office equipment Asset progress Balance as at 31 Decenber 2017 84881 826 55346838 2851 279 600616 37068397 180748956 Other depreciation amount from branches after affiliation* (13 044 567) (8 545 500) (979 833) (238 437) - (22 808 337) Accumulated depreciation (23 009 448) (28 867 492) (1 650 816) (570 122) - (54 097 878) Balance as at 31 December 2017 61 872378 26479346 1 200463 30494 37068397 126651078 Receipts 54 013 264 38 148 449 2011 704 1 004 879 - 95178297 Dsposals - (221 260) - (14329) - (235589) Internal reclass 3452488 2132350 - (5 584 838) - Depreciation deductions (6 154 532) (3626 380) (130 194) (24 098) (9 935 204) Balance as at 31 December 2018 119338130 66538885 3212167 1 021044 31483559 221 593785 Other depreciation amount from branches after affiliation' - Accurmulated depreciation (29 163 980) (32 493 872) (1 781 010) (594 220) - (64 033 082) Balance as at 31 December 2018 90174149 34045013 1431 157 426824 31483559 157560703 The book value of the "Buihng., and constructions" group represents th S costo the sewage treatment plant buikling and th sewagt network systcn. The book v;ilue of the "Machinery and equipment" group', is the cost Of tractor5, trucks used for cleaiintg the sewage vst-m aInd oumps Incomp te onstruction is m11ainly the cost of reconstruction of sew.,age treatment plants and sewage svstemns, 31 Samar-and RSUE ,Suvckoa. ranc a statemerts for the yea, ended 3'[Decembe 2016 (m thouserds o' JZSt 4 PropertY, plant al (ipctt (continued) Buildings and Machinery and Computers and Other Construction in Total constructions equipment office equipment Asset progress Balance as at 31 Decenber 2016 62433100 51667 481 1 776013 316876 11 488532 127682002 Accumulated depreciation (7298081) (18 574 970) (470668) (282940) - (26626659) Balance as at 31 December 2016 5135019 33092511 1 305345 33936 11488532 101 055343 Receipts 22454035 3884 123 1 076350 283740 25579865 53278113 Disposals (5309) (204 766) (1 084) - - (211 159) Depreciation deductions (2 666 800) (1 747 022) (200 315) (48 745) - (4 662 882) Balance as at 31 December 2017 84881 826 55346838 2851 279 600616 37068397 180748956 Other depreciation arrount from branches after affiliation* (13 044 567) (8 545 500) (979 833) (238 437) - (22 808 337) Accuriulated depreciation (23 009 448) (28 867 492) (1 650 816) (570 122) - (54 097 878) Balance as at 31 December 2017 61 872378 26479 346 1 200 463 30494 37068397 126651078 32 Samarxand RSUE USuvokova, tinanciaI statermes for the yea, ended 3' Decerber 20 18 0 thoLsands o4 UZS . Investments in the Sutvakav a District According to die orders of the Cabiner of Ministers of tie Republic of t.'zbekistan, Uzbekistan No. 215 dated October 16, 2015 and No. 306 of October 30, 2015, "On Measures to Implement the Main Directions for the Development of Water Supply and Sewerage Orgaimzanons." the (ompany was reorganized as the Suvokava State Unitary Enterprise and is a commercial organization. All areas were merged into the Company. 6 Deferred expenses Defcrred expenses include a one-time commission of one percent of the principal amount of the IBRI) loan. These deferred expenses for the loan period of 20 years. 7 Inventories 31 December 2018 31 December 2017 Spare parts 636711 873005 Inventory and household supplies 486 868 274 548 Raw material 432937 139529 Fuel 234238 168407 Others 243246 149883 Total inventory 2 034 000 1 605 373 Inventries are raw materials, stationery, inventor\ and household items, spare paris and are recorded at historical cost. Raw materials mainlY include chemicals used in a sewage treatment rank, reinforced concrete curbs and manholes, as well as various cast iron devices (bends, latches, valves, etc,), Spare parts include spare parts tor vehicles, excavators and tractors purchased from suppliers used in the daily activities of the Companm. 8 Trade receivables and other receivabthles Helow is informanon on other receivables: 31 December 2018 31 December 2017 Financial Assets Trade receivables 17740952 17259 694 Receivables for other services 169960 382650 Impairment reserve (3701 804) (3701 804) Total financial assets 14209109 13940541 Other non-financial assets. Prepayment 14738631 5328605 Prepaid taxes 1 553906 (42831) Total non-financial assets 16292537 5285774 Total trade receivables and other receivables 30501646 19226315 The accounts receivable for the main business, with a maturity of less than three months, are not considered as overdue debts. 33 Sararkanri RSUE oSuvo-ova> iF aci a statemerts for the year ended 3' Decernber 2D1 8 in risanis of UZSi 8. Trade rcceivables and other receivablcs (Continuied) As of the date of each report on the financial statements, the (Company evaluates all oblective factors in connection with which it is possible to consider the nipairmen of receivables. In the event that there is sfttictent grounds to consider a receivable as impaired, the amount the allow,vance for impairment losses is determined as the difference between the carrying amount of that debt and the expected recoverable amount, discounted at the original effective interest rate. In the event that the (ompany establishes te fact that there are no obiective factors for the inpairment of :his receivable, irrespective of the rateriality of the anIouT. 'The company relates this debt to the group ot debts with the corresponding characteristics of the credit risk, and the fact of the impairment of the entire group of receivables is considered. The main factors that the Company takes into account when considering the issue of impairment of trade receivables is as overdue statis for more than 91 days. Movements in the provision for impairment or trade rece:vables and other receivable, as of 31 DJeceiber 20 18 and 20 17 are as follows: 31 December 2018 31 December 2017 Provision for impairment at 1 January 3 701 804 3701 804 (Recovery) / provision for impairment during the year - - Reserve for impairment at 31 December 3 701 804 3 701 804 9 Cash and cash equivalents 31 December 2018 31 December 2017 Current account in UZS 1 402 262 390 335 Other special accounts in UZS - 63 857 Total cash and cash equivalents 1402262 454192 Below i- an analysis of cash in banks for credii quality: 31 December 2018 31 December 2017 Cash in demand bank Banks of Uzbekistan 1 402 262 454192 Total cash in demand bank 1402262 454192 The balance of cash and cash equivalents as of 31 December, 2018 is ii loint-Stock C0niumerCial Bank "Ipoteka-Bank" and joint-Stock Cnommercial Bank "Hamkorbank". Joinst-tock commercial bank "Ipoteka Bank" and Joint Stock Conimerc!al Bank "H aimkor Bank" have a rarng of "Stable" according to the rating. Mood's and long-term rating on deposit in k>cal currency "H2" 34 Sama,kanci RSUE «SuvoKova, Firarcal sta-erents for the yea- endec 31 Decermner 2018 :r ocusaids o UZS 10 Chartercd capital 31 December 2018 31 December 2017 Chartered capital 13048353 13048353 Total Chartered capital 13048353 13048353 TVhe company was registered by- Decree No. 589 of jne 24, 1978. by the Council of Ministers of the Soviet Socialist Republic of Uzbekistan. Tlie comnpany has the rights of an independent econoiic enterprise and is nanaged in accordance wvith the egislaton of the Repubbe of Uzbekistan. 1he share of the Government of the Republie of Uzbekistan in the autllroject are: (a) to reduce the harniful effects of wastewater collection on the environment; (b) improving the efficiency and sustainability of sewage systeis in the Bukhara RSUF "Suvokova" (hereinafter - BVK) and the Samarkand RSUE "Suvokova". The total amount of funding for the project is estimated at USD 105 million. 'The project is funded bY the IDA with a loan in the amount of 74,700,000 Special Drawing Rights (equivalent to VSI) 105.0 million), with an interest rare of 1.25% o of the principal amount under standard conditions (11DA 5698-1/', and 1.83% for solid conditions (IDA 5699 1. /).1 he maintenance fee in respect of die withdrawn and ourstanding portion of the sub-loan is 0.75. per annuni. Ilie interest rate on oligatJons in the amount of 0.5%: per annum should be paid on the unused loan arounts, The prneipal aniount of the loan must be repaid every six nionths for 25 years, irciuding 5 years of the grace period, starting from the date of approval by the Board of Directors of the \World Bank. Tnie mterest rate on the IDA loan (1) is calculated at the six-month .IBOR rate plus 1.75% per annun. Interest is paid every six months, starting on julv 1, 2004. with a final marurirt date of July 1. 2022, and payment of the principat amount every six tmionths fron January 1, 2008 with a final maturity date o july 1, 2022. 1he interest rate on the loan (II) IBRD is caIculated at a six-ionth li1BR plus 1.75% o per annui. Interest is paid every six months, beginning on April 1, 2003, with a final maturity date of April 1, 2022, and payment of the principal amouit every six mionths, starting on October 1, 2007, with a ninal miaturity date of A3pril 1, 2022. 35 Samarxard RSUE ( Suvokova, F:nanceia sta!t're nts in !he2 yeat erded 31 Decc-mber 2018 pn th-ouasins ait U/S 12 Other lont - term borrowi1s 31 December 2018 31 December 2017 Credit on the French Project (Agreement NROUZ989C 24396720 9609944 from 19.05.2005) IDA Loan from 09 01 2003 33869583 19955553 IBRD Loan (Agreement N94655 from 09.01.2003) 25883957 15513536 Other borrowings 6853782 1 104790 Total borrowings 91004042 46183822 13 Restricted capital 31 December 2018 31 December 2017 Contribution of the Government of the Republic of Uzbekistan in kind Contribution of the Government of the Republic of Uzbekistan in cash Total restricted capital at December 31 4668719 4668719 14 Trade payabils and other payables 31 December 2018 31 December 2017 Financial liabilities Payables to suppliers and contractors related to ongoing 1 918 997 1 975 489 investments Trade payables 20303603 22 137648 Total financial liabilities 22222599 24113137 Non-financial liabilities Taxes payable to the budget 386983 332211 Advances received 1 742 665 49 303 Salary 863960 882374 Total 2 993 609 1 263 888 Total liabilities 25216208 25377025 15 Rev enues 31 December 2018 31 December 2017 Income from legal entities 23146882 19085 134 Income from individuals 27676 190 25593273 Revenues from works and services 16351 49768 Total Revenue 50839423 44728175 36 Saomarkasnd RSU «vov Nnnilstaernents for the year enided 3 Decernber 2018 rn tiusands of /S Tariffs for the supply of drinking water and collection of waste water are approved by the regional department of the Ministry of Finance of the Republc of Uzhekistan. As indicated in Note 1 of the Company, legislation allows for a gross margm of not more than 10 w, vhich leads to a permanent net loss before the reecipt of a Goverinment Grant. I lowever, in order to support the Companyl's acnvitis and to implenent capital expenditures, the Government provides contributions in kind and in cash. During 2007, management installed water meters, which allowed the Company to measure the exact amount of water produced and supplied to the system. 1his information provides a rehable basis for calculatig the vater balance. Eurther, the management analyzes the loss of water resources, which are still significant. To analvze the causes of water losses, rellahle estimates and judgments of management are needed. I lowever, these Circumstances indicate that there are signifneant inaccuracies that may lead ro significant doubts about the completeness and rehiablity of biling for water cotslmptioi. By population, i.e. Individuals are registered in the specialized program Billing - automation of accounting, control and analysis of indicators of water use and sanitation. According to concluded agreements with the population for water use, the data on the avaibility of water meers meters) have been entered into the program, and if they are not established, then the number of residens provides the data provided by the self-government bodies. Monthly, the program records data on consumed water volumes (meter readings) collected by line inspectors and, according to the estab1shed tariffs, the Company's revenues are calcilared. For those categories of the population that do not have water neters (mieters), acerual is imade montlil aceording to the tariff for the number of residems. Ihe tecihnical effectiveness of the billing systeni is litnited. Data on billing fr Individual cliems is hased on budgetarx norms for using the sewage system per person, while the actual use of sewerage by idiv idtals may differ materially. 16 Cost of sales The table below shows the cost of sales: 31 December 2018 31 December 2017 Staffcosts 9885858 18051 114 Repair and maintenance costs 1 013950 234591 Costs materials and spare parts 1 995 574 6 558 203 Fuel and electricity 14660983 3846644 Depreciation 9 545 371 4051 916 Others 2453222 219484 Total cost of sales 39 554 958 32 961 951 17 Adiniistrativ-e and other operating expenses The table bek>w shows the items of general atid idniiustrati\ve eTpenSes: 37 Sara,kanl RSUF -Suvckova, Finarcial statements tor the year erned 31 Decerier 219 :In thousan ds of UZS, 17. Adninistrativc and othtr operatin.- expenses (continued) 31 December 2018 31 December 2017 Staffcosts 4086663 5871408 Deductions for social insurance 198910 59164 Taxes other than income tax 232 527 1 435 543 Stationery and supplies 74309 518616 Depreciation 389833 610966 Banking fees 132 055 - Servces 410694 386584 Fuel 201 891 428 900 Communications costs 71 774 103742 Sponsorship and charity 77320 - Deducation for government funds 1 329 098 Environmental protection - - Commission fee 148347 347 Fines and penalties 437 251 - Other 1 579983 187635 Total general and administrative expenses 9 370 655 9 602 906 18 Goverinicnt Grant 31 December 2018 31 December 2017 Government grant 46331769 5409479 Total government grants 46331769 5409479 19 Othcr operatiig inco1C The table below shows the items of other operating income: 31 December 2018 31 December 2017 Profit from disposal of fixed assets 10039893 4647 Financial aid - Other operating income 46404 2845561 Total operating income 10086297 2850209 38 Sam~rkand RSUF SvoCkova, Hinarcia statements for he year eidec 31 December 208 n thousands of UZS1 20 Financial expenses and incomes [he table below shows the iterns of financial ex-Penses and revenues: 31 December 2018 31 December 2017 Interest exenses on long-term borrowings (4383653) (2 527 447) Loss from revaluation of foreign currency on financial activities: Long-term borrowing (215 281 042) (198 982 634) Financial expenses (219 664 695) (201 510 081) Profit from revaluation of foreign currency on financial activities: Long-term borrowing 7706960 1 560150 Financial income 7706960 1 560150 Tle profit and loss from revaluation of foreigri currency arises inunly from the revaluation of liabilities in US dollars and EUR0 for loans from IDA and Natexis Bank as a result of strengthening or weakering of the UZS in relation to the US dollar and E`1CO. 21 Incomlie Taxe"s T1e C11opanv comipiles tax paYnients for the current period oi the basis of tax accoutinug da t hat is carried out in accordance \wth the requilremeunts ot the tax leoslinoi Jthe Republic ofl/ bekistan, wdhich may differ from IFRS. Differences between IFRS and the tax legislaton of the Republic of t-zbekistan result in certain temporary differencs bertween the carrying am1ount of a number of assets and liabiliries for the purposes of compiling financial statements and for the purpose of calculating the corporate income tax. Tax on income ()rofit) by the Company is accrued in accordance with the Tax Code of the Republic of I zbekisran. The current tax rate on income (profit) for the Company in 2018 amounted to 11 percent of the taxable profit In accordance with the tax legislation of the Republic of Uzbekistan, the Coipany also pays other taxes and deductions related to its operating activities. 31 December 2018 31 December 2017 Loss before tax (154 679 975) (192 809 630) The estimated amount of income tax reimbursement at the statutory rate of 14% (2017: 7 5%) (21 655 197) (14460722) Non-deductible expenses 6913283 4657138 Unrecognized other possible tax assets 14643224 9864419 Income tax expense for the year (98690) 60835 22 Conitintent liabilitics Legal issues. In the no"nal CoUrse of business, the Company is subject to lawsuits and claims. In the opinion of the management, the probable liabilities (if any) arising from such claim or claims wll not have a material adverse effect on the financial position or performance of the Conpany in the future. I nsurance. The marke: of insurance services in the Republic of Uzbekistan is at the stage of formation and many forms of insurance, common in other countries of the wvor'd, are not vet available in .'zbekistan. The compani does 39 Sj.ar,and RSUE «Suvokova» Pinancial statercents for the year ended 31N Dcmbe 2 18 o3n thosar:s 22. Coitingent liabilities (continued) not have full insurarce coverage for its producion faciblies; losses caused by production delays, or incurred obligations to third parties due to damage to real estate or the ervlironment caused by accidents or the Company's activines. Unti the Company has full insurance coverage, there is a risk that the loss or damage of certain assets could have a material adverse effect on the Company's operations and financial position. Tax law. Cäirrently in the Republic of Uzbekstan there are a number of legislative acis regulating the system of taxes paid to the Republican and local state budgets. 1hesc taxes include valuc added tax, income tax, and a number of other taxes and social deductions. The tax legislation of the Republic of Uzbekistan is sub1ect to varying interpretations and subject to frequent changes. Often there are different opinions regarding the interpretation of legislative aets hoth berween different departments and within one department (ie the State Tax (omtinee and its varios inspeens), which creates uncertainty and the ground for vanous disputes. Tax declarations and other leal obhgations (for example, quesdoiis of custorns and currency regulation) are Subject to review and inspection by a nuiber of agencies that by law have the righi to appiv signiicant administrative penalties (includig lnes and penalties) and nay take a tougher positon in the interprctation of legislation and verification of tax calculations. As a coiseluerice, tax authorities may fie claims t`Or those trans.actions and accounting methods for which they (Id not make claims before. This siniation ercate a greater 1roblability of occurrence of tax risks in the Republic of U zbekisran than, for example, in other countries wiii miore developed taxation systemns. Tax inspections can cover tive calendar years of actxvit. immediaitely preceding the year of verification. Under certain conuhons, carlier periods may be subjected to verintication. As of 31 1 )ecember 2018 management believes that it adlieres to an adejuate interpreition of the relevant legislation, and the Company-'s position regarding tax, currency and customs issues will be supported by the controlling bodies, Credit related commitments. The main purpose of these instruments is to ensure the provision of funds to custoters as ncessar I ihe total anoult of obligatlons for guarantees, sureties, letters of credit and other tinancial hliabilites docs not nccessarily represent future cash requirements, as the expiration or cancellation of these obligations may be possible without the provision of funds to the counterparty-. Nevertieless, there is a potential risk, therefore, in the statenient of financial position, anong other obligarions under guaranees provision is made for a loan cormitment in respecr of provided guarantees and guarantees, depending on the financial condition of the chent. T~he management of the company does not control issued credit related commnitments, as it behev es tiere wil be rio obliganon and accordingly no provision for these conungent credit habilites has been created. 23 Related P;art iransacions Vor the purposes of these financial starements, the parties are considered to be related if one of them has the ability to contro il the other or exercise signicant influence in making other financial and operaronal decisions by the other party as set out iti IAS 24 "Related Party Disclosures". In constdering all possible relatonsnips with related parties, the econonic content of such relationships is taken into account, and not only their legal form. The company is a state enterprise with 10i u state share in the authonized capital. The cOmpany, purchases goids and services from a large number of enterprises \withi state participation. Such purchases are indiidually snall amourits and are usually carried out commiercially. The transacnons with the state also include settleinents or taxes. 40 amrkn HSLF «Suvckrova)» Financiai st temen:s for 'he year er-ed 31 Decernoer 2C19 tn osanus 9f UZ18 23. Related Party T,ratnsacti>tls(co)ntl)tinued) Management believes :hat transactions with related parties are carried out on rerms ecuivalent to market conditions. Transactions with related parties are not secured and are not guaranteed by third parties. Key management personnel of the Company receive short-term compensation, including salaries, paid leave and paid sick leave, bonuses and other pavments. The total amount of pavments to the Conpa-N's top managenent is not public information. 24 Segmenit Iiformationi )perating segments are components that carry out economic activities, h:e they can generate revenuc or may be related to expenses. the operating results of the segments are regilarly analysed by tc supreme operational management bodv, and financial information is available for operatmg segments. Tlie iighest operafional management body can be represented by one person or a group of pe ple who allocate resources and evaluate the resUlts of the companY's acrivities. 1h functions of the supreme operational management body are performed by the Company's ianagemntc Board. T1he operating segment of the Company's reporting is one operating segment, namely, investmient portfolio manageient of subsidiaries, associates and joint v-entures. Tlhe management evaluates the operati, results of the segment to make decisions aboit the allocation of resources and evaluation of their pert rmnaice. The Manageient does nol divide the Company's assets and liabilties int1 segmenis, as all assets and labihties are accounted for byN the Company's onlY reporring segmnent. To conduct an analss of the Companys operations and make decisions based on this analysis, the Company 's Management Board is proided xwith financial results in the form of oiperating reports i r ont segment. The inancial results in this operating statement do not differ from thost in the financial statements. 25 Fair valuc Fair valuc is defined as the price at which the instrument can be exchanged as part of a current transaction berween interested parties xwilling to enter ino- a transaction on market terms, other than forced sale or i.id ::: Ii ic best collina.ttitn of fair valuc i, the ortizedi cost( The fair value of liabilities is determined using the valuation echnique. The estunated fair value of the instniment wiih a fixed interest rate and a fixed maturity is based on the expected discouinted cash flows using interest rates for lew. instruments with smiilar credit risk and a similar perod to maturiti. The fair value of habihties repay able on denand or redeemed In advancc notice ("labilities payable on demand" s 41 Sa-mai,,d RSLJE :Su.,ckovai Financa s:airre's fo, te .er encc 31 Decern ber 2:18 rt iusands o.f UZS 25. Fair value (continued) calculated as the anount pavable on demand, discounted starting from tc first date of :he potenual presentation of the demand for settlement of the obligation. Discount rates used varv from 15' tt) 12% per annurn deending on the maturity date arnd the currency f thc oiugation. Due tt the short nanirties, the book value of short-term financial payab:es approximares its fair va'ue. 26 Risk Nlanagmciet The Chairman of the Management Board has overall responsibility for the organization of the Conpany'S risk naiagemnent systen and for oversecing the operation of this systei. Thbe risk mrianagement of the Company is carried out in respect of funancial risks (markt, currency, itrest, crecdit risks, liquidity risks) Ie Company's main task in nsk rnanagcient is to identify and analyzc the risks faced by the Comnpany estabhsh acceptable risk lmits and appropriate control mecanisms, and for monitoring risks and compliancc with the nced to make changes in coinnection with changes in market condition s and the Company'st operaions. Arke-t risk Market risk is the risk that changes in niarket prices, such as foreign exchange tates and interest rtes, will affect thle Conpany's profits or the value of its available financial instruments. [be goal of market risk manaicient is to control exposure to inarket risk and keep it within aceptable limits, while seeking to optimize return on investiment. Currncy risk TIhe Company is exposed to foreign exehange risk on the following transactions: provision and rcceipt of loans in foreign curreny; miutual settlernents with related parties in foreign currency. Due to the Underdev elopmnent of the instruments t of currency risk ianagement in the financial niarket of 1-zbekistaii, the Conipany docs not effect currencv risk insuraice. Thc table below shows the changes in the financial result and aggregate inconie as a result of possible changes in exchange rates used at the end of the reporting period, vhilc all other conditions remai onehanged. A reasonaly possible change in the exchange rate for cach currency is determined on the basis of the extreie linits of the fluctuations of the ratcs changed ni conparison with the sem-annual dynamics of 2018 with the current rates (for 2017 annual), Ie sei-iannual chatge in the rate is oniy for strengthening foreign exchange. Ilie risk was calculated only for cash balances iii curreicies other than the functional currency of the Conpany. [ he Change in te exchange rate will be further negaively refilected in the tinancial position of the Company, as the Conpany is forced to attracr credit resources trom banks and international financial inistitutions to fulnl the whole nvestment obligations. According ro the Decree of the President of the Republic of Uzbekistan "On Prioity lcasures to Liberahze Monetary Policy" No. 5177 dated September 2, 2017, in order to Increase the efficiency of foreign exchange flows based on market principles, create a favoirable investment and husiness climate to attract foreign investment, as wei as boost stimulating the role of nsan>ds of JZS, 26. Risk Mltn"Cment (continued) LIZS USD Dollar Euro Others USDI= EURI= 31 December 31 December 2018 8,339.55 UlZS 9,479.57 UZS Tota 2018 Total Total Financial assets: Cash and Cash Equivalents 1 402 262 - - - 1 402 262 1 402 262 Trade and other receivables 30501 646 - - - 30501646 30501646 Total financial assets 31 903 908 - - - 31 903 908 31 903 908 Financial liabilities: Trade payables 25216208 - - - 25216208 25216208 Long term coans and loans 71403057 339380479 25568915 - 436352452 436352452 semi Short-term oans and loans 5242155 5242155 5242155 received Total financial liabilities 101 861 420 339380479 25568915 - 466810814 466810815 Open balance (69957512) (339 380 479) (25568915) - (434 906 906) (434 906 907) The follkwing table provides an anallysis of the Connpany's currency risk as of 31 December 21)17. Th1e Company's tHnancial asses and liabilities are shown in the table at face value in tecrnis of malor currencies. UZS USD Dollar Euro Others USD I= EUR1 = 31 December 31 December 2017 8,120.07 UZS 9,624.72 UZS Tota 2017 Total Total Financial assets: Cash and Cash Equivalents 454192 - - 454 192 454 192 Trade and other receivables 19226315 19226315 19226315 Total financial assets 19680507 - - - 19680507 19680507 Financial liabilities: Trade payables 25377025 - - - 25377025 25377025 Long-term loans and loans 691 852 180827304 104467978 - 285987134 285987 134 seme Short-termi loans and loans 1 924 900 1 924 900 1 924 900 received Total financial liabilities 27993777 180827304 104467978 - 313289058 313289059 Open balance (8 313 270) (180 827 304) (104467 978) - (293 608 551) (293 608 552) Anaysi, oitsfisitivitl to hIo'nA exchange rA Tie f0llouing table provides an analysis of the sensitivity of the Company to 151' t, and 15% of the increase and decrease in the sum to the US dollar and euro as oi 31 Deember 2018 ad 2017 and 181 respectively. Management believes that, given th current economic situation in the Republic of Uzbekistan, it is possible that the exchange rate of the sum against the US dollar and curo will fluCtuate up to 5C. This level ot sensiuvitv is used internally by the Company when preparig currency ask reports for key nanagement personnel of the Conpany and represents nanagement's assessnent of possibe changes in exchange rates. The sensitivity analysis includes onlY the foreign currency amounts available at the end of the period, with the conversion at the end of the year using rates that are changed by 3 compared to those in eftect as of 31 Decenber 2018 and 2017, respectively. 43 Samarkand RSUE «Suvokova,, Financia s:atenents 'cr the yea, ended 31 December 2C18 yi tCousans :U 26. Risk N;iagcment (continuced) 31 December 2018 31 December 2017 UZSIUSD UZS/USD UZSIUSD UZS/USD +3% -3% +151% -151% Impact on net income and equity (10 181 414) 10 181 414 (273 049 229) 273049229 31 December 2018 31 December 2017 UZSIEUR UZS/EUR UZSIEUR UZSIEUR -2% +2% +181% -181% Impact on net income and equity (511 378) 511 378 (189 087 040) 189087040 Limitaions oIfsensitiv ity analyhsis, The above tables refleet the effeet of a change in the mnain assumtiption,,\ while other assutnpuons remain unchanged. ln faet, there is a connection between assumptions and other factors. It should also be noted that the sensitivity is non linear, so interpolation or extrapolation of the results shoud not be performed. The sensidvity analsis does niot take inmo aiccoumn that the (Group ctively managies assets and habilities. ln additton to this, the financial position of the Conpany nay vary depending on the changes taking place in the market. For example, the Group's strategy in the area of inanicial risk nianagement is aied at ranaging the risk of rnarket volauhty-. In the case of sharp negative price Auctuations in the secunties niarket, nanagenenr can resor: to such methods as selling investments, changing the cotiposifon of the investment portfolio, and also to other methods of protection. T herefore, the chan in , ssupt ins mays not have an impact on liabilities and significantly aftct the assets rec-rded on the halance sheet at the niarket price. In this situation, diftereit tmethods of assessng assets and liabilities can lead to signi fucant uctuations in the anount of capital Other Iiitations in the above sensivity analysis nelude the use (with the aim of disclosing the potental risk) of hvpothetical niarket movements, which are lust the Company's forecast of fortheoning narket changes that can not be predicted with anyv degree of certatiity. Also a imitation is the assumption that all interest rates change in an idecrtial wvay 11, Urc"fFjv j',. The Company assumies the risk associated with the eftect of flikctations in narket interest rates on its tinaticial position and cash Cows. Such fluctuations nay icrease the lev-el of interest margin, but in the evet of ueiixpected ehanges in interest rates, interest rnargin may also decline or case losses. Clianges in interest rates affect mainly borrowed loans and loans, ehatigg either their fair value (ñxed-rate debt, or future cash flows (variable-rate debt). Whben attracting new loans or loans, the ianagement decides whether a fixed or variable interest rate will be riore benenicial to the Company durmng the expected period hefore maturity, based on its own professional judgnent. The change in the floarng interest rate during the reporting period would not affeet the protit or loss for the period, as all borrowed loans were received with a fixed niterest rate. The refnancing rate established by the Central Bank of the Republc of .'zbekistan since june 29, 2017 has been increased from 9u to 14% This change may have a negaive impact on the financial position of the Company, as the Company is forced to attract credit resources froni banks atid internattonal Financial institudons in order to fulfil the whole invesnitent obhgations. 44 Sarnar-,and RSUE «Suvckovan Financial satemrerts fCr :he year ended 31 Decernber 2018 n :ncusan 1~I:-,ds o UZS, 26. Risk Management (coteinued) Crcit ri;1s. The Companv is exposed to credit risk, namely the risk that one party to a fnancial instrument bears financial k>sses to the other party by defaulting on its obbgations. Exposure to credit risk anses from the provision of services by the Company on deferred pay ment terms and other transactions with counterparties that result 111 financial assets. Financial assets for wvhich the Company has a potential credit risk are mainly due to the related parnes' indebtedniess for loans, balances wvith banks and other recewvahles. The company issues loans to its structral enterprises and the obligation to repay loans \-as tot evetil distributed. In this regard, the Company's exposure to credit risk from counterparty debt is signiticant. To reduce the credit risk associated with paying suppliers, the Conpany adheres to the poiky of conciuding the inain contracts for the purchase of goods and services fron corprate clients that have a reliable credit histon. The Compiany's accounts are seniced in onre bank (see Note 111 The manaigement of the Comupany believes that the credit risk assocvated with cash depends on the size of rhe hank and its reputation. A1J.-1.im umi eXpoure Io credit ri The tmaxirtn sie of the Company's credit risk mag vary significaitly,, dependiig on the initdv\idual risks inherent in specific assets and on general narket risks. The following table shows the maximum exposure to credit risk for financial assets. For inaticial assets recorded on halance sheet aceonts, the maxtimum exposure to credir risk is the carrying valuc of tiese assets, excludimg offsets uf assets and habihties and collateral Maximum Net credit risk 31 December exposure to Offset afteroffset 2018 credit risk Cash and cash equivalents 1 402 262 - 1 402 262 1 402 262 Trade receivables 30 501 646 30 501 646 30 501 646 Maximum Net credit risk 31 December exposureto Offset after offset 2017 credit risk Cash and cash equivalents 454 192- 454 192 454192 Trade receivables 19226315 - 19226315 19226315 Liudit; risk Liquidity risk is the risk that the Cotmlpatny has dificulry in meeting its financial obligadons, which are senled by the transfer of cash or another linancial asset. The Company's approach to liquidity maiiagemtetit is to ensure, to the extent possible, the Conpany's coninued avatlahilty of lquid funds sufficient to pa, off its obhligations on time, both under normal and stressful conditions, preventing the occurrence of unacceptable losses and without jeopardizing reputation of the Company. Tle Company does not provide an analysts of the Company's financial liabilities by maturity, with an indication of the terms that remam at the reporting date before the end of the terms of repaiment of information secrecy provided by the terins of the coritraets. 45 5amarkarnd RSUE- .Suvasova, Finarc al statements for the year endced 31 Dcember 0 n o Jo 26. Risk Managcment (conitued) Cpital anagemnt The Company's task in the field of capital naagment is to ensure the Companys ability to continue its uninterrupted business, providing an acceptable level of profitability, respecting the interests of other partners and maintaining an optimal capital structure. The company controls capital based on the rauno of debt to capital. This indicator !s calculated by dividing the ict amount of the debt by the whole amount t capital under the management of the Company. Net debt is the total ailoLInt oA debt recoginzed in the statement of inancial position, net of cash and cash euivaleVns. The total amount of capital under management of the Company is the total amount of ecuity recorded in the statement of financial position. 27 Subsequent events After 31 Deceniber 2018 - the reporting date until the approval of these financiAl statements, there are no adjusting events reflected in the financial statements or events that are materiall% significant for disclosure in these financial statements. 46